Definition: Remuneration is a payment received in exchange of services provided. It is a sum of money that serves a compensational purpose.
What Does Remuneration Mean?
In an organizational context, remunerations are given to individuals in exchange of services provided either as employees or as independent contractors. These remunerations can be variable or fixed depending on the nature of the agreement. Some remunerations are variable by nature, as in the case of technicians and occasional hires like for maintenance tasks or one-time jobs. In other cases variable remunerations are calculated based on the number of hours worked at a predefined hourly rate.
In other cases, remunerations are fixed, as in the case of salaried employees. On the other hand, these employees can also have both fixed and variable remunerations when the compensation structure defined by the company that hired them includes items like commissions and bonuses.
These remunerations are subject to taxation and in some cases these taxes are directly deducted from the payment. Overall, the total remuneration an individual receives can contain different items like wages, commissions, bonuses, stock options and any other economic incentive.
Example
Cold Air LLC is a company that provides maintenance services for industrial and domestic air conditioners. The company’s current staff includes the General Manager, a Sales Manager and 3 technicians. It is a small business that has been running for 2 years. Currently, the General Manager’s salary is $3,000 a month, plus a $300 bonus tied to performance.
On the other hand, the Sales Manager earns a monthly salary of $2,000 a month plus a 1% commission on all closed sales. Finally, technicians earn $1,800 a month plus a bonus of $20 per each service completed successfully. Each of these employees has a different remuneration structure. The General Manager can get a total gross remuneration of $3,300 per month if he reaches the expected performance.
On the other hand, the Sales Manager can go as high as he possibly can if he sells more services but the company normally sales $20,000 a month, which means he normally gets a $2,200 remuneration per month. Finally, the company sells an average of 50 services per month, that means technicians normally earn (if the number of services delivered is divided equally) a total per-month remuneration of $2,120.
