Compensation: Payment Methods
3 July 2008
Read by 6311 persons
Compensation can be defined as payment for work done.
Employers must ensure that company compensation rules are followed, whether set by law, collective agreement, or each employee's contract. They must also respect applicable company practices unless they are denounced sufficiently in advance, informing employees of this denunciation.
Forms of Compensation
The most common compensation system is fixed pay calculated based on working time. But other forms exist: commission, performance bonuses, benefits in kind.
Fixed Compensation
- Time-Based Pay
Fixed salary often corresponds to a set working time, usually monthly. However, a weekly schedule can be used if it's the usual schedule. Similarly, the annual working time can be referenced when the employee's time is annualized. In this case, compensation is spread over the year, with one-twelfth or one-thirteenth (in case of a thirteenth month) paid monthly from the annual compensation.
Regulations for executives with annual salary packages in hours or days are different. In practice, the compensation clause refers to the number of days or hours worked by the executive during the year and specifies the amount paid each month.
- When a fixed salary is paid to employees not paid by the hour, such as salespeople, there's no need to reference working hours in the clause.
Commissions
Variable compensation based on results is also possible. This often applies to salespeople and some executives.
Commissions can be indexed to pre-tax turnover, quantity sold, gross margin, etc.
Bonuses
Many types exist. They can be linked to performance, attendance, seniority, or be year-end, holiday, or thirteenth-month bonuses.
Bonuses can be stipulated by contract or collective agreement, or by practice. If a company regularly pays a fixed bonus to a group of employees, the employer is obligated to pay it unless they give sufficient advance notice of termination. In other words, the employer must pay the bonus if it is consistent, general, and fixed, unless they denounce this practice.
Caution: Bonuses must not be misused. For example, an attendance bonus should not punish striking employees. Removing a bonus for striking is void. However, the employer can reduce or eliminate a bonus due to employee absence, without distinguishing the reasons (illness, strike, etc.).
Benefits in Kind
A company car can be provided if the job requires it. A contract clause must detail this benefit, including employee responsibilities (insurance, maintenance) and usage (strictly professional or not). Providing a company car with personal use constitutes a benefit in kind (at least for privately driven kilometers). This benefit is added to the cash compensation. This also applies to other potential benefits: housing, heating, meals, etc. These are salary supplements if they don't correspond to professional expenses imposed by the job. Their value will be estimated according to Social Security rules and added to the salary for social security contribution calculations.
Posted July 3, 2008
easydroit.fr
Employers must ensure that company compensation rules are followed, whether set by law, collective agreement, or each employee's contract. They must also respect applicable company practices unless they are denounced sufficiently in advance, informing employees of this denunciation.
Forms of Compensation
The most common compensation system is fixed pay calculated based on working time. But other forms exist: commission, performance bonuses, benefits in kind.
Fixed Compensation
- Time-Based Pay
Fixed salary often corresponds to a set working time, usually monthly. However, a weekly schedule can be used if it's the usual schedule. Similarly, the annual working time can be referenced when the employee's time is annualized. In this case, compensation is spread over the year, with one-twelfth or one-thirteenth (in case of a thirteenth month) paid monthly from the annual compensation.
Regulations for executives with annual salary packages in hours or days are different. In practice, the compensation clause refers to the number of days or hours worked by the executive during the year and specifies the amount paid each month.
- When a fixed salary is paid to employees not paid by the hour, such as salespeople, there's no need to reference working hours in the clause.
Commissions
Variable compensation based on results is also possible. This often applies to salespeople and some executives.
Commissions can be indexed to pre-tax turnover, quantity sold, gross margin, etc.
Bonuses
Many types exist. They can be linked to performance, attendance, seniority, or be year-end, holiday, or thirteenth-month bonuses.
Bonuses can be stipulated by contract or collective agreement, or by practice. If a company regularly pays a fixed bonus to a group of employees, the employer is obligated to pay it unless they give sufficient advance notice of termination. In other words, the employer must pay the bonus if it is consistent, general, and fixed, unless they denounce this practice.
Caution: Bonuses must not be misused. For example, an attendance bonus should not punish striking employees. Removing a bonus for striking is void. However, the employer can reduce or eliminate a bonus due to employee absence, without distinguishing the reasons (illness, strike, etc.).
Benefits in Kind
A company car can be provided if the job requires it. A contract clause must detail this benefit, including employee responsibilities (insurance, maintenance) and usage (strictly professional or not). Providing a company car with personal use constitutes a benefit in kind (at least for privately driven kilometers). This benefit is added to the cash compensation. This also applies to other potential benefits: housing, heating, meals, etc. These are salary supplements if they don't correspond to professional expenses imposed by the job. Their value will be estimated according to Social Security rules and added to the salary for social security contribution calculations.
Posted July 3, 2008
easydroit.fr
