Which term refers to nonwage compensation such as health insurance and paid vacation?

• A. Wage gap
• B. Fringe benefits
• C. Affirmative action
• D. Right-to-work law

Answer: (B)

Nonwage compensation refers to the part of pay that isn’t cash wages but still adds to an employee’s overall compensation. The term fringe benefits captures this idea. Health insurance and paid vacation are classic examples because they provide value beyond the base salary, forming part of the total compensation package. Employers offer these benefits to attract and keep workers, and they often come with favorable tax treatment or cost-sharing arrangements. So, total compensation equals wages plus fringe benefits. The other concepts described—wage gap (earnings differences between groups), affirmative action (policies to promote representation), and right-to-work laws (rules about union membership)—do not describe nonwage compensation.