Determine what the ideal Components of Remuneration system for a company is one of the strategic tasks of the Human Resources departments of companies. A key point to motivate the employee and avoid the brain drain.
Although the term can be confused with that of salary, the remuneration system does not refer only to the receipt of a fixed Wages and Salary at the end of the month. In fact, the worker can be compensated in many other ways: in the form of incentives, Non-monetary benefits, training, and so on.
What is a remuneration system?
A remuneration system is a method that determines how the worker receives payments and other compensation for tasks performed for the company. Something that can vary depending on your productivity, your effort, your ability and your responsibility.
We find different types of economic remuneration:
- Salary: The mandatory money that all companies must pay their employees on behalf of their services and work activities. It can never be less than the minimum interprofessional salary when it is a typical 8-hour contract.
- Bonus: The payment of overtime that any worker can perform. You cannot demand more than 3 hours a day or abuse this function more than three times a week.
- Benefit: Amounts of money that the worker receives annually, is not part of the salary and is intended to cover needs that are not covered by the monthly salary.
- Commission: Percentage that corresponds to an employee according to the sales made.
Types of remuneration systems
When choosing a compensation system we can do it as follows:
- Depending on the periodicity with which the payment occurs: for example, if it is a monthly, biweekly or daily salary. Something closely related to the type of contract and the nature of the work.
- According to the form of causation: here we refer to variable salary, in-kind or fixed. The first has incentives, while the second adds other types of compensation, such as bonuses in the gym, medical insurance and the like. Regarding the fixed and as its name indicates, it lacks oscillations beyond overtime and the like.
- According to the elements included in the compensation: we distinguish between ordinary salary and integral salary. The ordinary only includes work done during the day, while the integral includes overtime, shifts, Fringe benefits, etc.
The importance of remuneration in HR
Choosing the right remuneration system in HR is key. Why? Because doing so motivates, retains and compensates employees (and consequently, prevent the brain drain). The worker, feeling that his work is valued and that he is financially incentivized, acquires a stronger feeling of belonging to the company and does not seek other job opportunities outside.
Characteristics of a good remuneration system
A good remuneration system must meet the following characteristics:
- That the incentive is directly proportional to the work done by the employee, so that if one is more productive than another, they receive a higher remuneration
- That the effort is rewarded in a notorious way and is not a mere formality of the company, that does not make too much difference, with what the worker already received.
- Make clear the business objectives and of each employee, to establish productivity ranges associated with increasingly higher remuneration ranges
- That HR knows the needs and concerns of each worker and there is a good communication climate.
How to choose a compensation system?
To choose the most appropriate compensation system for our company and our employees, we must take into account a series of variables. Namely:
The objective of the Components of Remuneration system
It is necessary to clarify the objective, that is, what we want to achieve by implementing a remuneration system. That is why we will have to be clear:
- If we want to have a payment system with a fixed salary and commissions in which there are remuneration scales based on productivity. This means that the payment of the incentives is fair and equitable.
- If we look for variable procedures that allow reducing or canceling the incentives when the worker assumes unnecessary risks to achieve his objective.
- If we want employees to be able to balance their work with their family life. Thus, for example, there are companies that have installed nurseries inside the building. This measure not only reduces work absences but also increases productivity.
- If we seek to attract and retain qualified personnel. An optimal remuneration system draws the attention of external personnel and motivates the internal.
Be aware of the type of company
Knowing deeply the characteristics of the company, we can decide if it can provide its workers with a variable remuneration, a flexible one, or if it has to be done in the traditional way, with fixed remuneration.
The company must be sufficiently solvent to allow itself to remunerate the workers in a variable way since, depending on its results, it will have to make a monthly payment or another for incentives. If you choose a flexible remuneration system, you must also reserve a game. Health insurance, daycare checks, restaurant tickets; they are also a business expense.
Know the type of work
Very diverse activities can be developed within the same company. Not all positions are capable of quantitatively measuring their results. For example, it makes sense for a salesperson who exceeds his sales targets to receive an additional amount that rewards this productivity.
However, in other jobs such as geriatric assistant, you do not work this way. The service is valued qualitatively and not based on the people it has cleaned. This worker may be motivated with a Component of Remuneration system adapted to his needs and in the correct performance of his duties.
The professional category | Components of Remuneration in HR
The professional group to which each employee belongs is important when it comes to receiving one salary or another. In order to receive a higher salary, the characteristics of the job, the functions that the worker is going to develop, the knowledge required or the responsibilities to be carried out are taken into account. The degree and experience of the employee will be taken into account, but they will not be conditioned that modify the salary. On the other hand, the first ones do.
In a practical way, if a journalist performs administrative tasks, they will be placed in the professional group of administrative officers, even though their training corresponds to another professional category.
We must start from the perquisites that no person can be hired for a salary lower than the Minimum Interprofessional Salary (SMI). Labor agreements by professional category and rank of the employee must also be taken into account. Although we will focus on this aspect in a specific section.
Simplicity and transparency | Components of Remuneration in HR
A good compensation system must be understandable and easy to calculate, otherwise, it will create a bad work environment. The worker can interpret that the company wants to hide something. To avoid this, the necessary documentation must be provided. This explains in a simple way where the figures come from or what concepts they correspond to.
A collective agreement to which the worker belongs
The collective agreement regulates the working conditions of employees. Each company can be governed by its own agreement and, if it did not have one, it would be the General Workers’ Statute that would have to be put into practice. These agreements regulate, for example, the number of hours of the working day, the minimum wage, vacations, and so on.
To know if the worker is paid according to his collective agreement, four factors must be taken into account. :
- Define his professional category well in the contract,
- Know the base salary and the agreed bonuses,
- Look at seniority,
- Take into account the allowances to which The worker has the right for short trips or long trips.
Conclusion | Components of Remuneration
The company can use the document management software to give all its workers access to the agreement to which they are governed so that they are aware of their working conditions. At the same time, they can consult their contracts, to know exactly how they are paid. Full access to the company’s document repository.
- 1 What is a remuneration system?
- 2 Types of remuneration systems
- 3 The importance of remuneration in HR
- 4 Characteristics of a good remuneration system
- 5 How to choose a compensation system?
- 6 The objective of the Components of Remuneration system
- 7 Be aware of the type of company
- 8 Know the type of work
- 9 The professional category | Components of Remuneration in HR
- 10 Legal aspects
- 11 Simplicity and transparency | Components of Remuneration in HR
- 12 A collective agreement to which the worker belongs
- 13 Conclusion | Components of Remuneration