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Chapter: Mechanical : Human Resource Management(HRM) : Sustaining Employee Interest

Types of rewards

Rewards serve many purposes in organisations. They serve to build a better employment deal, hold on to good employees and to reduce turnover.

Basic Types of Reward


·        Extrinsic rewards


–    satisfy basic needs: survival, security


–    Pay, conditions, treatment


·        Intrinsic rewards


–    satisfy higher needs: esteem,development


Rewards by Individual, Team, Organisation


·        Individual: base pay, incentives, benefits


–    rewards attendance, performance, competence


·        Team


–    team bonus, rewards group cooperation


·        Organisation


–    profit-sharing, shares, gain-sharing



Types of rewards


Rewards serve many purposes in organisations. They serve to build a better employment deal, hold on to good employees and to reduce turnover.


The principal goal is to increase people's w productivity.



Most people assimilate "rewards", with salary raise or bonuses, but this is only one kind of reward, Extrinsic reward. Studies proves that salespeople prefer pay raises because they feel frustrated by their inability to obtain other rewards,but this behavior can be modified by applying a complete reward strategy.


There are two kinds of rewards:


·  Extrinsic rewards: concrete rewards that employee receive.


o   Bonuses: Usually annually, Bonuses motivates the employee to put in all endeavours and efforts during the year to achieve more than a satisfactory appraisal that increases the chance of earning several salaries as lump sum. The scheme of bonuses varies within organizations; some organizations ensure fixed bonuses which eliminate the element of asymmetric information, conversely, other organizations deal with bonuses in terms of performance which is subjective and may develop some sort of bias which may discourage employees and create setback. Therefore, managers must


be extra cautious and unbiased.


Salary raise: Is achieved after hard work and effort of employees, attaining and acquiring new skills or academic certificates and as appreciation for employees duty (yearly increments) in an organization. This type of reward is beneficial for the reason that it motivates employees in developing their skills and competence which is also an investment for the organization due to increased productivity and performance. This type of reward offers long-term satisfaction to employees. Nevertheless, managers must also be fair and equal with employees serving the organization and eliminate the possibility of adverse selection where some employees can be treated superior or inferior to others.


o   Gifts: Are considered short-term. Mainly presented as a token of appreciation for an achievement or obtaining an organizations desired goal. Any employee would appreciate a tangible matter that boosts their self-esteem for the reason of recognition and appreciation from the management. This type of reward basically provides a clear


vision of the employee‘s correct path increasing their efforts to achieve higher returns and attainments.


o   Promotion: Quite similar to the former type of reward. Promotions tend to effect the long-term satisfaction of employees. This can be done by elevating the employee to a higher stage and offering a title with increased accountability and responsibility due to employee efforts, behaviour and period serving a specific organization. This type of reward is vital for the main reason of redundancy and routine. The employee is motivated in this type of reward to contribute all his efforts in order to gain


managements trust and acquire their delegation and responsibility. The issue revolved around promotion is adverse selection and managers must be fair and reasonable in promoting their employees.

o  Other kinds of tangible rewards


o   Intrinsic rewards: tend to give personal satisfaction to individual Information / feedback: Also a significant type of reward that successful and effective managers never neglect. This type of rewards offers guidance to employees whether positive (remain on track) or negative (guidance to the correct path). This also creates a bond


and adds value to the relationship of managers and employees.


o  Recognition: Recognition: Is recognizi appreciation. This type of reward may take the presence of being formal for example meeting or informal such as a - esteem―patand on happiness which will result into additional contributing efforts.


o   Trust/empowerment: in any society or organization, trust is a vital aspect between living individuals in order to add value to any relationship. This form of reliance is essential in order to complete tasks successfully. Also, takes place in empowerment when managers delegate tasks to employees. This adds importance to an employee where his decisions and actions are reflected. Therefore, this reward may benefit organizations for the idea of two minds better than one.


Intrinsic rewards makes the employee feel better in the organization, while Extrinsic rewards focus on the performance and activities of the employee in order to attain a certain outcome. The principal difficulty is to find a balance between employees' performance (extrinsic) and happiness (intrinsic).


The reward also needs topersonalitybe. accordingForinstance,sports fantowill the be really happy to get some tickets for the next big match. However a mother who passes all her


time with her children, may not use them and therefore they will be wasted.


When rewarding one, the manager needs to choose if he wants to rewards an Individual, a Team or a whole Organization. One will choose the reward scope in harmony with the work that has been achieved.


·  Individual

o  Base pay, incentives, benefits

o   Rewards attendance, performance, competence

·        Team: team bonus, rewards group cooperation


Organization: profit-sharing, shares, gain-sharing

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Mechanical : Human Resource Management(HRM) : Sustaining Employee Interest : Types of rewards |

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