Main forms of wages accounting

All companies - both domestic and foreign, in Kiev and regional - must remunerate to their employees. Each does it in his clearly framed order. But the practical study and evaluation analysis of the experience of many companies in this area make possible to identify five of the most used forms of calculation of wages taking into account their merits and demerits and the most appropriate principles of application for the different employees categories.

1. Basic wage

The simplest for calculation and use is a wage, which consists only of well-fixed part. Typically, it is used for staff directly involved in the design and manufacture of products, goods or services of the company.

Categories of employees, who are paid in this way, can be divided into two subgroups.

To the first belong majority of professions from various industries, ranging from workers, engineers, technicians, production engineers and designers to developers of products such as software, advertisement projects, banking software and so on.

The second group is the staff, ensuring production process and promotion process (sales) of the respective products. It is the administrative, financial, marketing and advertising departments of the company, employees of HR department, IT-specialists, etc.

The biggest advantage of this form of payroll accounting to employees of the company is its simplicity - the wage is settled initially for each position and changes only in exceptional situations.

Besides, the rational use of "net salary", which depends on the length of employment in the company and the quality of its performance, can stimulate "binding" of an employee to the organization, as well as his interest in professional growth. But on the other hand, the lack of direct financial incentives actually nullifies the desire to improve professional performance (including quality) of their activities.

At the same time, clearly set wage is perceived by the person as a guarantee of the stability of the company, of course, if its payd on time. But the definition of payment by itself in this case is subjective, and therefore may serve as a basis for the emergence of internal coffee klatsch on the topic "Why Ivanov is paid better?”.

Therefore, based on the advantages and disadvantages of this wages accounting form, its use is appropriate only in the initial phase of the company`s activity for all staff as a temporary standard and as an intermediate (transition) standard for remuneration to a new specialist for the period of its entry into the position.

In continuous mode such form of payment may sometimes be used for the categories of employees, who are not directly responsible for the implementation of sales and the flow of funds into the company. In this case, it is advisable to set the salary for one year. And if the quality of performance of his professional duties by the employee is good, salary for the next period (year or more) should be increased, at least for a few percent.

Respecting employees, who are responsible for the promotion of company`s products, the use of such forms of remuneration is irrational, because it does not provide a sufficient level of financial motivation.

2.Incentive payments

The second form of wages accounting - commission – consist of salary and interest incomes or sales volume.

Quite often it is used in the sales departments of companies and stores, that is, in financial relationships in the organization, that encourages the initiative of employees, who are actually responsible for the promotion of the products. There are the following: the inability to control the revenue side, an individual employee as well as business units (almost no financial planning); the lack of financial aspects of the tight binding of an employee to the company; focus managers on the search for organizations with a high commission size.

That is why, the use of this form of payroll for producing business employees can be only temporary. On a permanent basis it is more effective in such way to pay for the work of freelance sales agents.

3. Bonuses for plan implementation

The third form of wages accounting can be called bonus-bearing, as it is formed from the basic wage and awards for the implementation of the financial plan. It applicable to employees as the commercial department (sales department) and auxiliary departments of the company. At that bonuses for implementation (over-fulfillment) of the financial plan are calculate, as a rule, following the results of the quarter or year, more seldom monthly. Their size depends on the degree of over-fulfillment of plan and ranges from 15 to 150% of the salary. The total size of all the premiums paid during the year, sometimes reaches 2-14 monthly salaries.

A distinctive feature of the companies that use this form of payroll, is clear and consistent financial planning, which refers to one of the key activities. It is usually provided on scheme "from the bottom - (formation of financial performance) – to the top (agreement and approval of financial performance) – to the bottom (execution of financial performance, reporting)", which allows to manage the revenue side of the budget, both the individual employee and the company in whole.

Companies that have already passed the stage of formation at the market, can use such system of financial relationships with the staff, who are directly responsible for the production of business. For the rest of the staff is more expedient to use other forms of payment.

4. Participation interest

Another form of payroll is based on the payment of profit share (percents) according to sales contracts for the accounting reference period and is relatively rare used in modern companies is. And even in those organizations where it is applied, wage of only a small part of the staff is formed according to the mentioned scheme. Basically it's the staff that really sells the goods (products, services). According to results of their activities during the accounting reference period (usually one year), that is, according to the real income, that a particular employee or unit has brought the company, is calculated the part for remuneration. It can reach 20 percent of the profit or more.

Similar remunerations to a staff, although not very popular, but have certain advantages. Firstly, the direct staff incentives improve financial performance of their work. Secondly, an employee is focused on reduction business expenses that can be very important for some companies. And third, quite strong "binding" of an employee to the organization, at least until the end of the accounting reference period.

5. Bonus it's not just the money

Fifth form of payroll - bonus - a to a greater or lesser degree combines all four forms and, therefore, has its advantages and disadvantages.

It is used for material incentives of top management of companies. Apart from premium payments, the total bonus package can include: recovery of expenses for petrol and amortization of the own car, provision of a mobile phone or recovery of expenses on it, health insurance, company vehicle, hospitality expenditures, etc. Sometimes, if the head should work "away", one of the components of the package is bying or rental of appartment (for him and his family) and the sum for provision of the necessary facilities.

Additional benefits and payments exceeding the salary are used recently more often. Domestic enterprises to adopt positive experience regarding financial incentives of staff from the western colleagues. Thus they improve the entire system of human resource management and increase the potential for the development of the company in whole.