German car giant Volkswagen on Saturday said it was capping its chief executive's pay package at 10 million euros as it moved to rein in top brass salaries in the wake of the "dieselgate" scandal that has cost the company billions.

Other members of the board will see their annual remuneration capped at 5.5 million euros.

"This reduces the maximum remuneration theoretically possible by up to 40 per cent compared with the previous system," the group said in a statement after a meeting of the supervisory board at its Wolfsburg headquarters.

VW's generous pay and bonus system has come under increasing scrutiny since the group admitted in September 2015 to having installed software in 11 million diesel engines worldwide to cheat emissions tests.

The resulting fallout has already cost VW more than $22 billion (20 billion euros) in fines and compensation to drivers, dealers and authorities in the United States alone.

With the company still facing a string of legal claims around the world, experts say the final bill could be far higher.

VW's pay packages have also threatened to become a political hot potato as Germany heads for a tight general election in September.

The German state of Lower Saxony, where VW is based, is a major shareholder and holds two seats on the group's supervisory board.

The state is led by the centre-left Social Democrats, who have made clamping down on executive pay a key plank of their campaign.

VW has long vowed to come up with a new pay system but the issue was given fresh urgency last month when compliance chief Christine Hohmann-Dennhardt left the company with a 12- million-euro golden parachute after just a year in the job.

Before that, former chief executive Martin Winterkorn, who quit over the dieselgate scandal and remains under investigation over his role, regularly came under fire for his high payouts.

He controversially pocketed 17 million euros in 2011, a record for a chief executive running a firm listed on the Dax index of leading German shares.

In its statement, VW said the new pay system included a higher fixed salary while the variable part would be more closely linked to the group's financial performance.

VW stressed that under the new rules, the maximum payouts "can only be achieved if the group performs exceptionally well".