Elements of Remuneration Policy

Remuneration is made up of three sets of elements which can be grouped into primary, secondary and tertiary elements.

Primary elements of remuneration

Primary elements of remuneration are the pay in money or pay in kind, which includes all bonuses and allowances, holiday allowance, shift work premium, etc., granted directly to the employee in person. Of this gross pay, a proportion is deducted at source for collective charges levied on employees, tax, social security and pension contributions, etc., leaving the net pay actually received by the employee;

Employee compensation and benefits are basically divided into four categories: Primary elements may be inform of guaranteed pay or variable pay.

Guaranteed pay is the reward paid by an employer to an employee based on employee/employer relations. The most common form of guaranteed pay is the basic salary.

Variable pay refers to reward paid by an employer to an employee that is contingent on discretion, performance or results achieved. The most common forms are bonuses and sales incentives.

Secondary elements of remuneration

Secondary elements of remuneration are those elements which, although their cost is apportioned on an individual basis, do not become available to the employee personally.

These are the employer’s share of social security and pension contributions and any other contributions. Paid time off, such as leave of absence and annual holidays, is sometimes also included in this category.

Tertiary elements of remuneration

Tertiary elements of remuneration are the general staff costs borne by an employer, such as a staff association, company newspaper, company shop, canteen facilities and the cost of meal breaks. It is difficult to apportion the cost of these elements on an individual basis.

This categorization of remuneration elements is neither universally accepted nor watertight. A number of elements such as various fringe benefits (e.g. the right to take annual holidays in the form of scattered days off, medical care, pension contributions and education costs) are difficult to categorize. The primary and secondary elements together constitute gross wage costs .These can be calculated per hour worked, either per employee or for all the company’s employees combined.

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