REMUNERATION

 Definition :
Remuneration is the compensation an employee
receives in return for his or her contribution to
the organization

 Components of remuneration :
Typical remuneration of an employees
comprises-wages and salary , incentives , fringe
benefits , perquisites , and non – monetary
benefits
Wages and salary
Wages represent hourly rates of pay , and salary
refers to the monthly rate of pay , irrespective of the
number of hours put in by an employee . wages and
salaries are subject to annual increments. They differ
form employee to employee , and depend upon the
nature of job , type of industry , seniority , and merit .

Incentives
Also called ` payments by results ‘, incentives are
paid in addition to wages and salaries . Incentives
depend upon productivity , sales , profit , or cost
reduction efforts.
 There are :
 (1) individual incentive schemes.
 (2) group incentive programs. Individual
incentives are applicable to specific
performance. Where a given task demands group
effort for completion , incentives are paid to the
group as a whole .

Fringe Benefits
There include such employee benefits as
provident fund , gratuity , medical care .
 perquisites :
 These are allowed to executives and include
company car , club membership, paid holiday ,
furnished house , stock option schemes and the
like. Perquisites are offered to retain competent
executives.
 Non-monetary benefits :
 There include challenging job responsbilities,
recognition of merit , growth prospects ,
competent supervision comfortable working
conditions , job sharing , and flexitime.
 Factors influencing employee remuneration
 External factors
 Factors external to an organization are labour
market. Cost of living, labour unions , government
legislation , the society . And the economy .
 Labour market :
 Demand for and supply of labour influence
wage and salary fixation . A low wage may be fixed
when the supply of labour exceeds the demand for
it . A higher wage will have to be paid when the
demand exceeds supply , as in the case of skilled
labour .
 Going rate of pay is another labour –related factor
influencing employee remuneration . Going rates are
those that are paid by different units of an industry in
a locality and by comparable units of the same
industry located elsewhere . This is the only way of
fixing salary and wage in the initial stages of plant
operations.

 Productivity of labour also influences wage fixation.

Productivity can arise due to increased effort of the
workers , or as a result of the factors beyond the
control of the worker such as improved technology ,
sophisticated machines and equipment , better
management , and the like.
 Cost of living :
 Next in importance to labour market is the cost
of living . This criterion matters duing periods of
rising prices , and is forgotten when prices are stable
or falling . The justification for cost of living as a
criterion for wage fixation is that the real wages of
workers should not be allowed to be whittled down
by price increases.
 Labour unions :
 The presence or absence of labor organizations
often determine the quantum of wages paid to
employees. Employers in non- unionized factories
enjoy the freedom to fix wages and salaries as they
please.
 Labour laws :
 we have a plethora of labour laws at the
central as well as at the state levels . Some of the
central laws which have a bearing on employee
remuneration are the payment of wage Act ,
1936; the minimum wages Act , 1948. the
payment of bonus Act , 1965 ; Equal
remuneration Act ,1976; and the payment of
gratuity Act ,1972.
 in addition to legal enactments , there are
wage boards , tribunals and fair wages
committees which aim at providing a decent
standard of living to workers.
 Society :
 remuneration paid to employees is reflected
in the prices fixed by an organization for its good
and services. For this reason , the consuming
public is interested in remuneration decisions.
 The economy :
 The last external factor that has its impact on
wage and salary fixation is the state of the
economy.
 ( e.g. ), A depressed economy will probably
increase the labour supply . This ,in turn , should
serve to lower the going wage rate.
 Internal factors :
 Business strategy :
 The overall strategy which a company
pursues should determine the remuneration to its
employees . Where the strategy of the enterprise
is to achieve rapid growth , remuneration should
be higher then what competitors pay . Where the
strategy is to maintain and protect current earning
, because of the declining fortunes of the
company , remuneration level needs to be
average or even below average.
 Job Evaluation and performance appraisal :
 job evaluation helps establish satisfactory
wage differentials among jobs . Performance
appraisal helps award pay increases to
employees who show improved performance.
 The employee :
 several employee- related factors interact to
determine his or her remuneration . There include
performance , seniority , experience , potential ,
and the sheer luck .
 Concepts of wages :
 Minimum wage is the one which provides
not merely for bare sustenance of life , but also
the preservation of the worker . For the purpose,
the minimum wage must also provide for some
measure of education , medical requirements and
amenities. Minimum wage may be tied by an
agreement between the management and the
workers , but is usually determined though
legislation .
 Fair wage :
 fair wage is understood in two wags . In a
narrow sense , wage is fair if it is equal to the
rate prevailing in the same trade and in the
neighborhood for similar work . In a wider
sense , it will be fair if it is equal to the
predominant rate for similar work throughout the
country and for trades in general .
 Living wage :
 living wage is a step higher then fair wage.
Living wage may be described as one which
should enable the wage earner to provide for
himself/herself and his / her family not only the
bare essentials of life like food , clothing and
shelter, but a measure of frugal comfort including
education for children; protection against ill
health; requirements of essential social need ;
and/or measure of insurance against the more
important misfortunes including old age.
 Conclusion :
 Remuneration occupies an important place in the life
of a employee . His or her standard of living , status in the
society , motivation , loyalty and productivity depend upon
the remuneration he or she receives. Remuneration is the
only HR activity which has its impact on all other
functions regarding personnel. Remuneration strategy
must gel with corporate strategy. If corporate strategy is to
invest to grow, remuneration strategy should be so
designed to stimulate entrepreneurship . If Business
strategy is just to manage earnings, remuneration strategy
should reward management skills. Finally, remuneration
strategy should stress on cost control, if corporate strategy
is to reinvest elsewhere.

Thank you