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Factsheet:

Reward and pay: an overview

Resource summary

This factsheet was last updated in February 2016.

What are reward and pay?

The term ‘reward’ generally covers all financial provisions made to employees, including cash pay and the wider benefits package (pensions, paid leave and so on). It can also include wider provisions for employees, with the term ‘total reward’ encompassing non-pay benefits.

Pay may be divided into two categories:

  • base (or fixed) pay - guaranteed cash wage or salary paid to employees for doing their work for a contracted period of time
  • total earnings – base pay plus additional variable earnings such as bonus payments or overtime earnings.

Pay definitions vary. For example, certain location allowances might be seen as part of base pay by some employers, while others may see it as variable pay and exclude it from base pay.

Other terminology may also be used. ‘Compensation’ for example is usually taken to refer just to financial rewards (base pay and earnings) while ‘remuneration’ might be used interchangeably with ‘reward’ to mean the wider benefits package.

Login or register for a free account to continue reading this factsheet and to learn about:

  • What are reward and pay?
  • Managing pay and reward
  • Determining base pay and total earnings
  • The role of employee benefits
  • Non-financial rewards and total reward
  • CIPD viewpoint
  • Useful contacts
  • Further reading

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