Consists of three elements. The first is base pay, expressed as an hourly rate or annual salary. The second is variable pay, which consists of additional supplements, bonuses, and other payments that typically are linked to performance. The third component is benefits or indirect pay, including cash payments like occupational sick pay and maternity pay and non-cash awards like paid holidays and health insurance. Increasingly, it is recommended that companies calculate and manage total remuneration for each employee as a means of securing tighter control of labour costs. It is also recommended, by advocates of the new pay, that the contribution of the three elements should be altered, such that variable pay makes up a larger proportion of the total. The purpose of this is to incentivize workers and ensure a tight link between reward practice and business strategy.
Subjects: Human Resource Management.