Remuneration: Introduction and Components

Remuneration: Introduction and Components

Remuneration is the compensation an employee receives in turn for his or her contribution to the organization.

Remuneration occupies an important place in the life of an employee. His or her standard of living, status in society, motivation, loyalty, and productivity depends upon the remuneration he or she receives.

For employer too, employee remuneration is significant because of its contribution to the cost of production.

è Strikes/ lockouts: on issues of wages and bonus

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Components of Remuneration

An average employee in the organized sector is entitled to several benefits- both financial and non-financial. E.g. Typical remuneration of an employee comprises – wages and salary, incentives, fringe benefits, perquisites, and non-monetary benefits.

1.      Wages and Salary: Wages represents hourly rates of pay, and salary refers to the monthly rate of pay, irrespective of the numbers of hours out in by the employee.

a.       Subject to annual increment

b.      Differ from employee to employee

c.       Depends on nature of job, seniority and merit

2.      Incentives: Also called ‘payments by results’, incentives are paid in addition to wages and salaries. Incentives depends upon productivity, sales, profit or cost reduction efforts.

a.       Individual incentive scheme

b.      Group incentive scheme

3.      Fringe Benefits: These include such employee benefits as provident fund, gratuity, medical care, hospitalization, house, relief, health and group insurance, canteen, uniform, recreation and the like.

4.      Perquisites: These are allowed to executives and include company car, club membership, paid holidays, furnished house, stock option schemes and the like.

Perquisites are offered to retain competent executives.

5.      Non-Monetary Benefits: These include challenging job responsibilities, recognition of merit, growth prospects, competent supervision, comfortable working condition, job sharing and flexitime.