Salary vs. Remuneration: Understanding the difference to avoid mistakes in personnel management

Companies must ensure accurate entries of salary and remuneration, mitigating the risk of penalties.

While many people use "salary" and "remuneration" interchangeably in everyday language, it’s important to recognize that these terms have distinct meanings within the field of labor relations. 

A clear understanding of these concepts is crucial for companies to ensure regulatory compliance and to prevent issues stemming from miscalculations or labor disputes. 

Poor management in this area can affect social charges and obligations, such as FGTS (Government Severance Indemnity Fund for Employees), INSS (National Institute of Social Security), and the 13th salary, putting the business at risk. Below are some key points to consider.

Differences between salary and remuneration

Brazilian legislation does not provide such precise definitions for the terms "salary" and "remuneration." 

Salary is the amount paid directly by the employer to the employee for services rendered. It is a fixed amount agreed upon by both parties and must be specified in the employment contract. This amount may be determined based on a set period, work output, or a combination of both factors. 

Remuneration is a broader concept that includes salary as well as additional compensation the employee receives from the employer or third parties. It may consist of various elements that accumulate over the course of employment, such as regular bonuses, length of service additional, tips etc. 

In other words, salary is a component of remuneration, but remuneration encompasses a broader range. While remuneration includes the total earnings derived from the employment relationship, whether paid directly or indirectly by the employer, salary specifically refers to the earnings received directly from the employer in exchange for the work performed. 

Although the Consolidation of Labor Laws (CLT) does not provide direct definitions on the subject, it is the main reference for the question of salary vs. remuneration. 

Article 457, § 1 of the CLT states: “The salary includes the fixed stipulated amount, legal bonuses, and commissions paid by the employer.” 

Paragraph 2 of the same article clarifies that: "The amounts, even if habitual, paid as a cost allowance, meal allowance (provided it is not paid in cash), travel allowances, bonuses, and grants do not constitute part of the employee's remuneration, are not incorporated into the employment contract, and do not form a basis for any labor or social security charges." 

It is also necessary to pay attention to this part of Art. 458: “In addition to payment in cash, the salary includes, for all legal purposes, food, housing, clothing, or other 'in-kind' benefits that the company, by force of contract or custom, habitually provides to the employee.” 

In Article 458, § 2, it is stated that the following benefits provided by the employer shall not be considered as salary:

• clothing, equipment, and other accessories provided to employees and used at the workplace for service provision;
• education, at the employer's or third-party educational institutions, covering costs related to enrollment, monthly fees, annual fees, books, and educational materials;
• transportation intended for commuting to and from work, regardless of public transportation availability on the route;
• medical, hospital, and dental care, provided directly or through health insurance;
• life and personal accident insurance;
• private pension plans;
• amounts corresponding to cultural vouchers.

The topic requires careful attention and involves several related concepts, including minimum salary, base salary, gross salary, and net salary. Additionally, professional salaries (specific to certain job categories) and regional salaries floors should also be taken into account.

It is also important to remember that the rights guaranteed by the Constitution include:

• irreducibility of salary, except as provided in a collective agreement or bargaining agreement;
• 13th salary based on full remuneration or pension amount;
• profit-sharing or results-sharing separate from remuneration, and, exceptionally, participation in company management, as defined by law.

Numerous components make up employee compensation, whether stipulated and regulated by legislation, such as overtime, night-shift premium, remunerated weekly rest, or other benefits internally established by companies.

Ensuring best practices

Considering the complexity of this topic, seeking guidance from labor consultants is highly advisable. Aligning practices with legal requirements ensures accurate payroll processing, with all applicable charges correctly calculated and documented, helping to prevent potential issues and penalties.

It is also essential to review relevant collective agreements and conventions regarding salary and remuneration for the specific category to ensure compliance and security.

Additionally, having payroll management systems aligned with labor regulations is crucial.

See also: Superior Court rules that stock options are not wages and are subject to lower income tax

Labor consulting and support

If your company is looking for solutions and systems to improve personnel management or needs to better understand how to ensure compliance with labor obligations, contact our team: dpc@dpc.com.br.