Definitions & Differences

Between Compensation, Salary, Employee Benefits, Perks, Perk Stipends, & Lifestyle Spending Accounts

As the market for skilled labor tightens, the ways in which employers support their employees has grown in tandem.

Companies today are doing anything and everything they can to attract, engage, and retain the top talent, and a direct result of this is more comprehensive total compensation plans.

Because of the expansion and increased investment in total compensation packages, now more than ever, the industry needs clear definitions on what benefits, perks, perk stipends, and lifestyle spending accounts (LSA) are. Continuing without a consensus, people will continue to be confused, time and money will continue to be wasted, and worst of all -- we won’t understand our employee's actual needs.

Below are the elements of compensation we'll cover in this piece:

  • Compensation
  • Salary
  • Benefits
  • Perks
  • Perk Stipends/Perk Allowances
  • Lifestyle Spending Accounts

Compensation

Compensation Definition:

While once considered just salary, the definition of compensation has expanded to describe the entire package that employees receive for their labor.

Compensation includes salary, bonus commission, stock options, benefits, perks, and any other additional financial or non-financial extras.

According to an Ernst & Young report, 63% of respondents said that an employer which “provides fair compensation and good benefits” was a leading factor in determining the level of trust to place on their employer.

Sources: UpcounselSmall Business ChronThe Balance Careers

types of compensation compt

Salary

Salary Definition:

The monetary amount to which your employer agreed to pay you for your employment. Salary is often referred to as base pay as it does not include any of the additional benefits, perks, raises, promotions.

Salaries are paid to employees often on a semi-annual basis, either on the first or the 15th of every month or every two weeks.

They differ from hourly employees because pay remains unchanged from one pay period to the next, regardless of the number of hours an employee may work. Where an hourly employee is paid for the hours they work. Salaries are given to full time employees and can be also offered to part-time employees. However, according to Salary.com, while part-time salaries are typically based on full-time salaries divided by the number of hours worked, some companies pay part-time employees a discounted rate, that is, less than the equivalent full-time salary. 

What salaries are not:

  • Company equity
  • Employee Stock Purchase Plans (ESPP)
  • Paid time off (vacation or sick time)

Sources: The Balance CareersSmall Business Chron, Compt’s HR Glossary, & Salary.com,  Investopedia

Benefits

Benefits Definition:

Benefits are non-salary compensation given to employees.

There are two forms: 1. Government-mandated benefits and company-determined benefits.

Benefits that employers are required by federal or state law to provide (within specific parameters):

Below are the examples of benefits company can offer to make their organization a more attractive place to work. They often include insurance, retirement benefits, health-related accounts, and formalized paid time off.

Examples of benefits:

  • Paid time off (aka holidays, vacation, and sick days)
  • Health insurance
  • Dental insurance
  • Vision insurance
  • Disability insurance (short-term and long-term)
  • Retirement benefits: 401(k)
  • Healthcare spending or reimbursement accounts (HSAsFSAsHRPs, and HRAs)

What benefits are not:

  • Commuter stipends or benefits
  • Lifestyle spending accounts
  • Flexible work location or working hours.
  • Things which have tax advantages. While it’s true some do have tax advantages such as ROTH 401k or an FSA, not all of them do.

Sources: The Balance CareersHR Zone benefits definition.

Perks

Perks are additional ways to support the needs of employees beyond salary or benefits and include ones which are purchasable and programmatic. 

(Read here to find all the secrets you need to know to build a top-notch perks program!)

Purchasable perks include catered lunches, books, fitness stipends, pet insurance and student loan forgiveness. Programmatic perks are policy-driven advantages to working at a company such as being pet-friendly, Summer Fridays, or remote work.

Perks are one of the largest umbrellas of offerings as many items fit within them.

Examples of offerings:

  • Beer
  • Car allowances
  • Career coaching services
  • Casual dress
  • Catered meals
  • Charitable matching
  • Child care (in-office support or subsidized)
  • College loan repayment services
  • Commuter Stipends
  • Company outings
  • Conferences & training
  • Continuous Learning Stipends
  • Dedicated time for learning
  • Fitness Stipend
  • Flex Work Hours
  • Game Room
  • Generous Parental Leave
  • Gym memberships
  • Happy Hours
  • Lifestyle spending accounts
  • Meditation rooms
  • Mentorship Programs
  • Online learning classes & courses
  • Onsite gym
  • Performance bonus
  • Pet-friendly office
  • Pet insurance
  • Professional memberships
  • Certificates
  • Recreational clubs (company-sponsored teams)
  • Relocation assistance
  • Remote work opportunities
  • Sabbatical leave
  • Software stipends
  • Summer Friday's
  • Tech goodies stipend
  • Tuition reimbursement
  • Volunteering opportunities
  • Wellness programs

Other, less-discussed perks:

  • Birthday lunches or gift cards
  • Spot bonuses
  • President’s Club

To see a comprehensive list, check out this employee perks listing page.

What perks are not:

  • A company's mission, vision, values. 
  • Strong leadership or managers.
  • Excellent programs or process.
  • Working close to the office. 

Sources: JustWorks, Compt Employee PerksRobert Half

Perk Stipends / Allowances

Perk stipends are a monetary amounts allocated to employees for them to spend on perks which align to specific company policies, values, or culture initiatives. The amounts can be given to employees on credit cards, paid back through reimbursement (while accounting for taxes), or through a lifestyle spending account.

Want some ideas for perk stipend spending? Check out this list of how Compt users spend their perk stipends.

Examples of perk stipends:

Examples of companies using perk stipends today:

Sources: Perk Stipends: Everything You Need to Know.

Lifestyle Spending Accounts

A lifestyle spending account is an employer-contributed account set up for employees so that they are able to purchase the perks which are most meaningful to them and their needs.

To set up a lifestyle spending account, companies set basic parameters for their employees’ lifestyle spending accounts including how much each employee can spend, within what timeframe, in which categories, and who pays the taxes. Companies often align the categories of spending with the mission, vision, values, culture or company goals.

Lifestyle spending accounts are an ideal option for companies that wish to personalize their employee perks, support satellite offices or remote employees, ensure IRS tax compliance with perks, and remove the administrative burden on HR for managing individual perks and vendors.

This sounds perfect, doesn't it? Want to learn more about how LSAs work? Read all you need to know about them here.

Sources: HR Daily AdvisorLifestyle Spending Account eBook.

sample lifestyle spending account

Example of a Lifestyle Spending Account.

In the example to the left, Sam's company has allocated $100 per month to spend the following categories: learning, health & wellness, and food.

This month, Sam purchased books, a gym membership, paid for a lunch with her team, and still has $20 remaining.

How would you spend your $100 this month?

the ultimate guide to lifestyle spending accounts

Want to learn more about Lifestyle Spending Accounts?

We have helpful resource for you. Download our Ultimate Guide ebook and receive 22-pages full of what you need to know.