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Remuneration

Published November 2, 2023 (last updated on May 15, 2024) | Adam Wyatt - Copywriter and Content Creator

What is the meaning of remuneration? 

Remuneration is the total compensation and rewards that an employee receives from an employer for their work. It includes both monetary and non-monetary benefits, such as base salary, bonuses, commissions, overtime pay, paid leave, health insurance, retirement contributions, and company perks. 

What is a remuneration package? 

A remuneration package is a customised set of compensation and benefits that an employer offers to an employee. It is typically designed to attract, retain, and motivate top talent. Remuneration packages can vary widely depending on the employee’s role, experience, skills, and the company’s budget and culture.

What is the purpose of remuneration? 

The purpose of remuneration is to attract, retain, and motivate top talent. A competitive remuneration package can help employers to: 

  • Hire the best candidates: In a competitive job market, employers need to offer attractive remuneration packages in order to attract the best candidates. A good remuneration package can help employers to differentiate themselves from other employers and to attract candidates who are top performers in their field. 

  • Reduce employee turnover: Employees who are fairly compensated are more likely to be satisfied with their jobs and to stay with their employer for the long term. A high turnover rate can be costly for employers, as it takes time and resources to recruit and train new employees. 

  • Improve employee engagement: Employees who are fairly compensated are more likely to be engaged and productive in their jobs. Engaged employees are more likely to go above and beyond their job duties and to be creative and innovative in their work. 

  • Boost employee productivity: A competitive remuneration package can help to boost employee productivity by motivating employees to work harder and to achieve their goals. 

  • Promote a positive company culture: A fair and competitive remuneration system can help to promote a positive company culture. Employees who feel that they are being compensated fairly are more likely to be happy and motivated in their jobs, and this can create a more positive and productive work environment. 

In addition to these general purposes, remuneration can also be used to achieve specific business goals. For example, a company might offer higher salaries to employees in key roles, such as sales or engineering, in order to attract and retain top talent in these areas. Or a company might offer bonuses to employees who achieve certain performance goals, such as increasing sales or developing new products. 

What is a profit share scheme? 

A profit share scheme is a way for companies to reward their employees for helping to generate profits. Under a profit share scheme, employees are given a percentage of the company’s profits, typically calculated on an annual basis. This means that employees have a direct stake in the success of the company and are incentivised to work hard and contribute to the bottom line. 

Profit share schemes can be a win-win for both companies and employees. Companies benefit from a more motivated and engaged workforce, while employees enjoy the opportunity to share in the company’s success. 

Here’s an example of how a profit share scheme might work: 

A company with 100 employees has a profit share scheme in place. At the end of the year, the company calculates its profits and decides to distribute 10% of those profits to its employees. This means that each employee would receive a bonus equal to 10% of their annual salary. 

When included as part of a remuneration package, profit share schemes can be a great way to boost employee morale and productivity.  

What is the average remuneration in New Zealand? 

The average remuneration in New Zealand varies depending on a range of factors, including industry, occupation, and experience level. However, according to the 2023 Hays New Zealand Salary Guide, the average base salary for all employees in New Zealand is NZ$95,000.

Here is a breakdown of the average base salary by industry: 

  • Information technology (IT): NZ$124,000 

  • Financial services: NZ$116,000 

  • Professional services: NZ$112,000 

  • Engineering: NZ$110,000 

  • Construction: NZ$98,000 

  • Healthcare: NZ$95,000 

  • Retail: NZ$54,000 

  • Hospitality: NZ$54,000 

It is important to note that these are just averages, and individual salaries can vary significantly depending on the factors mentioned above. For example, a senior software engineer with 10 years of experience could earn significantly more than the average IT salary. 

In addition to base salary, remuneration also includes other forms of compensation and benefits, such as bonuses, commissions, overtime pay, paid time off, health insurance, and retirement contributions. According to Hays, the average total remuneration package in New Zealand is estimated to be around NZ$120,000.  

Are you paying the minimum wage?

The Minimum Wage increased on 1 April. Are you paying your staff fairly? 

As a business owner or employer, you may have questions about the latest wage increase and what it means for you. We have created FAQs to help you prepare your business.

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How does remuneration affect employee motivation? 

There are several ways in which remuneration can positively affect employee motivation: 

  • Fairness: When employees feel that they are being compensated fairly, they are more likely to be motivated to contribute to the company’s success. They are also more likely to be satisfied with their jobs and to stay with the company for the long term. 

  • Adequacy: When employees are paid enough to meet their basic needs and to live a comfortable lifestyle, they are more likely to be able to focus on their work and to be productive. They are also less likely to be stressed about financial matters, which can lead to improved job performance and morale. 

  • Recognition: When employees feel that their contributions are valued and rewarded, they are more likely to be motivated to go the extra mile. They are also more likely to be proud of their work and to have a positive attitude. Recognition can come in many forms, such as verbal praise, financial rewards, or opportunities for advancement. 

  • Transparency: When employees understand how their compensation is calculated, they are more likely to feel that they are being treated fairly. They are also more likely to be able to make informed decisions about their careers. Transparency can be achieved by providing employees with clear and concise information about their compensation packages and by answering their questions honestly and openly. 

  • Consistency: When employees receive consistent compensation, they are more likely to feel secure and stable. They are also less likely to be distracted by financial concerns. Consistency in compensation can be achieved by having a clear and fair compensation policy in place and by following that policy consistently. 

In addition to these five factors, other factors that can affect employee motivation through remuneration include: 

  • Competitiveness: Employees are more motivated when they know that they are being paid competitively compared to other employees in their field. 

  • Relevance: Employees are more motivated when their compensation is linked to their performance and to the company’s goals. 

  • Flexibility: Employees are more motivated when they have some flexibility in how their compensation is structured. For example, employees might prefer to receive a higher base salary and lower bonus, or vice versa. 

  • Timeliness: Employees are more motivated when they receive their compensation in a timely manner. 

By taking all of these factors into account, employers can develop remuneration systems that motivate their employees to perform at their best. 

The negative effects of offering an unfair remuneration package 

When employees are not compensated fairly, it can lead to a range of negative consequences, such as: 

  • Low morale: Employees who feel that they are not being compensated fairly are more likely to have low morale. Low morale can lead to decreased productivity, increased absenteeism, and higher turnover rates. 

  • Reduced motivation: Employees who feel that they are not being compensated fairly are less likely to be motivated to work hard and achieve their goals. 

  • Increased stress: Employees who are struggling to make ends meet are more likely to be stressed. Stress can lead to decreased productivity, increased absenteeism, and health problems. 

  • High turnover rates: Employees who feel that they are not being compensated fairly are more likely to leave their jobs in search of better opportunities. High turnover rates can be costly for employers, as it takes time and resources to recruit and train new employees. 

What are the key components of executive remuneration? 

Executive remuneration typically includes a combination of the following components: 

  • Base salary 

  • Bonus 

  • Long-term incentives (e.g., stock options, restricted stock units) 

  • Other benefits (e.g., company car, performance-related pay) 

Executive remuneration is often designed to align the executive’s interests with the interests of the company. For example, long-term incentives are often linked to the company’s stock performance, which encourages the executive to make decisions that will benefit the company’s shareholders over the long term. 

What’s the legal framework for remuneration in New Zealand? 

The Employment Relations Act 2000 (ERA) sets out the minimum standards for remuneration in New Zealand. The ERA requires employers to pay their employees at least the minimum wage and to provide them with certain other benefits, such as paid time off and sick leave. 

In addition to the ERA, there are other laws and regulations that affect remuneration in New Zealand. For example, the Equal Pay Act 1972 prohibits employers from paying women less than men for doing the same job. 

How can I negotiate my remuneration package? 

Here are some tips on how to negotiate your remuneration package: 

  • Do your research: Before you start negotiating, research the market rates for your position and experience level. You can use online salary calculators and job boards to get a good idea of what other people are earning. 

  • Be prepared to walk away: If you are not happy with the offer, be prepared to walk away from the negotiation. This shows the employer that you are serious about getting a fair compensation package. 

  • Be confident: Remember that you are bringing value to the company, and that you deserve to be compensated fairly. Don’t be afraid to ask for what you want. 

Here are some specific negotiating tactics that you can use: 

  • Anchoring: Anchor the negotiation with a high number. This will give you some room to manoeuvre and will help you to get a better final offer. 

  • Logrolling: Be willing to compromise on some things in order to get what you want on other things. For example, you might be willing to take a lower base salary in exchange for a higher bonus or more paid time off. 

  • The walk-away clause: Let the employer know that you are prepared to walk away from the negotiation if the terms of the package don’t meet your basic demands.  

Overall, remuneration is an important factor that can affect employee motivation. Employers who want to have a motivated and productive workforce need to offer fair and competitive remuneration packages. 

Frequently Asked Questions

What is an example of a remuneration package?

Here is an example of a typical remuneration package for a software engineer in New Zealand: 

  • Base salary: NZ$120,000 
  • Bonus: Up to 20% of base salary, if KPIs are achieved
  • Overtime pay: 1.5 times the base rate 
  • Paid time off: 4 weeks of annual leave, plus 11 public holidays 
  • Health insurance: Fully paid by the employer 
  • Superannuation contributions: 9% of base salary paid by the employer 
  • Company perks: Free gym membership, on-site childcare, and monthly team lunches 
Is remuneration the same as pay and salary?

No, remuneration is a broader term that encompasses all forms of compensation and benefits, while pay and salary generally refer to monetary payments only.  

Although salary and pay are an important part of any remuneration package (many would say the most important part!), employees are increasingly drawn to a broader offering of perks and benefits.

Thousands of Kiwi business owners trust Employsure for expert advice about wages, pay and leave entitlements. If you’ve got remuneration questions that need answering, call our FREE Advice Line today on 0800 568 012.

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