Remuneration could be simply described as how much an employee will be compensated in return of their work. Yet, in HR management, this word is not a simple word because it will involve many parties and could play a big part in the achievement of company objective. Successfully running the function, HRM will help the company to develop fast.
Remuneration is usually comes in the package of salary and benefits packages. The benefits are varying from insurance to incentives to issuing company shares for the employee. The goal of devising a good remuneration is to maintain motivation and loyalty of the employees to increase productivity. On the other hand, company financial should be kept in a good balance. This is why remuneration is complex. Employees must want the remuneration to be huge while company should make it low to maintain a good balance in their finance. Giving too little may lead to reduce of productivity while giving too much will make the company suffered.
Devising remuneration program is a function in HRM but remuneration is actually stars outside HRM. It starts from the high level of company board. It could be from the owner or in big company; they have remuneration committee of the boards of directors. It happens because payroll cost is one of organization’s largest costs. It takes central part in organization that may determine viability of the company and position of the company in the market.
If we see the reality and compare remunerating jobs of companies in similar sector, it is very common that some employers pay okay, some others pay poorly, and some pay greatly. At a glance, people may say the okay one is mediocre; the poor one is parsimonious, while the great one is generous. However, remuneration is not all about generosity. As mentioned before, remuneration is linked to company viability. Company who pay less is commonly does not have enough to pay generously. Commonly, a startup company or one who struggle in the market will pay less than the going rate and ask employee to be patience today with promise that the future would be better.
Become generous in remuneration is part of company strategy to attract talents. However, there is something we called market lines. It is the position in the market where the organization will pay. The market lines are divided into three categories, trailing the market, meeting the market, and leading the market. Trailer will pay less while leader will pay more. Company affordability and the need to attract talents will influence company decision to choose the market line.
There is also something we called role sizing. It is an identifying process to translate job description into a numerical remuneration value. Each company usually has list of roles starts from the lower role in trainee level to the high role in executive level. Sometime, company chooses different market lines for different role size. For example, employee in the executive level would be paid in leading-the-market line while the others may be paid in meeting-the-market. This complex devising is part of company strategy to develop and become the frontrunner.