5 Principles of Remuneration System

published in: Leadership

03 Sep
2010

The remuneration system is one of many elements that directly affect the success of the company. Unfortunately, there is no universal efficient system applicable to all the specifics of various types of businesses and individuals.  But there are principles which distinguish the better remuneration systems:


Principle 1. Top performance clear definition.
 
Whatever remuneration system is applied if disclosed to the staff there will be colleagues angry because of their low salaries. Other colleagues with higher salaries will also be unhappy because their salaries are not higher enough over newcomers’ salaries... The objective prerequisite for such behavior is the lack of a clear picture of what a top performance is. It is managers’ responsibility to disclose the criteria for top performance in such a way that each team member to have a clear idea of what an outstanding performance is.


Principle 2. Remuneration should be directly linked to present objectives.
 
The most common mistake is giving priority to long-term objectives while setting remuneration based on current earnings.


Principle 3. If an employee may get fired for poor performance, s/he  must have the opportunity to get "rich" for top performance.five prinicples, 5 principles, remuneration system
 
Colleagues who have excellent performance that exceeds top performance standards must receive decent salaries.


Principle 4. Extra remunerations.

The remuneration system must allow extra payments for merits. Some of the most neglected merits are the merits of training newcomers. If you have in your department employees who teach and train well, you must reward them as they actually build the company spirit. It is that men’s will - to give more of themselves than their duties require - that distinguishes the great companies from the ordinary ones.


Principle 5. Acknowledgement.

Use every bonus or salary increase to personally recognize the contribution of your top performers. Money cannot buy you loyalty! Loyalty is won by highly principled and fair treatment.

 

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