Final answer:
Compensation includes salaries, wages, and benefits such as health insurance and retirement plans, influenced by various factors including skill level and economic conditions. Wages make up about three-quarters of compensation, with the rest in benefits and legally mandated programs.
Step-by-step explanation:
Compensation is the money and other benefits that employees receive in exchange for their labor. This includes not only salaries and wages but also includes health insurance, retirement plans, and other legally required benefits such as Social Security and unemployment insurance. The exact composition of compensation is affected by several factors, including the employee's experience, education, skills, and the current economic environment.
On average, in private industries, wages and salaries account for about three-quarters of an employee's compensation, with the remaining quarter coming from various benefits. These can include health benefits, insurance, vacation pay, and contributions to retirement and savings plans. Employers also contribute to legally mandated programs, such as worker's compensation insurance, which provides benefits to employees who suffer job-related injuries.
The determination of wages is influenced by the supply and demand of particular skills in the market. During periods of high unemployment, wages may stagnate as job seekers may settle for less to gain employment, while in times of labor shortages, employers may offer higher wages to attract the needed talent.