Types of remuneration are defined classifications within a payroll system used to differentiate between various salary components and payroll-relevant values. They make it possible, for example, to map basic remuneration, allowances, one-off payments or benefits in kind according to their respective characteristics.
What are types of remuneration?
In the Payroll different remuneration components can occur. So that these can be distinguished from one another in the payroll system and processed technically, they are assigned to specific Lohnarts.
Among other things, a Wage type can contain information about how a value is processed within billing and which tax or social security calculation categories it is assigned to.
However, the decisive factor for the actual tax and social security treatment is the legal classification of the respective set of circumstances, rather than solely the designation or technical setting of a Wage type.
What Lohnarts are there?
Depending on the payroll system and employment situation, numerous different Lohnarten can be used. Typical groups include, for example:
- ongoing base remuneration such as monthly salary or hourly wage
- Surcharges and allowances
- One-off payments such as bonuses, holiday pay or Christmas bonuses
- Benefits in kind and monetary benefits
- further payroll-relevant allowances or deductions
The specific name, numbering and technical design of individual Lohnarts may vary between different billing systems.
Wage type and pay component – what is the difference?
A salary component describes the actual remuneration or the underlying factual situation, for example a monthly salary, an allowance or a bonus.
The Wage type by contrast, it is the technical or systematic classification used to process this remuneration component in the payroll system.
In short: The remuneration component describes what is being paid for – the Wage type maps this fact in the billing system.
Connection with tax and Social security
Depending on the type of remuneration component, it can have varying effects on tax and social security calculation parameters.
In the billing, this can include, among other things, the Gross taxable income or that gross social security salary to influence. The Wage type used must therefore be suitable for the professional and legal categorisation of the respective pay component.
