How Do Remuneration Packages Help HR?
A healthy relationship between an employee and employer is integral to the success of any enterprise. Do you know what the key to this healthy relationship is? It’s remuneration packages! You might be intrigued to know that 80 percent of employees wish to receive financial counseling aid from their company.
Financial struggles and crises substantially halt the productivity of employees. Ultimately, it’s the business that is going to suffer. However, this issue can be easily dealt with by introducing competitive remuneration packages.
Don’t know much about them? Well, all you need to do is stick with us till the end of this article.
What is Remuneration?
It is a competitive offering designed by an organisation for its employees. It focuses on providing additional non-monetary benefits to employees on top of their base salary. The non-monetary benefits can be anything from gas or electricity allowance to rewards such as work flexibility, company car, or child care stipends.
According to a study held in 2021, 73 percent of employees leave their job for a better salary package. So, remuneration is critical in recruiting top-quality employees and making them stay at one’s company.
Types of Remunerations
There are three main types of remuneration, as they can be both monetary and non-monetary. It’s the company’s choice to design an offering that either has one of the types or is an amalgam of the three compensations.
1. Base Salary
As the name suggests, it’s the minimum amount an employment contract offers. The employee receives that fixed amount every month on a designated date.
The amount for base salary is based on job responsibilities, the complexity of the role, working hours, and additional factors that vary for each company. The company has to pay the employee monthly, even if they fail to meet the expectations.
2. Variable Pay
Unlike traditional salary, variable pay is compensation paid to employees based on their performance. Usually, variable pay is an additional compensation over the fixed salary. Variable pay is a great way to encourage productivity in employees.
It encourages productivity and assists employees in going above and beyond to reach common company goals. Employees can be compensated for their exceptional performance in the form of bonuses, incentives, and commissions.
Offering variable pay might not be as easy as it sounds. Companies have to ensure that they have a credible system that monitors the performance of employees and rewards them accordingly.
3. Non-monetary Compensations
For variable pay, the compensation has to be in cash. However, if a company wants to reward its employees with products and services rather than cash, then it is referred to as non-monetary compensation.
Non-monetary compensations are offered on top of the base salary as a reward when an employee hits exceptional performance marks. Health insurance, company car, restaurant vouchers, pension plans, and child care stipends are all some forms of non-monetary compensation.
Such compensations are more attractive for employees because they lift the burden of added tax which comes with variable pay.
What is a Remuneration Package?
It’s critical to design a remuneration package that complies with the policies of the remuneration tribunal of Australia. On top of that, companies have to make sure that the compensation packages are advantageous for the employees and the company itself.
Don’t know how to do that? Well, that’s what we are here for. To design a competitive and worthy remuneration package, your company’s HR department has to consider the following aspects:
- The package shall cover base salary and additional benefits.
- Added benefits mainly comprise life insurance and superannuation, i.e., retirement pension benefit funds.
- Allowances and leases for motor vehicles shall be a component of the package.
- Supplementary payments and individual benefits that your company can offer shall be considered.
What is the Difference In Between Remuneration, Wage, and Salary?
People often confuse remuneration with wage and salary. It’s vital to clear this misconception because all of them depict a different meaning and are not related to each other.
It is the total compensation that an employee receives for his services. It not only comprises the base salary but also added non-monetary benefits that are offered in exchange for exceptional performance.
Wages are payments received by employees either at an hourly or a daily rate for their services. Non-monetary benefits are not offered with wages.
It is a fixed amount paid to employees, either monthly or yearly, based on their employment contract. Again, non-monetary benefits are not a part of salaries.
How Do Remuneration Packages Help HR?
Human Resources plays a very vital role in the growth and success of a business. So, they have to execute their responsibilities efficiently and effectively. Remuneration packages are in the best interest of a company as they substantially assist the HR in various aspects, discussed below:
- Attracting Talent
It’s challenging to stand out among competitors and attract top talent to your enterprise. Designing an exceptional remuneration package that aligns with the needs of employees and guarantees better offerings than competitors makes a huge difference. Ultimately, attracting top talent and strengthening your company’s employer branding strategies makes it possible.
- Engaging the workforce
Businesses with a highly engaging workforce tend to increase their profit rates by 21 percent. When a company adequately compensates its employees, they feel valued, and their morale rises.
Ultimately, their productivity surges many times, and they perform better at work. So, remuneration packages can help HR build a highly engaging workforce and positively impact the company’s success.
- Boosting Loyalty
Many companies struggle with retaining their employees. They end up wasting their money and time recruiting new employees again and again.
Commitment and loyalty in an employee can be boosted by offering competitive remuneration packages. Employees will choose to stay with the company when they are satisfied with their salaries and compensation packages.
- Increasing Profitability
HR can substantially surge the profitability potential of its company by introducing competitive compensation packages. When employees are satisfied, productive, and committed to their job, they’ll ultimately add value to the profitability of a business.
Remuneration packages are exceptionally beneficial in overcoming common challenges faced by HR. Ultimately, they assist in paving a road toward guaranteed success.
Besides compensation packages, HR can drive exponential growth for its business by utilising management software tools like Employee Connect. Such software makes workflows immensely easier and effortless through its cloud-based interface and flexible modules.
In the world of HR software, EmployeeConnect continues to be one of the leading industry providers of innovative solutions. We helps Australia business owners and people managers be more efficient, cost-effective and compliant by taking the hassle out of HR and payroll admin. If you spend more than an hour every day on HR administration (like on/off-boarding, performance review, or employee timesheets), then EmployeeConnect is here for you.