Remuneration systems involve financial compensation for services rendered, including base salary, deferred compensation, benefits, commissions, and incentives. Base salary is the most common type, while deferred compensation and insurance are classified as benefits.
The key focus in understanding the different types of remuneration systems is the fact that the basic principle underlying all types of remuneration for work performed involves some form of financial compensation in exchange for services rendered. Compensation is the key word in understanding compensation systems, and it can come in many forms. It can be in the form of base salary, deferred compensation, benefits, commissions, or incentives.
Base salary or salary is the most common type of remuneration systems, because it is the most immediate payment for services rendered. This type of compensation system is classified as a basic rate scheme since the exact amount of pay in this compensation system is based on the exact terms of the contract between the employer and the employee. As such, the employee knows exactly how much to expect and at what time to expect compensation. For example, if the contract states that the employee will be paid on the first of each month, then the employee may have the right to file a grievance when the first month passes and the expected pay has not been received.
Another aspect of compensation systems that is less immediate than salary or salaries is the deferred compensation system of a cumulative nature. This is still tied to salary, because it is still part of the compensation accrued by the employee over the course of employment. Deferred compensation can include pensions and other types of retirement packages that employees can earn if they meet certain terms or conditions in the employment contract. In this sense, this type of remuneration system can be classified as based on incentives or as a benefit of employment.
Insurance is another type of compensation system that can be classified as a benefit. To a large extent, the benefits do not have to be monetary, as they can come in many other beneficial and compensatory forms that do not necessarily involve cash, but still benefit the employees financially. An example of such a benefit is the provision of housing to an employee as part of the employment package. This type of employment benefit generally does not involve sending physical cash to the employee, as the employer typically handles any housing-related payments directly. Still, the agreement offers the employee a financial benefit by freeing him or her from the burden related to housing expenses.
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