How to create effective remuneration systems?

Service Business

Employees create the company's potential. They bring their knowledge, skills and commitment to it, as well as devote their time. For all this, they should be paid, so that they remain motivated to act for the benefit of the organization and do not think about leaving it. Various remuneration systems can help us in this. In this article, we'll go over all of them, and also suggest which ones are the most effective.

Various remuneration systems

Compensation systems are methods by which the amount of money that an employee will receive as payment for his work is worked out. The remuneration is influenced by a number of factors, which are primarily related to the policy of a given company. They may include, among others: methods of job evaluation and evaluation, forms of wages or the tariff system.

The effect of analyzing all these factors is to create a salary adequate to the work of a given person. It will fit into one of the types of the remuneration system, that is:

  • the result (divided additionally into piecework and commission),
  • temporal,
  • mixed.

Thus, the classification of a given remuneration as one of the above types depends on whether the units of output, time measures or the performance of assigned tasks are taken into account.

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The resulting remuneration system

The resulting remuneration system is used in a situation where the employer wants to use the time, skills and knowledge of his subordinates more efficiently and is based on the dependence of the sum of payments on the value of the work performed. They are additionally divided into:

  • piecework system - the remuneration determined in it depends on the performance of a given person (therefore it can only be used in the case of work, the effects of which can be quantified); it should not be applied to a weak employee, because even if he works a lot, he does not get too many products, he will receive a small salary; Piecework is also not suitable for people who need a steady income, because in this case it is impossible to say how much the person will earn in the coming months; although this type of wage setting is not always fair to the employee, the employer may assume that he will be working very efficiently to earn as much as possible;

  • commission system - consists in determining the remuneration on the basis of transactions concluded by the subordinate on behalf of the employer; when accounting at the end of the month, the (usually constant) percentage of profit that is due to the employee is calculated from each transaction; the amount of such a commission often depends on the qualifications of the person performing the duties; This is not a favorable solution for the employed person, as it does not realistically define the contribution of his work, and besides, it is associated with the risk of concluding a transaction.

Temporary remuneration system

The temporary pay system is perhaps the most frequently used by employers. It consists in determining the amount of payment in relation to the time that a given person has spent performing their duties in the company. It works best when it is difficult to indicate the effects of work or when it is determined how much work and how an employee is to perform in a given time unit - hour, day, week or month. The advantage of this remuneration system, especially for the employee, is the fixed value of the remuneration.

Mixed remuneration system

The final method of determining wage amounts is a mixed wage system. It is a combination of the types of wage calculation outlined above. This is because it contains both fixed and variable parts, as well as employee benefits and wages in kind. Such a system brings many benefits to the employer. First of all, he or she is free to choose the type of remuneration. In addition, by using both result and time-based accounting, he can motivate his subordinates to perform their tasks better and more efficiently.

The remuneration systems are different and should be adapted to the company's profile. It is up to the manager to decide how the employees are remunerated. Therefore, it is worth considering which type will not only benefit his company, but also increase the efficiency of the subordinates' work.

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