Chapter # 1

EMPLOYEE REMUNERATION/COMPENSATION

 Meaning of Remuneration/Compensation
 Components of remuneration
 Importance of an ideal remuneration system
 Concepts of wages
 Factors influencing employee remuneration
 Challenges of remuneration
 MEANING OF REMUNERATION/
COMPENSATION

Remuneration is the compensation an employee receives

in return 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, state in the
society, motivation loyalty, and productivity depend upon
the remuneration he or she receives. For the employer
too, employee remuneration is significant because of its
contribution to the cost of production. Besides, many
battles (in the form of strikes and lockouts) are fought
between the employer and the employees on issues
relating to wages or bonus. For HRM too, employee
remuneration is a major function. The HR specialist has
a difficult task of fixing wages and wage differentials
acceptable to employees and their leaders.
COMPONENTS OF REMUNERATION SYSTEM
Remuneration

Financial Non Financial

Wages & Salary

Hourly, Weekly, Monthly

Direct Rewards
Incentives Challenging Job
Individual & Group Responsibilities,
Growth Prospects,
Supervision,
Working Condition,
Fringe Benefits Job Sharing & Security.
Gratuity, Insurance etc.

Indirect
Perquisites
Office Car, House, Air Trips,
Club Membership etc.

ENVIRONMENT
IMPORTANCE OF REMUNERATION SYSTEM

 Reduces absenteeism
 Fulfills expectation
 Retains and Motivates workers
 Increases loyalty
 Reduces inequity
IMPORTANCE OF REMUNERATION SYSTEM
(Contd.)

Feedback to Employees

Employee Rewards Employee

sets goals Performance considers
are given
and is rewarded equity of
Expectations performance
rewards

Employees sets new goals & expectations based on prior experiences

Figure: Motivation & Performance Model

 CONCEPTS OF WAGES

 Minimum Wage

 Fair Wage

 Living Wage
FACTORS INFLUENCING EMPLOYEE
REMUNERATION
Remuneration

External Internal

Labor Market Business Strategy

Cost Of Living
Job Evaluation &
Labor Union Performance Appraisal

Government Legislation
The Employee
Economy

Society
 CHALLENGES OF REMUNERATION

Skill based pay

Pay Review
Employee Participation

Remuneration
Challenges

Comparable worth Pay Secrecy