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What Are the Different Types of Remuneration Plans?

Osmand Vitez
Osmand Vitez

Remuneration plans represent the compensation a company gives to each employee in return for labor in a job. Many different types of plans can exist, with companies tailoring each plan according to a specific job. Two different components are often included in remuneration plans: base pay plus commission, bonuses, or profit sharing. The purpose of tailored compensation packages is to create a competitive job market. Companies often have a great desire to find the best workers possible to match the company’s needs in terms of labor.

Base pay in remuneration plans is either a fixed salary or hourly wage. Companies that offer only these items for compensation have the most basic plan possible in place. Human resource directors typically work with a company’s owners or executives to set the rates for each job in the company. Both internal and external factors can play a part in this decision process. Internal factors set the base pay according to the tasks, hours, and knowledge or education necessary for the position; external factors look for a market rate for a similar position.

High-level executive payment contracts use the term "remuneration" rather than salary to indicate that a total compensation package can consist of more than just wages.
High-level executive payment contracts use the term "remuneration" rather than salary to indicate that a total compensation package can consist of more than just wages.

Companies offer additional compensation beyond base pay in order to create a competitive pay package without unduly raising labor costs. The most common addition to remuneration plans is a bonus. Employee positions can have a commission-style or fixed bonus that rewards employees for exceptional work. Bonuses may pay out quarterly, annually, or at other specified intervals, depending on the agreement between the employee and the company. Other bonuses — such as profit sharing — allow employees to share in a part of the company’s profits based on certain accounting metrics.

Benefit packages can also be a part of remuneration plans. In most cases, these additions are noncash rewards, though employees may experience some type of monetary benefit with the package. Inclusions for these packages may be insurance plans, contributions to retirement accounts, company vehicles, or memberships in clubs. The latter two benefits are mostly common to owner or executive remuneration plans. Regional additions are common factors in terms of creating competitive compensation packages.

A market economy is generally a good place to create tailored remuneration plans. Outside of meeting a few human resource laws, remuneration plans are the sole responsibility of companies. This means a company can alter compensation at just about any time in order to meet changes in the market. While lowering current employee pay can be difficult, hiring new employees with a different remuneration plan is possible.

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    • High-level executive payment contracts use the term "remuneration" rather than salary to indicate that a total compensation package can consist of more than just wages.
      By: olly
      High-level executive payment contracts use the term "remuneration" rather than salary to indicate that a total compensation package can consist of more than just wages.