What Is the Difference Between Salary & Remuneration?

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Paper paychecks are phasing out in favor of electronic payments.
Paper paychecks are phasing out in favor of electronic payments. (Image: Comstock Images/Comstock/Getty Images)

If you're looking for your first job, then you need to understand the difference between salary and remuneration. These two methods of payment affect your income and taxes differently. While one method is not more lucrative than the other -- as this depends on your occupation -- each offers benefits that may help or hurt you financially.

Salary Definition

Your salary consists of your yearly gross wages (before taxes). The company may pay you an hourly rate or a set amount each pay period. Your salary does not include the value of benefits, such as health insurance or your matching contributions to your 401k.

Salary Pros

If your employer pays your salary as an hourly wage, then you're eligible for overtime pay at the rate of time-and-one-half. For example, if your hourly rate is $10, then the rate for overtime is $15. Employees working on straight salary, usually management, earn the same amount of money each pay period regardless of any overtime work. However, management may receive a significant bonus at the end of the year to help compensate for excessive hours.

Salary Cons

Overtime applies after 40 hours in one week, not eight hours in one day. For example, if your boss has a rush project that he needs completed in three days, he can generally demand that you work 13 hours a day for three days. If he tells you not to come in to work until the following week, your total hours would be 39. Conversely, if the boss has little business that week and sends you home early, he only has to pay hourly employees for the actual hours worked. This can hurt you with small paychecks. Salaried employees are at the mercy of their boss as far as the number of hours worked each week. However, when business is slow and the shop closes early, salaried workers still receive a full paycheck.

Remuneration Definition

Remuneration includes all forms of employment compensation, such as free room and board, stock options, sales commissions and bonuses. It also includes your salary.

Remuneration Pros

Many sales people work on straight commission, which means they only earn money when they make a sale, rather than receiving a weekly salary. Additionally, top sales people receive perks that may include free trips, expense accounts and hefty performance bonuses. Upper management in many corporations have stock options, bonuses and severance pay as part of their remuneration package. The value of these options may equal or exceed your yearly salary, helping to increase your personal wealth.

Remuneration Cons

The Internal Revenue Service (IRS) requires that you pay income tax on many types of remuneration, for example, if you drive a company-leased car, or if your employer pays your share of the Social Security tax. Your employer places a monetary value on these types of non-cash incentives and includes the amount when reporting your income to the IRS. Some forms of remuneration, such as most company-paid health insurance plans, are not taxed.

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