Meaning and Definition of Remuneration for unemployment with their 5 Methods; Remuneration is the full compensation obtained by way of a worker. It includes not the best base revenue but any bonuses, commission bills, beyond regular time pay; or other financial benefits that an employee gets from an agency.

Here is the article to explain, What is the Meaning and Definition of Remuneration for unemployment with their 5 Methods?

An activity perk may also or might not be a factor of employee remuneration. An on-site gymnasium or a Beneficiant excursion plan are perks but they are not cashing in a worker’s pocket. Remuneration may additionally consist of the direct price of money or taxable fringe blessings along with non-public use of a company automobile.

Meaning and Definition of Remuneration for unemployment;

Remuneration is any form of compensation or payment that an individual or worker receives as the price for their services or the work that they do for a business enterprise or company. It consists of something base salary an employee gets, at the side of other kinds of payment that accrue throughout their work; which includes fee account finances, bonuses, and inventory alternatives.

Introduction to Remuneration;

Rewards may define because of the compensations and benefits obtained by using an employee in change for their offerings. Remuneration forms a crucial subset of the entire rewards and comprises the one’s elements that may value in monetary phrases. Effective remuneration approach frequently underpins the success of the business; as its miles consider as one of the key elements to draw and motivate human capital. Herzberg (1993) asserts that insufficient remuneration is one of the key elements inflicting dissatisfaction amongst personnel. The term remuneration is often associated with primary pay.

However, remuneration is a far broader period and can encompass an extensive range of strategies for profitable employees within the shape of salaries, bonuses, piece-based remuneration, fee, employee stock options, fringe advantages, deferred concerns, performance-related pay, and earnings-sharing amongst many others. One of the fundamental challenges for companies in the contemporary commercial enterprise environment is that of employee motivation.

Motivation can define as; “the diploma to which a man or woman needs and chooses to have interaction in positive specific conduct”. The cause of this essay is to seriously examine diverse strategies of employee remuneration definition; and, determine its position within the strategic control of human sources for an organization by way of dropping the light on its key benefits and drawbacks. The essay will eventually conclude by using analyzing; if a specific method of remunerating employees fits all situations or prefer other methods of remuneration.

5 Different Methods of Remuneration for unemployment;

The following 5 different methods of remuneration below are;

Performance-related pay scheme:

As the name suggests, performance-related pay schemes reward employees by linking the level of reward with the performance of the employees. Typical examples of performance-related pay include bonuses, commissions, and deferred considerations.


One of the key advantages of performance-related remuneration is that; it provides an effective means of rewarding by distinguishing between good and poor performers. Other advantages of performance-related pay increase motivation amongst employees to improve performance, attract and retain high performers and talented individuals, and ultimately improve corporate performance.

Nonetheless, empirical evidence highlights that performance-related pay has often been ineffective. Also, highlight that the link between the increases in performance-related pay and corporate performance has remained weak.


Performance-related pay is also criticized for inciting employees to take dysfunctional decisions; as it acts as an inducement for employees to take greater risks which could put an organization’s survival at stake. Their pay may also lead to a conflict of interest for the employees by inducing them to focus exclusively on areas that impact; their pay and ignore other important tasks that may be in the long-term interest of the company.

Performance-related pay might often suppress the intrinsic motivation of employees. Asserts that intrinsic motivation reflects employees’ passion and interest in work; which has a stronger impact on the performance of an employee and the business.

Lastly, Maslow’s theory of motivation elucidates that within every individual; there is the hierarchy of five needs – basic physiological needs, safety needs, belongingness needs, esteem needs, and self-actualization needs. That the needs lower than the self-esteem needs can accomplish through remuneration definition; whereas the higher-level needs of esteem and self-actualization for the senior management are unlikely to achieve through extrinsic rewards, such as performance-related pay. Thus, it may not act as a motivational factor for the senior management.


In contemporary times, increased numbers of business organizations have started linking; the level of remuneration offered to the employees with the profits of the organization. Stock options are a common example of this type of remuneration. One of the key advantages of this remuneration policy deems to be the higher level of commitment by the employee towards the company because of an increased level of mutual interest.


Another common advantage of profit-sharing schemes deems to be a change in the attitude of workers due to an increased sense of belongingness with the company. Asserts that feeling of an increased sense of belongingness leads to intrinsic motivation; which has a more direct and stronger relationship with the company’s performance. However, Empirical evidence highlights a lack of evidence of a relationship between this type of remuneration and the performance of the company.


One of the key criticisms of this type of remuneration is that any improvement in the company’s performance will reward both good and bad performers, resulting in poor motivation for high performers; as they may feel that part of the reward that they deserve is being enjoyed by the low performers. Furthermore, sometimes profit-based remuneration policies might fail to motivate the employees; as they often feel share prices are undervalued despite business outperforming the forecasts.

Lastly, Argues that shareholders expect the board to reward employees when the company has outperformed the market. However, empirical evidence highlights that for executives to exercise the option profitably; the performance of the company need not be superior and executives can easily benefit in times of the rising market. Thus, if employees feel that the movement in share prices is independent of their performance; there is a risk that a profit-based remuneration scheme may not act as a motivational factor.

Piece Based Remuneration;

A piece-based remuneration definition scheme is historically one of the most commonly used incentive schemes in practice for manual workers and is based on the number of items they produce or the number of hours worked by them. Typical examples of piece-based remuneration schemes include individual time-saving schemes, measured day work schemes, group incentives, plant-wide bonus schemes, and commissions.


Advantages of such schemes typically include an increased level of control by the management over the production process; and, it also acts as a cost-control measure because the workers’ main goal is to do the task expediently and efficiently to achieve the goal. Furthermore, Maslow’s theory of motivation (1943), as mentioned above, highlights that extrinsic rewards; such as piece-based remuneration, might act as a motivational factor for manual workers; because these workers are likely to have lower-level needs as per Maslow’s theory.


Like other types of remuneration, piece-based remuneration has its own set of disadvantages. Remuneration definitions such as group incentives and plant-wide bonus schemes lead to additional pressure on employees; and, create interpersonal animosities because of high performers not being able to receive the incentives due to some low performers in the group.

Furthermore, time-saving schemes and measured day work schemes may act as a deterrent to creativity; as individual employees’ focus is on standardization and predictability to complete the work in the minimum possible time. Motivation hygiene theory suggests that job satisfaction and job dissatisfactions are two independent experiences. Whilst extrinsic rewards, such as piece-based remuneration, can help the manual workers to avoid job dissatisfaction; they might not lead to job satisfaction as the employees do not intrinsically motivate by the work itself.

Skill Based Pay;

This is a remuneration policy where employees remunerate based on the skills and competencies they possess.


One of the biggest advantages of skill-based remuneration definition is that it promotes employees to acquire multiple skills; thereby, offering flexibility to the organization in terms of using the same employees for various purposes and responding to customer needs more efficiently. Such remuneration schemes also enable organizations to attract and retain skilled employees easily compared to their competitors as people are likely to reward appropriately for the skills they possess under this scheme.


The potential disadvantage with this scheme is that costs often outweigh the benefits; if the increase in productivity is not enough to compensate for the increased cost of hiring and training skilled employees. As the business operates in a dynamic environment; there is a risk of skills obsolescence and associated high cost of training. Lastly, the business might also bear the risk of losing a skilled employee; on whom the business has invested a significant amount in training, to a competitor due to a highly competitive labor market.

Flexible and Fringe Remuneration;

Fringe benefits can define as the benefits in kind provided to the employees and have substantial growth in recent years. The value of the fringe benefits paid to the employees reflect approximately twenty to fifty percent of the remuneration; and typically includes benefits like pensions, company cars, sick pay, private health insurance, mobile phones, staff discounts, maternity or paternity pay, crèche facilities, and relocation expense amongst many others. Flexible benefits provide options to the employees to decide how their remuneration should structure.

Under such schemes, the gross value of the remuneration definition package is determined by the employer; however, the employees have the flexibility to choose the mix of cash; and other benefits as a part of the remuneration package. Examples of flexible benefits include the option to choose between additional holidays, access to company crèche, childcare vouchers, or cash, amongst many others.


The advantages of flexible benefits include the potential of increased employee motivation as they end up getting the rewards they desire. Savings in social security taxes could also make through comprising the salary for the desired benefits that might attract a lower level of tax. Furthermore, research has highlighted that flexible remuneration programs contribute to attracting new employees, improving retention of existing employees, and improving employee engagement.


The primary disadvantage of flexible benefits remuneration schemes increased; the cost burden for the employer due to rising in the amount of administrative work related to managing the individual choices of employees. Another criticism of flexible remuneration policy is that the expensive company cars; and glamorous lifestyle provided to employees have contributed little towards developing long-term commitment towards the business organization and retention of employees.

Empirical evidence highlights that the employees do not completely understand the value of the flexible benefits; and, there is little evidence of the positive motivational impact of these remuneration policies on the employees. Nonetheless, it does not indicate that employees do not value the presence of these benefits and are likely to resist their removal.


Based on the discussions in the sections above, it is evident that each method of remunerating employees has certain advantages associated with it. However, Maslow’s theory of motivation and Herzberg’s hygiene factors, as discussed above, have highlighted a common issue across all forms of remuneration, i.e. the extent to which extrinsic rewards can contribute to motivating an individual employee, thereby, improving the company’s performance.

Asserts that whether remuneration is performance-based, profit-based, or piece-based, it might motivate employees in the short run; but would not contribute to long-term commitment towards the company. Nonetheless, it is not deniable that remuneration plays an important role in influencing employees’ decisions regarding the long-term commitment towards the company.

However, no one method of remuneration deem to recommend over another method; and a business might use a combination of methods to remunerate the employees according to the needs and motivations of the employees. Employees at lower levels might motivate by the prospects of better remuneration definition through different tools; however, for senior management self-esteem and self-actualization needs would need to satisfy to motivate them. Thus, rewards need to be carefully crafted to support one another and incorporate both financial and non-financial remuneration.

What is the Meaning and Definition of Remuneration for unemployment with their 5 Methods Image
What is the Meaning and Definition of Remuneration for unemployment with their 5 Methods? Image byMohamed HassanfromPixabay.

References; Various Methods of Remunerating Employees. Retrieved from


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