Remuneration: Defining Employee Compensation

What Is Remuneration?

Remuneration is the total compensation received by an employee including base salary, bonuses, commission payments, overtime pay, and any other monetary benefits that the employee receives.

Perks such as an on-site gym or vacation time aren't counted as compensation because they don't involve money paid to the employee. However, benefits such as the use of a company car may count as remuneration and may be taxable income. Tips, although they are paid by customers rather than employers, count as compensation.

Determining Compensation

At the executive level, remuneration can include options, bonuses, expense accounts, and other forms of compensation detailed in an employment contract. The total depends on many factors, including:

• The employee's value to the company. Employees with in-demand skills are likely to get more perks.
• The job type. Some are straight hourly or salaried positions, while others offer base pay plus commissions, bonuses, or tips.
• The company's business model. Some companies pride themselves on their generous employee remuneration and may offer bonuses, employee stock options, and 401(k) plan matching contributions.
• The general state of the economy. If jobs are plentiful but talent is scarce, companies offer benefits to attract the best candidates, translating into higher remuneration.

Types of Remuneration

The most common type of remuneration is in the form of wages or salary. Many sales positions offer a commission on sales or a percentage of the amount sold.

Positions in the food service and hospitality industries often rely on tips, as the minimum wage for these jobs is usually substantially less than the state's general minimum wage.

Other benefits may include health insurance, retirement plan matching contributions, sick days, personal days, and reimbursement for work-related travel or other expenses.

The Golden Hello

A company anxious to attract a person with a unique skillset or an outstanding reputation may offer yet another type of remuneration: the golden hello. This is a signing bonus, due when the employee starts the job.

Indirect Remuneration

Another type of remuneration at the executive level is deferred compensation, which sets aside a portion of an employee's earnings to be redeemed later. One example is a retirement plan that includes an employer matching a certain amount contributed by an employee.

Remuneration may also refer to the benefits an employee receives from the company, such as health insurance coverage, gym memberships, and the use of a company mobile device or car.

Minimum Wage Laws

The minimum wage is the lowest remuneration employers can legally pay most employees. The minimum wage varies by state, although the state minimum must at least equal the federal minimum wage of $7.25 per hour.

As of Jan. 2024, 22 states increased their minimum wages. Those with hourly rates of $15.00 or more include Maryland, New Jersey, New York, California, Connecticut, Massachusetts, and Washington. Washington state boasts the highest state minimum wage of $16.28. In the United States, 47.8% of all workers earn less than $15 an hour and reside in one of twenty states that still use the federal minimum wage of $7.25 an hour.

The Bottom Line

Remuneration is the total compensation earned, such as salary, bonuses, commission payments, overtime pay, or other monetary benefits. Federal law requires that most workers receive a minimum hourly wage, currently $7.25, although many states pay a higher rate.