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The Principle of Fairness in Remuneration

One of the most significant issues dealt with by business managers is fairness in remuneration or ensuring that compensation for services rendered is just. In this context it should be recognized that compensation is not only monetary. Market conditions will largely determine compensation requirements for highly skilled personnel. To attract top talent competitive compensation packages and work conditions must be provided. Under-compensation will result in turnover among valuable employees and unnecessary costs will be incurred. Successful managers learn that they must take care of key personnel. People in support positions must be treated fairly as well and this is sometimes overlooked because there is no challenge presented.

Fairness in remuneration does not only apply to personnel it also applies to the business. From the business perspective employee compensation is a cost which in turn affects prices and profit margins. So over compensation can result in non-competitive pricing, poor return on invested capital or both. The key to proper remuneration is balance. Fairness in remuneration results in competitive pricing, positive profit margins and well compensated employees.

In most key positions it’s possible to offer incentive based compensation. Under these kinds of arrangements the employee has the opportunity to earn more for producing more. And as the employee earns more so does the company. Circumstances vary so this may or may not be the best arrangement for every situation. But it does foster competition and reward those who produce at a high level.

The most important point in considering the management principle of remuneration is that it should be continuously managed. As things change compensation packages may need to be addressed and upgraded as well. If remuneration is fair for all then all will prosper.

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