Compensation

This is the total payment received in exchange for a service as well as a reward for outstanding performance. It is usually used in reference to a person’s salary or wages. Compensation includes the following:

• Basic pay
• Dearness allowance
• House rent allowance
• Leave travel allowance
• Overtime pay
• Bonus
• Perks, incentives, or commission
• Stock options or profit sharing

Compensation or salary is an important consideration for lenders as it defines a person’s ability to repay debt. For instance, if A gets a fixed income of ₹15,000 and variable pay of ₹10,000 based on job execution in an organisation, then A’s total compensation will be ₹25,000.