Total Remuneration

What Is Total Remuneration?

Total remuneration is the overall sum of an employee’s annual compensation package.

Typically, remuneration includes base salary (or wages), bonuses, commissions, stock options, and pension plans, as well as other financial compensation and employee benefits.

Total remuneration is taxable, so the employer must withhold income taxes and other payroll taxes and report them on the employee’s W-2 form.

What Does a Total Remuneration Package Mean?

A total remuneration package is the employer’s policy that defines how they are going to compensate an employee. A total remuneration package includes both financial and non-financial compensation and is considered taxable.

A total remuneration package policy is set up to consider the organization’s:

• Philosophy or values of fairness and equity
• Business strategy
• Budget
• Corporate Social Responsibility goals
• Desire to improve employer-to-employee relationships
• Investment in recruitment and training costs.

What Is Included in Total Remuneration?

Total remuneration includes both financial compensation  and  non-financial compensation.

Financial compensation in total remuneration includes the pre-tax cash value of:

• Salary, hourly wages, or piecework pay
• Incentive pay, commissions, and tips
• Bonuses
• Stock options
• Pension plans, like a 401(k)
• Social Security and Medicare tax payments
• Relocation expenses
• Living and food stipends

Non-financial compensation in total remuneration may include:

• Flexible work hours
• Time off
• Educational and training opportunities
• Childcare assistance
• Recognition awards
• Catered lunches
• Use of a company car
• Gym membership
• Mental health counseling
• Life insurance
• Health insurance
• Retirement benefits

The line between non-financial compensation and indirect compensation can be a little gray, especially when an organization doesn’t share the cash equivalent of benefits with employees. However, employers have the authority to decide which non-financial compensation benefits they include in their total remuneration package.

What Are the Types of Remuneration?

There are two basic types of remuneration (compensation): direct and indirect.

1. Direct remuneration is simply a different term used to explain financial compensation and includes salary, incentives, bonuses, travel expenses, and more.
2. Indirect remuneration is a different term for non-financial compensation and includes educational opportunities, childcare assistance, health insurance, and more.

An employer has the choice whether to offer their employees direct or indirect remuneration.

What Are the Advantages of Total Remuneration?

Effective total remuneration is advantageous for both employers and employees. The benefits of total remuneration include:

1. Powerful recruitment tool to attract the best talent and demonstrate the value of the employer’s compensation package.
2. Heightened employee satisfaction, as a result of the employer being transparent about compensation and seen as offering an equitable, consistent remuneration package.
3. Promotes a long-term sustainable investment into pay levels that take into account the market and the employee’s role
4. Improved   employee engagement, performance, productivity, and retention rates
5. Positively reflects an organization’s values, goals, and strategies by supporting and rewarding the actions and behaviors of their employees.

An employer may choose to provide their employees with a total remuneration statement as part of their payroll documents. Doing so has some additional benefits, such as:

• Displaying and communicating the true cost the employer is investing into its employee
• Establishing the value that the employer places on the employee
• Allowing employees to compare their compensation to the market.

What Is the Difference Between Total Remuneration and Remuneration?

Total remuneration includes both financial compensation (wages, incentives, bonuses, tips, and pension plans)  and  non-financial compensation. Remuneration  only  includes base wages or salary and any other financial compensation such as bonuses, tips and pension plans, but  not  non-financial benefits such as those related to medicine, psychology, and lifestyle.

What Is the Difference Between Salary and Remuneration?

Often, the terms salary and remuneration are used interchangeably. However, there is a difference between the two:

• Salary refers to the flat, base wages that are paid to an employee for their work.
• Remuneration covers the base wages, but also includes other financial compensation such as commissions, tips, and bonuses.

What Is the Difference Between Total Remuneration and Total Compensation?

There is no difference between total remuneration and total compensation. The term remuneration is more commonly used outside the US, while compensation is the term more commonly used in the US and Canada.