A remuneration model made for Covid-19

4th May 2021

A remuneration model made for Covid-19

In a Covid-stricken economy, employee motivation and productivity are being hampered by salary cuts and reduced working hours.

“Employers are looking for innovative remuneration solutions that will inspire their workforce while preserving their own constrained finances,” says Tanya Tosen, Master Mobility, Tax and Remuneration Specialist at Tax Consulting South Africa.

According to Tosen, there is indeed a strategy that fits the bill in the current economic climate.

Remuneration models
Generally, three main remuneration approaches are followed in South Africa. The first, being a basic plus benefits structure, is a gamble for most organisations. With a fixed basic salary and variable benefits added over and above, the burden of any increases on these employer contributions following rate changes, mainly falls on the employer.

The second structure being the classic cost to company model, pays a fixed total remuneration package, that incorporates both, salary and benefits. Increased contributions to benefits and subsequently the tax impact are then borne by the employee, leaving them at a disadvantage.

The recommended strategy to follow, is to implement a cost to company with flexible benefits structure, which strikes a fair balance between the two previous models. Employers enjoy the advantages of a fixed cost to company strategy while employees are able to structure their packages in line with their present needs. This optimal model offers the following key practical benefits:

At a time when organisations’ ability to offer more attractive rewards is severely impeded, the cost to company with flexible benefits remuneration pay strategy is fast becoming the go-to remuneration model.

“The balanced set of benefits it offers makes it the best strategy for controlling costs while liberating workers to meet their own financial commitments,” says Tosen.

Written by Tax Consulting SA