Employee Remuneration

04/07/2022 0 By indiafreenotes

Remuneration may be defined as money received in the performance of work, plus many kinds of benefits and services that organisations provide their employees. Money is a direct compensation, known as wages, gross pay. Benefits are indirect compensation, it includes, life insurance, accident insurance, health insurance, employees contribution to retirement benefits such as gratuity, pension, pay for vacation, pay for illness/ sickness, simply it includes payment for welfare and social security.

It must be in proportion, to what services rendered by him/her to an organisation. Remuneration occupies an important place in the life of an employee. Therefore it must be adequate and fair. His or her all the needs should be satisfied by this remuneration. Employee remuneration is significant because of his contribution only the cost of production would be minimised. Remuneration or compensation is very important function of human resource management.

Remuneration is concerned with needs, motivation and rewards. Managers, therefore, analyse and interpret the needs of their employees so that reward can be individually designed to satisfy these needs. It is very difficult for human resource management to fix wages and wage differentials, salaries acceptable to employees and their leaders.

Wage or salary is very important from employees point of view because it contributes a major share of their income. Pay is a powerful motivational factor. It provides recognition, a sense of accomplishment, social status.

Remuneration Objectives

(1) To acquire qualified competent personnel

(2) To retain the present /existing employees

(3) To secure internal and externals equity means similar wages for jobs within an organisation. External equity implies payment of similar wages to similar jobs in comparable organisations.

(4) To ensure desired / positive behaviour of employees.

(5) To enhance employee morale and motivation.

(6) To keep control on labour and administrative cost.

(7) To protect in public as progressive employers and to comply the wage legislation.

(8) To satisfy people/employees to reduce the labour turnover, grievances and frictions over pay inequities.

(9) To pay according to the content, challenges, difficulty, risk of the job and according to the effort and merit of the employees.

(10) To facilitate pay roll administration of budgeting and wage and salary control.

(11) To simplify and facilitate collective bargaining procedure and negotiations.

(12) To facilitate growth and survival of the organisation and to promote organisation feasibility.

Remuneration Components:

Basic Wage:

It is a stable wage paid over a period of time; monthly, weekly or daily. It can also be considered as the normal rate for a specified level of output. Thus, for a particular job involving its varied requirements such as skills and training, it commands a price to get it done.

Dearness Allowance (DA):

The system of DA payment was used for the first time after World War I to enable the workers to meet the steep rise in prices of essential commodities such as foodstuffs. Although called by various names, the special allowance thus paid aimed at neutralising the high cost of living and protect the real wages of the wage earners. In other words, the major purpose of DA payment was to provide relief to the workers confronted with inflationary conditions by attempting to offset the cost of living with additional allowance.

Usually, the consumer price index (CPI) is issued to link DA with the cost of living. However, there prevail varying practices with respect to the fixation of DA across industries, regions, sectors and governmental and private undertakings. As National Commission on Labour (NCL) reports, “In some cases it was linked to the Working Class Consumer Price Index in others it was not. It was at flat rate and was applicable in some cases to all employees irrespective of their wages; in others, it varied according to wage or salary slabs. A graded percentage, linked to wages or salaries, was also prevalent.”


The overtime meets the exigencies of increased work load. Frequently, on working days, overtime rates are one and a half times the normal wage, while on holidays; these rates are two times the normal wage. However, in many work situations in India, it is used to accomplish vested interest to increase earnings. Indeed, the normal work is not done by workers unless their supervisors sanction the overtime.