Glossary of Human Resources Management and Employee Benefit Terms
Total remuneration is the complete sum of an employee’s annual compensation package. Typically, it includes base salary (or wages), bonuses, commissions, stock options, and pension plans, as well as other financial compensation and non-financial benefits (gym membership, etc).
A total remuneration package means the employer has set in place a policy that articulates how they are going to compensate an employee. A total remuneration package includes both financial and non-financial compensation and is considered taxable.
A total remuneration package policy is set up to take into account the organization’s:
Philosophy or values of fairness and equity
Desire to improve employer-to-employee relationships
Investment in and efficient use of recruitment and training costs
Total remuneration includes both financial compensation and non-financial compensation.
Financial compensation included in total remuneration includes the pre-tax cash value of:
Salary, hourly wages, or piecework pay
Incentive pay, commissions, and tips
Living and food stipends
Non-financial compensation included in total remuneration may include:
Flexible work hours
Child care assistance
Use of a company car
Mental health counseling
The line between non-financial compensation and indirect compensation can be a little gray, especially when an organization does not share the cash equivalent of benefits with employees. However, employers have the authority to decide which non-financial compensation benefits they include in their total remuneration package.
There are two basic types of remuneration (compensation): direct and indirect.
Direct remuneration is simply a different term used to explain financial compensation and includes salary, incentives, bonuses, travel expenses, etc.
Indirect remuneration is a different term for non-financial compensation and includes educational opportunities, child care assistance, health insurance, etc.
An employer has the choice whether to offer their employees direct or indirect remuneration.
The advantages of total remuneration are for both employers and employees, and include:
Being a powerful recruitment tool to demonstrate the value of the employer’s benefits package.
Employee satisfaction, as a result of the employer being transparent about compensation and seen as offering an equitable, consistent remuneration package.
The promotion of an affordable, long-term sustainable investment into pay levels that take into account the market and the employee’s role.
The encouragement of compensation that reflects an organization’s values, goals, and strategies by supporting and rewarding the actions and behaviors of their employees.
An employer may choose to provide their employees with a total remuneration statement as part of their payroll documents. Doing so has some additional benefits, such as:
Displaying and communicating the true cost the employer is investing into its employee.
Establishing the value that the employer places on the employee.
Allowing employees to compare their compensation to the market.
Total remuneration includes both financial compensation (wages, incentives, bonuses, tips, pension plans, etc.) and non-financial compensation.
Remuneration only includes base wages or salary and any other financial compensation such as bonuses, tips, pension plans, etc., but not non-financial benefits such as those related to medicine, psychology, and lifestyle.
Often, the terms salary and remuneration are used interchangeably. However, technically there is a difference between the two.
Salary refers to the flat, base wages that are paid to an employee for their work.
Remuneration includes the base wages, but also includes other financial compensation such as commissions, tips, and bonuses.
There is no difference between total remuneration vs total compensation. These two terms mean the same thing. The term remuneration is simply more commonly used outside the US, while compensation is the term more commonly used in the US and Canada.