Fayol's Remuneration Principle: Definition, Lesson & Quiz

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Rebekiah Hill

Rebekiah has taught college accounting and has a master's in both management and business.

In this lesson you will learn what the term remuneration means and how it is important to you. You will also learn what role the French theorist Henri Fayol played in remuneration becoming an important concept of management.

We also recommend watching Henri Fayol's Management Principles: Managing Departmental Task Organization and Fayol's Theories on Staff Management and Worker Satisfaction

During a job interview, what is the one piece of information that you want to know more than anything? Is it what hours you will work? Is it what days you will work? Is it what your job title will be? It's more than likely you'll be thinking this one: 'How much will I get paid?' That question is exactly what remuneration is all about.

job interview

Definition of Remuneration

What exactly is remuneration? According to the Merriam-Webster dictionary, the word remunerate means 'to pay an equivalent for a service, loss or expense.' If remunerate means to pay someone, then remuneration means the pay that you receive for a service. We all know that pay is one of the deciding factors when choosing whether or not to accept an offer of employment, but how do we decide what is fair pay? Fortunately for us, the guiding principle for deciding this was established many years ago.

Who is Henri Fayol, and What Does He Have to Do With Remuneration?

Not only was Henri Fayol a management theorist in the late 1800's and early 1900's, but he also spent the majority of his working life in a management position. It was during his years as a manager that Fayol began to feel that the entire concept of management was not very well-defined. There were no real guidelines on what managers should or should not do, nor was there any instruction on the topic of management. Fayol wanted to change this. He wanted management to be better-defined, and for the concept of management to be taught as early as primary school.

Henri Fayol
Henri Fayol

In 1917, a retired Fayol decided to open a facility strictly for the discussion of management, and thus the Centre For Administrative Studies (CAS) was born. The CAS was a place where professors of all areas could meet, discuss, and develop further understanding of the principles of management. It was during one of these discussions that Fayol introduced his 14 principles of management, the 14 things that he believed were needed to make management a concrete science. Of those 14 principles one of those was remuneration.

How Does Remuneration Work?

Fayol believed that a person should be fairly and equitably compensated. His argument was that there should be an understood remunerating policy in place, whether an employee is paid a piece rate, an hourly rate, a job rate or a salary. He also believed that bonus pay or profit-sharing should exist, but only with reasonable limits. His thoughts were that if an employee was compensated well for a job, then that employee would be satisfied. These guidelines are still used in the management world today.


Lesson Summary

Let's wrap up this lesson with a brief summary of what you've learned. First, you know that the term remuneration refers to the pay, or compensation, that you receive for a job or service performed. Second, you know that Henri Fayol is the person responsible for bringing the concept of fair and equitable remuneration to light in the world of management, as well as for relating that concept back to employee satisfaction. Last, but not least, you know that Fayol's theory of remuneration is still a guiding principle in management today. Next time that you are in that job interview negotiating salary, take the time to thank Henri Fayol - without him, that type of discussion may never have existed.

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