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What is the difference between direct pay and indirect pay?
ADirect pay is taxed while indirect pay is exempt
BDirect pay is wages or salary, indirect pay is benefits
CDirect pay is annual while indirect pay is monthly
DDirect pay is set by a union, indirect pay by the firm
Answer & Solution
Correct answer: B. Direct pay is wages or salary, indirect pay is benefits
1. There are two basic types of compensation, direct and indirect.
2. Direct pay is the wage or salary the employee receives in money.
3. Indirect pay is made up of various employee benefits and services rather than cash in hand.
4. The split has nothing to do with tax treatment or with how often payment is made, so options A and C describe the wrong dividing line.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 8 "Managing Human Resources and Labor Relations", section Types of Compensation or Pay_
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