Reward Management
A reward can be defined as the achievements and benefits that employees receive for their job performance in an organization.
Reward management is known as matching the reward system with the level of performance for each job assigned in an organization.
Objectives……
- Support the organization’s strategy
- Recruit (people outside the organization) and retain ( people inside the organization) high-quality workers which the organization needs.
- Motivate employees
- To obtain their commitment and engagement.
- Because of that they motivate and inspire.
- Internal and external equity
- provide equal pay for work of equal value.
- Strengthen psychological contract.
- Financially sustainable
- Comply with legislation
- Efficiently administered
- operate transparently
- Because workers have better idea of how reward process operate and how they are affected by them.
- operate fairly
- To comply with legal requirements- because organization should adhere to government rules and regulations.
Types of Reward
- Extrinsic rewards
Extrinsic rewards are the benefits provided externally. It satisfies basic needs such as survival, security, Pay, conditions, treatment
- Intrinsic rewards
Intrinsic rewards are the satisfaction that an individual obtains from the job itself. Higher needs such as esteem, self-development
- Financial Rewards
A financial reward means those direct and indirect payments that enhance an employee’s well-being. Such as salary, incentives, vacation trips, redeemable coupons, cash bonuses, etc.
- Non-financial Rewards
These rewards are those employee benefits that do not enhance an employee’s financial well-being. Non-financial rewards are potentially at the disposal of the organization. Also, this is not a direct payment.
Such as awards, certificates, letters of appreciation, perks, dinner with boss, promotions, etc.
The Elements of Reward Management
- Reward System
Consists of,
- Policies that provides guidelines to manage rewards.
- Practices that provide financial and non-financial rewards.
- Process concerned with evaluating the relative size of jobs.
- Procedures operated in order to maintain the system.
- Reward Strategy
Here set a long-term plan to develop and implement reward policies, practices, and processes that help to achieve organizational goals.
- Reward Policies
Policies address the following issues,
- Achieving equal pay
- Transparency of reward structure and process
- The scope for the use of contingent rewards related to performance, contribution or skill.
- The approach to total reward.
Total reward
This is a combination of financial and non-financial rewards available for the employees within the organization.
This approach is holistic.
Benefits of Total reward approach
- Greater impact on motivation and commitment of employee.
- Enhance the employment relationship.
- Flexibility to meet individual needs.
- Total remuneration
This is the combination of the value of all cash payments and benefits received by employees.
- Basic pay
This is the amount of pay that is related to the rate for the job. Also, this may vary according to the grade of the job or for manual workers the level of skills required.
This refers to the basic wage or salary paid to the employees and does not include allowance and other payments.
So, wages are paid according to the number of units. Also, quantitative work normally gets wages. Wages are paid on a daily or hourly basis. For example production, and sales employees
Salary pay according to the time spent on the work. Also for qualitative work got a salary. In addition, salary is paid on a monthly or weekly basis. For example clerical and managerial employees
Factors Affecting Pay
- Government legal requirements – minimum salary for certain jobs
- Trade union – trade union actions. Ex: strikes
- Cost of living – when inflation increase cost of living will increase.
- Demand and supply- depend on the organization demand they decide how many workers they need. Organizational demand means how many employees they wand. Also, organization supply mean external labor supply.
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