Tag Archives | employment

Remuneration Definition

See Also:
Pension Plans
Cafeteria Plan
How to compensate sales staff
Passive Income
Electronic Funds Transfer (EFT)

Remuneration Definition

We can define remunerations as compensation for employment services. Remuneration can include hourly wages, fringe benefits, salary compensations, and other forms of compensation such as stock options and cash bonuses. Strategies differ across industries and companies.

Remuneration Strategy

A company’s remuneration strategy, or compensation strategy, serves as the basis for planning and addressing compensation issues throughout the organization. Compensation strategies vary across industries and even within companies, depending on the nature of the work and the level of the employee in the hierarchy. Remuneration strategies should include both long-term and short-term incentives, and should include both monetary and non-monetary compensation.

For instance, a remuneration strategy should entail a mixture of long-term and short-term incentives, and a mixture of monetary and non-monetary compensation. Lower level employees should receive more short-term monetary incentives, and to a lesser degree long-term non-monetary compensation. Whereas senior employees should receive a greater proportion of long-term non-monetary compensation, and to a lesser degree short-term monetary compensation.

Basic Remuneration

The most basic type of remuneration is periodic compensation. Under this type of pay plan, compensate workers for spending time at work. Pay rates can differ due to skill, seniority, or education level. With this type of remuneration, there is no direct connection between performance and compensation. Motivate the workers with the prospects of being promoted to a higher pay rate, and avoid demotion and dismissal.

Performance Based Incentives

In certain work environments, it is more appropriate to evaluate and compensate employees based on performance and results. Examples of performance based incentives include merit pay, contingent pay, and piece rate pay.

Merit pay is an incremental pay increase achieved after reaching a certain performance level. For example, merit pay is a pay raise. Contingent pay refers to pay received after achieving a specific objective. Contingent pay may complement a base-salary or wage. An example of contingent pay is a bonus received for hitting a certain sales target. Piece rate pay refers to a flat rate earned for completion of individual units of production or work. For example, a seamstress in a shoe factory might earn a certain monetary amount per shoe. That is piece rate pay.

Another form of incentive based on performance is commission. Employees working on commission earn income based on sales of company products. For a more detailed look at issues regarding commission, see the section below entitled Sales Commission Structures.

Profit Sharing Policy

A profit sharing policy at a company encourages the employees to consider the overall goals and performance of the organization. Profit sharing may be earned as cash, shares of company stock, stock options, or stock appreciation rights. It may be earned in the current period or it may be deferred to a later period. Allocate profit shares among employees based on seniority or other criteria. The idea is to incentivize employees to strive towards success and performance not only at their own individual level but for the company as a whole.

Non-Financial Remuneration

Employees also benefit from and appreciate non-financial forms of compensation. Examples of non-financial remuneration include awards for recognition, a pleasant work environment, opportunities for advancement, employee buy-in in decision-making processes, perks, and fringe benefits.

Sales Commission Structures

Offer employees performance based incentives as part of their compensation. For example, many salespeople work on commission. These sales people earn a certain percentage of each sale and therefore motivates them to sell more. But there are some issues to consider when establish the sales commission structure of employee compensation.

Many companies offer salespeople commission as a percentage of the selling price of the product being sold. This essentially motivates the salesperson to focus on selling the most expensive products so as to earn the highest amount of commission. However, this may not always be the best thing for the company as a whole since the most expensive products may not be the most profitable items.

One way to effectively incentivize sales employees in a way that maximizes the company’s profitability is to pay commission based on a percentage of the product’s contribution margin. Define contribution margin as selling price minus variable production cost. A product with a higher contribution margin is more profitable than a product with a lower contribution margin. Incentivizing sales employees to sell the products with the highest contribution margins – regardless of the selling price – can align the goals of the salespeople with the overall goals of the company.

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Remuneration Definition, remuneration strategy

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Remuneration Definition, remuneration strategy

Source:

Barfield, Jesse T., Michael R. Kinney, Cecily A. Raiborn. “Cost Accounting Traditions and Innovations,” West Publishing Company, St. Paul, MN, 1994.

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The Power of Connections

AmandaStibbsco.

Laura Koch (SCFO) and Courtney Sheaffer (Stibbs & Co.)

We had a great time catching up with our friends at Stibbs & Co. at lunch last week. The power of connections is huge, and it is amazing how many ways you can help one another. Just by having a quick lunch, Courtney Sheaffer and I reconnected and shared connections that might help the other. In business, reconnecting periodically is more than building a personal relationship. It strengthens business ties and helps keep the other in mind while meeting new people. After all, word of mouth is still one of the strongest ways to meet people who are great at what they do.

I would like to introduce my network to one of Stibbs & Co.’s new attorneys, Courtney Sheaffer (pictured above on the right).  Even though we are in different industries, we both benefit greatly from our relationship. I can recommend her and Stibbs & Co. for the following:

The Power of Connections

Remember to keep in mind the importance of building your trusted network of people from other occupations. As your network grows, you can cross-connect and refer individuals that you have a strong relationship with. It was a past client that reconnected Courtney and I, so I wanted to bring this up to our Strategic CFO community!

Need guidance in networking? Download your free Networking for Introverts guide and start building your network today.

the power of connections

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Employment in Services to Dominate US Job Growth

The US Department of Labor issued a report yesterday detailing expected changes in US job growth or employment over the next decade.

Employment in Services to Dominate US Job Growth

The US expects service related jobs to constitute virtually all (96%) jobs created through 2018. The health care industry employment constituting a significant portion.

Whereas, the US expects manufacturing employment to continue its long decline. The recent recession accelerated it to the tune of two million manufacturing jobs.

In addition, the US expects a third of new job openings to require educational attainments past the high school level.

All in all, this report seems to confirm that the basic trends in the US economy over the last four decades will continue. In that time, the country has moved from an exporting creditor nation with a large manufacturing base to an importing debtor nation heavily dependent on the technical and financial service industries for economic growth.

Click here for the actual report.

If you want to determine which candidates are the right fit for your company, then use our 5 Guiding Principles For Recruiting a Star-Quality Team.

US Job Growth

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US Job Growth

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