What makes up your Remuneration?

It’s all in the detail

How many times have you been caught out when you are comparing the prices of two products and realise that the container weights are very slightly different? If it’s really “apples with apples” then we need to be sure that the compared items are indeed both apples.

The same truth applies to what makes up your remuneration, when we compare salaries but realise that one comparison includes a bonus and the other did not … it’s an apple and a pear.

Around the world, the reward fraternity is working hard to align remuneration definitions and to make sure that we all have a consistent understanding of what the various remuneration elements include.

In pictorial terms, this is the total remuneration concept illustrated by 21^st Century:

Variable pay is typically performance-related and we recommend a separate comparison on these components, because they are influenced by whether the performance criteria were met.

Total Guaranteed Package is the most reliable line item to compare on, as it includes all the guaranteed elements of pay, irrespective of the performance. It is possible that one company may contribute a bigger portion to retirement funding than another as an example, but the total guaranteed package (TGP) aligns with your TGP – it is only the components that differ

Internationally, you may see various remuneration definitions:

For Total Guaranteed Package:
- Fixed annual remuneration
- Total cost to company
- Total annual non-variable remuneration
For total annual remuneration:
- Grand total package (includes all benefits)
For cash portion of pay plus short-term incentives (excluding benefits):
- Total cash
- Total annual cash compensation
- Total remuneration / total earnings
- Total direct compensation

Looking at it from a different angle, it can be misleading only to benchmark the cash portion of pay (basic salary), as you may be comparing one company (40% benefits, 60 % basic salary) that offers fewer benefits in addition to cash, to another company (50% benefits, 50% basic salary) that offers more benefits. Total guaranteed package for both is 100, but the mix varies. In this case, the first company reflects a high value for basic, but the Total Guaranteed Package of the two companies may well align.

Conclusion

It is very important to ask your company what they mean when they use the various definitions of pay as illustrated in the definitions in table 1. This will help you to make sure your apple is indeed being compared to another apple when looking at comparison remuneration levels in different companies and industries.
It is also very important to use a reliable source of information for remuneration data.