Pay and Rewards
Work
performance is affected by:
Job
characteristics and (physical) work environment
+
Abilities
and skills
+
The
willingness to perform
Rewarding
Employees
n Major
strategic rewards decisions:
n What to
pay employees
n How to
pay individual employees
n What
benefits to offer
n How to
construct employee recognition programs
n What to
pay
n Need to
establish a pay structure
n Balance
between:
n Internal
equity – the value of the job for the organization
n External
equity – the external competitiveness of an organization‘s pay relative to a
pay elsewhere in its industry
n A
strategic decision with trade-offs
Definition
of Reward Management
• This
management discipline is concerned with the formulation and implementation of
strategies and policies, the purposes of which are to reward employees fairly,
equitably and consistently in accordance with their value to
the organisation.
• It deals
with design, implementation and maintenance of reward systems (processes,
practices, procedures) that aim to meet the needs of both the
organisation and its stakeholders.
Philosophy
of Reward Management
n Strategic
sense: long-term focus & it must be derived from the business strategy
n Total
Reward approach: considering all approaches of reward (financial or not) as a
coherent whole; integration with other HRM strategies
n Differential
reward according to the contribution
n Fairness,
equity, consistency, transparency
Economic
theories (partially) explaining pay levels
n Supply
& Demand: labor market factors
n Efficiency
wage theory: attraction of better employees, motivation, reducing fluctuation
leads to high wages
n Human
Capital theory: productivity differences
n Principal
– Agent Theory: inequality in the information leads to „agency costs‖
n The
effort bargain: collective bargaining
The 4Ps
of Reward
n Pay
n Salary,
bonus, shares, etc.
n Praise
n Positive
feedback, commendation, staff-of-the-year award, etc.
n Promotion
n Status,
career elevation, secondment, etc.
n Punishment
n Disciplinary
action, withholding pay, or criticism, etc
Strategic
Reward Management
n Where do
we want our reward practices to be in a few years time? (vision)
n How do we
intend to get there? (means)
Reward
Strategy
n A
declaration of intent that defines what the organisation wants to do in the
longer term to develop and implement reward policies, practices and processes
that will further the achievement of its business goals and meet the needs of the
stakeholders.
n It gives
a framework to other elements of reward management.
The
structure & content of a Reward strategy
n Environment
analysis:
n Macro-level:
social, economical, demographic
n Industrial
level
n Micro-level:
competitors
n Analysis
of the „inner environment‖: strategy, job evaluation, financial conditions…
n Gap-analysis
n Guiding
principles
n Broad-brush
reward strategy
n Specific
reward initiatives
Job-evaluation
A
systematic process
n For
defining the relative worth/ size of jobs/roles within an organisation
n For
establishing internal relativities
n For
designing an equitable grade structure and grading jobs in the structure
n To give
an input for reward considerations
Dimensions
of job evaluation
n Relative
or measured to an absolute scale
n Relative:
compares jobs to one another within the company
n Absolute:
compares to an „independent‖, external measure
n Analytical
or non-analytical (global)
n Analytical:
measures factors or elements of the jobs
n Non-analytical:
measures the job as a whole
Wage gaps
n Wage gaps
can occur in companies using international benchmarking in job evaluation. The
cause is simple:
n The
market of top managers is usually international: they earn international wages,
or they leave the firm
n The
market of workers with little or no qualification is local in (nearly) every
case: they earn local wages.
n In less
developed countries this can lead to enermous wage gaps between the „top‖ and
„bottom‖ employees.
Components
of Total Remuneration
n Base pay: Base pay is the fixed
compensation paid to an employee for performing specific job responsibilities. It is typically paid
as a salary, hourly (or in some situations piece rate). There is a tendency
towards market orientation and the increasing role of qualifications.
n Contingent pay: Individual contingent pay
relates financial rewards to the
n individual
performance, organisation or team performance,
n competence,
n service,
n contribution
or
n skill of
individual employees.
Consolidated pay: built into the base pay
Variable pay: provided in the form of cash
bonuses (increasing role nowadays).
n Employee benefits: Elements of remuneration given
in addition to the various forms of cash
pay.
Contingent
pay
n Individual
contingent pay is a good motivator (but to what extent?) for those who receive
it.
n It
attracts and retains better workers.
n It makes
labour related expenditures more flexible.
n It can
demotivate those who don‘t receive it (depends on performance measurement)
n Can act
against quality and teamwork.
Types of
individual contingency pays
n Performance-related:
increases basic pay or bonuses related to assessment of performance
n Competence
related: Pay increases related to the level of competence
n Contribution-related:
pay is related both to inputs and outputs
n Skill-based:
pay is related to acquisition of skills
n Service-related:
pay is related to service-time
Team
based pay
n Pay is
related to team performance
n It can
encourages teamwork, loyalty and co-operation
n It can be
demotivating on individual level (encourages social loafing) Organisaton-wide
schemes
n Profit-Sharing
Plans – organization-wide programs that distribute compensation based on an
established formula designed around profitability
n Gain
Sharing – compensation based on sharing of gains from improved productivity
n Employee
Stock Ownership Plans (ESOPs) – plans in which employees acquire stock, often
at below-market prices
Employee
benefits
n Attractive
and competitive total remuneration
n Provide
for the personal needs
n Increase
commitment toward the organisation
n Tax-efficient
Main
types of Employee benefits
n Pension
schemes
n Personal
(and family) security: different types of insurances
n Financial
assistance: loans, house purchase schemes, discount on company services…
n Personal
needs: holidays, child care, recreation facilities, career breaks…
n Company
cars and petrol
n Intangible
benfits: quality of working life…
n Other
benefits: mobile phones, notebooks…
n Cafeteria
systems
Related Topics
Privacy Policy, Terms and Conditions, DMCA Policy and Compliant
Copyright © 2018-2023 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.