Remuneration is any form of payment an employee receives for performing a service. Employees might think of it as their salary or hourly wage, but that often overlooks the bigger picture, i.e., group health insurance, bonuses, company car, etc. Employers who effectively communicate total remuneration and all it affords their employees may be better able to compete for talent.

Table of Contents

What are the types of remuneration?

Remuneration can be cash, a qualified cafeteria plan or a taxable fringe benefit. Specific examples include but are not limited to:

How remuneration affects taxes

Remuneration is generally subject to income tax and payroll taxes, though the IRS provides exceptions for certain fringe benefits. For example, employers who sponsor benefits that qualify as a cafeteria plan may allow their employees to participate on a pretax basis.

Complications arise when a non-cash, fringe benefit doesn’t meet the tax exemption requirements. Employers must then try to determine the monetary value of the benefit provided and report it as income on the employee’s annual Form W-2, Wage and Tax Statement. For assistance with this task, employers should review IRS publication 15-B or seek legal counsel.

What are the advantages of total remuneration?

Total remuneration or total rewards statements show how much an employer invests in people. This information may be the deciding factor when prospective candidates or existing employees weigh offers from other employers and, thus, could improve talent acquisition and retention.

Say, for instance, that an employer offers a moderate salary and generous benefits program with health coverage and retirement savings accounts. Another employer pays people above market value, but has a limited selection of benefits. An employee who values health coverage and retirement savings might be willing to take less payment to work for the first employer.

Frequently asked questions about remuneration

What does remuneration mean?

Simply put, remuneration is payment to employees for performing a service. Examples include cash wages, qualified cafeteria plans and taxable fringe benefits.

What is the key difference between salary and remuneration?

A salary is a form of remuneration, but it may not represent an employer’s entire investment in an employee. Remuneration usually includes not only salary, but also employer-sponsored benefits, like health insurance, retirement savings plans, commuter benefits, etc.

What is executive remuneration?

The compensation package awarded to employees who serve on an executive board or are in senior management positions is known as executive remuneration.

What factors affect remuneration policies?

When creating a remuneration policy, employers must consider many variables, such as the market value for certain positions, employee performance and experience, economic conditions, pay equity and labor laws.

What is the difference between total remuneration vs. total compensation?

Remuneration and total compensation are one and the same. In fact, when employers show employees their remuneration, it’s usually done via a total compensation statement.

Are perks the same as remuneration?

Employer-sponsored perks and fringe benefits are forms of remuneration that make up an employee’s total compensation.

What does total remuneration package mean?

A total remuneration package is the combined value of employees’ wages or salaries and any benefits they receive from their employer in return for their contributions to an organization.

Do all employees get remuneration?

Yes, all employees receive remuneration, though some are compensated more than others based on experience, performance, credentials, skills, etc. Employers must also be mindful of pay equity regulations.

This article is intended to be used as a starting point in analyzing the remuneration definition and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.

Trusha Palkhiwala, Divisional Vice President, Global HR Shared Services, ADP

Trusha Palkhiwala Divisional Vice President, Global HR Shared Services, ADP Trusha ensures Global HR Shared Services delivers service excellence through digital transformation, focus on client service excellence, continuous improvement programs and global simplification projects.