Total remuneration refers to the comprehensive annual compensation and benefits an employee receives from their employer.
Total remuneration goes beyond base salary or wages, incorporating various additional forms of compensation, perks, and benefits. In the global business landscape, total remuneration must account for diverse market conditions, cultural expectations, and legal requirements across different countries.
Often expressed as a comprehensive sum, total remuneration allows employers to showcase the full value of their employment offerings, serving as a powerful tool for attracting and retaining top talent in competitive international markets.
Remuneration vs. salary
While often confused, remuneration and salary represent different aspects of an employee's earnings. Salary refers to the fixed amount of money paid to an employee regularly as compensation for their work. This predetermined sum is agreed upon at the start of employment and usually remains constant unless the employee receives a pay raise or promotion.
Conversely, remuneration is a more comprehensive term encompassing the total package an employee receives. Remuneration includes base salary and other financial and non-financial benefits such as bonuses, commissions, health insurance, retirement plans, and other perks.
Remuneration vs. compensation
While remuneration and compensation are often used interchangeably, they are not precisely the same. Global compensation typically refers to the monetary and non-monetary benefits employees receive in exchange for their services. Compensation includes wages, salaries, bonuses, and benefits directly tied to the employee's work performance or position.
Remuneration is a broader term that covers all forms of payment and benefits an employee receives, including those not directly tied to job performance. Remuneration can include additional perks like company cars, housing allowances, or educational benefits.
In a global context, remuneration should align with cultural norms, cost-of-living adjustments, and local legal requirements—these considerations can significantly influence pay and global employee benefits packages.
What is included in total remuneration?
Total remuneration can be broadly categorized into two groups: direct and indirect remuneration. It's important to note that total remuneration packages vary significantly across different countries and regions, influenced not only by company policies but also by local laws and regulations. Companies should also distinguish between statutory and supplemental benefits, depending on where they do business.
Direct remuneration
Direct remuneration refers to an employee's monetary compensation in exchange for their work. This includes:
- Base salary or wages. As the fixed amount an employee earns regularly, typically paid monthly or annually, these funds serve as the foundation of an employee's compensation.
- Bonuses and incentives. Additional payments based on performance, project completion, or company profitability can significantly boost an employee's earnings and inspire high performance.
- Commissions. Common in sales roles, commissions are payments calculated as a percentage of sales revenue. Commissions directly link an employee's success to their earnings.
- Profit sharing. Programs that allow employees to participate in a company's financial success through distributions or allocations of profits can be highly motivational.
Indirect remuneration
Indirect remuneration includes non-monetary benefits and perks that add value to an employee's compensation package, such as:
- Health and welfare benefits. This can include various types of insurance (health, life, disability) and wellness programs, which may differ significantly based on local healthcare systems and cultural norms.
- Retirement benefits. Contributions to pension plans or similar retirement savings schemes, depending on company policy as well as the country's social security system and local regulations.
- Paid time off. Including annual leave, sick leave, and personal days, which contribute to work-life balance, the amount and type of leave can vary significantly across different countries.
- Professional development. Opportunities for training, education, and career advancement—ultimately, an investment in employees’ long-term growth and value to the company.
- Perquisites (perks). Additional benefits or privileges such as company vehicles, housing allowances, or childcare support. These can vary widely based on local customs and tax implications.
- Stock options or equity grants. Ownership stakes or opportunities to purchase company stock are often provided as a long-term incentive. Depending on local securities laws and regulations, the availability and structure of these programs can look quite different.
What are the benefits of total remuneration packages?
Total remuneration packages offer a range of benefits for both employers and employees, enhancing the overall work experience and contributing to organizational success. According to BCG data from 2023, a global employee's decision to take a new job is based first on pay, followed by benefits and perks, and then hours and work/life balance.
Benefits for employers
Total remuneration packages are advantageous for businesses in the following ways:
- Talent sourcing. In a competitive job market, a comprehensive total remuneration package can help employers stand out and attract skilled professionals who will contribute to a company's success.
- Employee retention. Comprehensive remuneration packages help boost employee satisfaction and loyalty. Employees who feel valued and fairly compensated are more likely to stay with a company, reducing turnover and associated recruitment and training costs.
- Motivating and engaging employees. Including performance-based incentives, bonuses, and recognition programs in remuneration packages can encourage employees to excel. Employees who see a clear link between their efforts and rewards are more engaged and committed to achieving company goals. Conversely, a lack of employee engagement can be costly, accounting for an estimated $8.9 trillion in lost productivity worldwide in 2023.
- Enhancing productivity and performance. Well-structured remuneration packages incentivize employees to boost productivity and meet or exceed targets. By aligning compensation with desired outcomes, employers encourage behaviors that drive organizational success.
- Holistic employee support. Benefits such as ample paid time off, flexible work arrangements, and wellness programs help employees balance personal and professional responsibilities. This support enhances job satisfaction, commitment, and productivity—in fact, work-life balance has been linked to positive outcomes for both organizations and employees.
- Improving employer brand and reputation. Competitive remuneration packages enhance an employer's reputation as a desirable workplace. Also, positive feedback from satisfied employees can attract more candidates and enhance a company's standing.
- Differentiating from competitors. A well-designed remuneration package provides a competitive advantage by differentiating employers from competitors. Unique or innovative benefits can position a company as an employer of choice in its industry.
Benefits for employees
Employees benefit from total remuneration packages in the following ways:
- Comprehensive compensation. Total remuneration packages offer more than just base salary—including bonuses, incentives, and benefits—providing better financial security and stability.
- Financial security. When companies offer supplemental benefits (like employer-provided health insurance, retirement plans, life insurance, and disability coverage), employees are better protected against unexpected expenses, offering peace of mind for workers and their families.
- Work-life balance. Packages often include ample paid time off, flexible work arrangements, and wellness programs that support a healthy work-life balance, allowing employees to prioritize personal needs while meeting professional responsibilities. In fact, work-life balance has been linked directly to public health impacts and physical well-being.
- Career development. Opportunities for career advancement through tuition reimbursement, training programs, and mentorship initiatives help employees enhance skills and grow professionally.
- Recognition and appreciation. Programs that recognize employee contributions boost morale and motivation, fostering a positive work environment. Appreciation is equally essential, promoted by robust forms of indirect remuneration.
- Health and wellness. Access to gym memberships, wellness programs, and mental health services supports physical and psychological well-being for employees, reducing stress and improving quality of life.
- Retirement planning. Retirement savings plans like 401(k) in the U.S. or pension plans help employees plan for a more secure financial future. Plus, employer contributions can significantly enhance retirement savings.
- Flexibility and choice. When companies offer flexibility in benefits selection, employees can tailor their programs to meet individual needs, such as choosing different health insurance plans or allocating retirement contributions according to personal goals.
- Employee assistance programs (EAPs). These programs provide confidential counseling and support for personal or work-related challenges, giving employees the resources they need to address issues proactively.
By offering comprehensive total remuneration packages, employers create an environment that benefits the organization and its workforce, leading to increased engagement, satisfaction, and productivity—especially since data shows that benefits influence outcomes related to health and wellness, mental health, and employee satisfaction.
Offer compliant, competitive total remuneration packages to a distributed workforce
When building a global workforce, offering competitive total remuneration packages is vital—but the process is also complex and time-consuming for HR teams. Velocity Global's comprehensive Global Benefits Solution simplifies this challenge by enabling companies of all sizes to provide competitive, locally-tailored supplemental benefits packages to talent in 185+ countries.
As a leading employer of record (EOR),Velocity Global helps companies hire, pay, and manage a global workforce without the need for entites. We simplify benefits administration and ensure your talent receives compliant, comprehensive rewards packages that make them feel valued.
