Differences between Compensation and Remuneration

26/08/2022 0 By indiafreenotes


The term Compensation is defined as something of value given in exchange for some other thing. Compensation can occur in two instances. The first instance refers to the monetary payment paid to someone for work carried out by that person. The second instance refers to the monetary payment given to a person who has suffered a loss or injury. The first instance represents an ideal employer-employee scenario. Thus, Compensation can refer to the payment given to an employee for his/her services or work performed. This type of Compensation is typically in the form of a salary or wages. The second instance can also be present in an employee setting. If the employee suffers any harm or injury as a result of performing work for the employer, then the employer will pay that employee Compensation.

Compensation can also include other forms of payment such as overtime payment, bonuses, payment to cover medical costs, and other miscellaneous payments. Some sources have defined Compensation to also include non-monetary payments. However, this definition will not really distinguish Compensation from Remuneration as we will see below. In the law too, Compensation refers to a form of monetary payment provided to a person who has suffered damage, harm, or injury. As mentioned before, Compensation is best understood as a monetary payment.


Remuneration is the total compensation received by an employee. It includes not only base salary but any bonuses, commission payments, overtime pay, or other financial benefits that an employee receives from an employer.

A job perk may or may not be a component of employee remuneration. An on-site gym or a generous vacation plan is perks but they aren’t money in an employee’s pocket. Remuneration may include direct payment of money or taxable fringe benefits such as personal use of a company car.



Compensation is paid to the employee in case of death of employee, physical injury, or mentally suffered during the course of employment. Remuneration is paid to the employee for the work done for his employer
Payment of the compensation is compulsory only in case of the death of employee, injury or mentally suffered during the course of employment. Remuneration is paid periodically to the employee on daily basis, weekly basis, fortnightly or monthly basis for the work done.
Payment of the Compensation to the employee is depended on the gravity of the injury he suffered but not according to the job position or job grade. Remuneration of the employee depends on the position of the job or grade of the job positioned in the organization hierarchy.
Payment of the compensation is one time settlement or for a certain period of time to the employee until He or she recovers from suffering . Payment of the remuneration is paid to the employee as long as he/she works for the organization starting from appointment to retirement
Payment of the Compensation varies from injury to injury suffered by the employee. Payment of the Remuneration varies from job to job position held by the employee in the organization.
Payment of the compensation provisions is same for all employees. Payment of the remuneration provisions is different from job to job.
Payment of the compensation depends on age of the employee and the injury he or she suffered. Payment of the remuneration of the employee depends and varies from the job title, job position or job experience
There is no other name for the word employee compensation Other names for employee remuneration are   wages or salaries.
There is separate and dedicated law for payment of compensation.

Workmen’s Compensation Act, 1923

There is separate and dedicated law for payment of Remuneration.

Payment of Wages Act, 1936