In every company and organization, there is something that called remuneration policy. Remuneration policy or compensation policy is form of compensation that was given to someone in exchange for the service or work that was performed. People know it mostly by its other name, salary or wage. But, monetary form is not the only one that considered as remuneration policy, since there are other types of non monetary form as well.
Remuneration types can include monthly salary, wage, commission, compensation, fringe benefit, stock options and so on. Basically, remuneration is payment plan that every organization has and it differs across companies and organization based on many things. Everything that was considered as compensation to the employee work performance is part of remuneration.
Remuneration strategies vary from one company to another, depend on many things. Things such as size of the company, nature of the work, employee hierarchy level, company financial situation and other things affect the remuneration strategy. Ideally, the remuneration strategies must include the monetary and non monetary form of compensation. It also need to include short term and long term incentives as form of appreciation and to differ between senior and junior employee, as long as they stay in the same level.
Like it was mentioned before, basically there are two types of remuneration, the monetary and non monetary form. The monetary form also shows up in different way and once again, it will be different from one company to another. Basic remuneration, performance based incentives, profit sharing and sales commission is among the monetary remuneration form.
Start with the very basic remuneration, which is periodic compensation. This is the most common type of remuneration that we can find in most company. Periodic compensation is compensation that was given on specific period such as hourly, weekly or monthly. The compensation rates vary from one employee to another based on education level, employee level, skill and seniority. Most employees receive their remuneration form this way.
Then we have performance based incentives. This kind of remuneration is applied in certain company where the compensation comes from the employee performance not based on how long they spend time at work. Basically, the employee will get the money based on the amount of things that they do. If they produce less, then they will receive less money. For example, those who work in data entry company will receive certain amount of money for single data, so what they will receive at pay time is based on how many data they manage to enter.
Similar to performance based incentives is sales commission. Sales people are those who receive this kind of remuneration, where they actually get paid by earning small percentage on each sale. More sales they managed to make, then they will get more money from it.
Profit sharing is another type of monetary remuneration that gains its popularity this day. Basically this concept refers to a company that shares their profit with the rest of the employee. It show up in different form whether it was cash that was given by the end of the certain period or it can show up in company stock shares options. Profit sharing is allocated based on different thing, usually seniority and capability. Those who go inside the circle of people who receive profit sharing most likely will make the best contribution in order to achieve the company goal and increase company production, where they will receive the benefit in the end of it.
There is other type of remuneration and that is non monetary remuneration. Basically this all goes to the things that the employee will get by working in the company but it doesn’t involve any sort of money. Some example of non monetary remuneration will be awards of recognition (usually involve employee of the month), great work environment, the availability of advanced career plan, chance to improve people skill, fringe benefits and many more.
Surely there are other kinds of things that can be considered as remuneration, such as health insurance, free vacation from time to time, company car and so on. It is all based on the company policy on how they manage their remuneration policy, as form of appreciation and compensation to the employee.
The company itself can calculate their remuneration policy in two ways. They can start with the base salary and then add the value of each remuneration type that they can manage to provide, or they can start with the total amount of value that they can manage to give to every employee they get and then deduct it with every value from each benefit. Once again, every company need to understand completely about their situation and take the best remuneration plan they can come up with, so they can manage to compensate their employee nicely and still gain profit from it.
Read excellent article about Best HR Management Training.