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What Are the Different Types of Remuneration Systems?

Esther Ejim
By Esther Ejim
Updated May 16, 2024
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The key focus in understanding the different types of remuneration systems is the fact that the basic underlying principle in all manner of remuneration for work done involves some form of economic-related compensation in return for the services performed. Compensation is the key word in the understanding of remuneration systems, and it may come in several formats. It may be in the form of basic salary, deferred compensation, benefits, commission or incentives.

Base pay or salary is the most common type of remuneration systems, because it is the more immediate payment for services performed. This type of remuneration system is classified as a basic rate scheme since the exact amount of pay in this remuneration 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 the remuneration. For example, if the contract states that the employee will be paid on the first of every month, then the employee may have a right to complain when the first of the month passes and he or she has not received the expected payment.

Another aspect of remuneration systems that is less immediate than the salary or wages is the deferred compensation system that is accumulative in nature. This is still tied to the salary, because it is still part of the compensation accrued by the employee over the course of employment. Deferred compensation may include pensions and other types of retirement packages that employees may earn if they fulfill certain terms or conditions in the employment contract. In this sense, this type of remuneration system may be classified as incentive-based or as a benefit of employment.

Insurance is another type of remuneration system that is may be classified as a benefit. To a large extent, benefits do not have to be monetary as they can come in many other beneficial and compensatory forms that do not necessarily involve cash, yet still economically benefit the employees. 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 does not usually involve the remittance of physical cash to the employee, since the employer usually takes care of any payment related to the accommodation directly. Still, the arrangement offers the employee an economic benefit by relieving the employee of the burden related to housing expenses.

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