Employee salary ranges are increasing with inflation and the rising rate of resignations, also known as the “Great Resignation.” This means companies are getting competitive with flexible work hours and significant benefits to attract a solid full-time employee.
In simple terms, a remuneration package is the group of benefits that an employee receives when they work for a company. This package goes beyond your average salary and includes things like non-cash benefits and flexible work hours. It’s extremely rare to find businesses that pay only a paycheck and nothing else to their team members. There are countless different types of remuneration strategies and packages that can be used to compensate your employees. An attractive remuneration package can attract the best talent in the job market.
By enabling a flexible work schedule and adding perks to your remuneration package, your prospective employees are more likely to go with you rather than another employer.
The value of a remuneration package isn’t just measured in its financial worth, with many companies working to provide benefits that don’t cost anything but still offer value to team members. Non-cash incentives make up a decent chunk of remuneration packages.
This can include flexible working hours, giving you the chance to build a package that will appeal to new employees without spending a fortune in the process.
These non-cash incentives combined with a solid salary package ensure skilled candidates are attracted to and committed to your company. But you have to get creative to find the right incentives that will attract talent to your company.
Creating a solid remuneration package isn't always easy, but we're here to help demystify the process. This article will cover the types of remuneration, why you should create a strong remuneration plan, what is included, how you can calculate your salary, and the advantages and disadvantages to watch for.
Types of Remuneration
As mentioned above, remuneration can come in many different forms.
You can find some of the most common types of remuneration below, but it will also be worth thinking about the specific options that you can offer to improve the value of the jobs you have on offer.
Base Salary: The money that each employee makes as their base salary is the main element of their remuneration package. While you have to pay your employees a salary, this can still be used as a benefit that will make your role more appealing. A competitive salary is a direct compensation strategy that can sway potential candidates to go with you rather than your competitors.
Cash Incentives: Cash incentives, like bonuses and commissions, can be a great way to encourage more people to apply for a job. This type of remuneration is usually based on performance, but you can outline what your employees can expect to receive from this in your job descriptions.
Stock Ownership: It’s long been common for companies to offer stocks to their most valuable employees. You can add this to a remuneration package during the negotiation process, providing each team member with their own slice of the business.
Benefits: Added benefits like a medical plan, vacation time, flexible work hours, company car, childcare, and gym memberships can all be great ways to boost your remuneration package. Benefits like this are very popular, giving your employees a lot more from their role with you.
Flexibility: This is an added benefit that can’t be quantified. However, assuring prospective employees that you are willing to be flexible with them and give them freedom when it comes to their working hours and PTO can be invaluable. Many employees value this over a salary or benefits package. Though, of course, you will need to offer those as well.
Why Should You Consider Remuneration Packages for Your Company?
It can be all too easy to overlook the importance of a strong remuneration package when you’re deciding what your employees should get for their work. The fact that it can cost extra money to do this is a big reason for many companies ignoring employee benefits packages, but this spending can be well worth it.
Not only will your employees enjoy more cash incentives for their work, but they will also know that they will be rewarded when they work especially hard. This can improve your productivity and decrease employee turnover dramatically.
Of course, though, it goes further than this, and many companies find that they are able to make big steps when they give their employees a comprehensive remuneration package. Direct compensation is always nice, but additional benefits are also a market standard.
Also, salary increases should be figured into the budget and should be given related to the duration of employment and increases in responsibilities. These salary increases don’t necessarily need to be part of the remuneration package, but if they are guaranteed and generous it wouldn’t hurt to include them.
One of these steps comes in the form of more applications for the jobs you have on offer. With most companies offering packages like this, it makes sense that it would be harder for employees to secure applications without offering them themselves.
What Is the Difference Between Salary and Remuneration?
People often get salaries and remuneration packages confused with one another. These two elements of employment aren’t too different, though a comprehensive remuneration package will provide more to your team than an annual salary.
A person’s salary is the main element of their remuneration package, but there will be more to this than the money they make. These packages offer new benefits and cash incentives to employees, providing something that goes far beyond making money.
In many cases, a remuneration package will go far beyond an employee’s legal entitlements.Here is a breakdown of what a Remuneration package looks like for the MissouriCorrections office.
Interesting how that all breaks down, isn’t it? It is helpful to get an idea of how other companies break down their package. You need to watch the industry standard for your location and industry to ensure you’re meeting or exceeding expectations.
What Is Included in a Remuneration Package?
Remuneration packages can include a lot of different benefits, including the annual salary that your employees receive. Employee performance will usually factor into this, but the whole thing will go beyond financial compensation.
Let’s take a look at some of the most popular elements of a competitive remuneration package to get you started.
Cash Incentives: Cash incentives are one of the most popular elements of a remuneration package. This can include commissions and bonuses, giving your employees more when they work harder. This is most common with sales teams, to ensure that they make more sales.
Company Cars: Providing your employees with a car to drive can be a great way to save them a lot of money. This sort of benefit is often offered with lower salaries, with the use of a company car being considered a form of payment.
Health Insurance: Health insurance can be crucial in countries like the US. Companies often provide this benefit as part of a competitive remuneration package, ensuring that their employees are always healthy enough for work. Employers based outside of the US may not need to worry about this specific perk.
Life Insurance: While it doesn’t benefit the policyholder, life insurance is a good way to provide for families if the breadwinner in the house passes away. This is great for businesses that want to attract young employees with families.
Career Progression: Most people don’t like the idea of starting a job that they won’t be able to progress within. This makes it very important for modern businesses to offer career development options as part of their remuneration packages. If you can ensure a clear career path that is advantageous employees are likely to stay with you for many years. Professional development is another important aspect of this.
Flexible Working Hours: Many businesses don’t need their employees to be working at set times each day. This can make it possible to include flexible working hours as part of their employee remuneration packages. This is a huge perk to employees and can help with productivity and mental health.
Gym Memberships: Keeping fit and active can feel just about impossible in the modern world, especially for those who spend most of their time working behind a computer. This makes gym memberships a very popular inclusion in most remuneration packages. It can also benefit you as an employer if you pay part of your employee's insurance premiums.
Stock Options: As mentioned above, providing a benefit like stock ownership can be a good way to encourage people to apply for your roles. This can be based on employee performance or something you give to everyone. Offering this as a perk also ensures that employees are bought into the company goals and will work hard to ensure the business succeeds.
Retirement Plans: Encouraging your team members to retire at the right time is very important. Providing retirement plans and pensions can be a good way to help with this, while also making your remuneration package more appealing to employees. You can match the employee’s 401k, or get more creative with how you will contribute to their retirement.
Childcare Support:It is becoming increasingly common for both parents in a partnership to both have full-time jobs, making it hard to look after young children. Many employers provide childcare support as a perk to solve this problem. Another solution to the issue of childcare is to offer flexible hours or remote work so that employees can pick up children from work and be home when needed.
How Do You Calculate Remuneration?
It can be a challenge to figure out exactly how much to give your teams when you are building their remuneration package. Your employee’s annual salary is the most important element of this, and you need to make sure that you are offering salaries that are both competitive and affordable for your business.
You have three choices here: you can trail the market, meet the market, or lead the market.
Each comes with its own benefit, with trailing the market being cheaper and leading the market being more appealing to new employees and meeting the market falling in the middle. This is why some companies offer a better employee benefits package than others.
It’s best to start this process by learning what other companies pay their employees. From here, you can figure out how much you want to pay your team members depending on where you want your business to sit.
Of course, at this point, you should also think about the other benefits you can offer your employees. Trailing the market can be alright when you have a bulky benefits package that will close the gap between the pay you offer and that of other companies. Likewise, though, you may have to offer a smaller remuneration package if you’re paying your employees a lot of money.
The Advantages and Disadvantages of Remuneration Packages
As with most of the things you do for your employees, remuneration packages come with both advantages and disadvantages. This makes it well worth taking the time to explore your options, but you should also think about how your packages could impact your business.
This is an important part of human resource management, especially if you want to provide flexible benefits. There are many benefits to having a strong remuneration package. Let’s talk about some of the main advantages.
Advantages of Remuneration Packages
Making Jobs More Appealing: Encouraging people to apply for your jobs can be a challenge, though a good compensation package can change this. People will be more likely to apply to your jobs if you offer a lot of perks.
Getting the Best Employees: Alongside getting more applications, you will also benefit from getting applications from the best employees. This can have a huge impact on your productivity and ability to make money, while also improving your services and enabling you to offer more to customers.
Improving Employee Retention: Hiring employees can be expensive, and this means that most employees will want to keep them for as long as possible. Offering unique benefits can help with this, giving your team members more reasons to stay with you.
Income Tax: While your employees will have to pay tax on their regular salaries, many elements of a remuneration package won’t be subject to income tax. Gym memberships are a great example of this, with many businesses being able to give their employees better deals than if they were to earn more money and buy memberships for themselves.
Improving Work-Life Balance: The working lives of your employees are important, but you also need to consider their life at home. Having benefits like life and health insurance can make it easier for your employees to have a good life at home.
Disadvantages of Remuneration Packages
Spending Money: Offering comprehensive remuneration packages to your employees will always cost money. Your best employees may be able to make this worth your while, but others won’t always achieve this. This means that you have to carefully balance your benefits with the price you will have to pay for them.
Lowering Salaries: It’s common for companies to lower their employee’s salaries to offer good remuneration packages. This can seem bad to some employees, even if they stand to gain more than they lose, and can make it harder to convince people to apply for your roles.
More Work for HR: Planning and distributing each element of your remuneration package will all be additional work for your human resources management team. This means that they will have to work extra hard to do their jobs and keep their employees happy.
As you can see, the benefits of a good remuneration package will often outweigh the negatives. However, there are some issues that you will need to consider and weigh before deciding about your compensation package.
If you promise a certain pay rate or benefit to your employees, you will not be able to take that away without major pushback. So, ensure that your plan is feasible before committing to it.
The disadvantages of this sort of effort are often worth it to ensure that your employees are happier in their jobs, but you can also take the time to make sure that you don’t have to deal with the negatives at all.
This will all get easier as time goes by and you’re able to shape your remuneration packages around your teams.
Are Remuneration Packages Worth It?
It can be hard to say for sure whether or not a comprehensive remuneration package will be good for your business. But it is almost certainly worth it to ensure that your team is happy. If you have the budget and bandwidth to improve your employee's benefits, why not pursue it?
It is crucial to sit down with your HR team and your finance department to ensure that your plan is affordable and aligned with your team’s efforts and expectations.
This sort of action can make it easier to push your team members to work harder, but it doesn’t always have this impact on businesses that don’t rely on excellent employee performance.
This means that you have to look at the benefits and the costs of remuneration packages to find options that will truly benefit you and your employees. Of course, though, this should be easy with so many options available to you.
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