REWARD

REWARD
MANAGEMENT
MANAGEMENT
It is concerned with the
Formulation and Implementation
of Strategies and Policies
that aim to Reward people
Fairly, Equitably and Consistently
in accordance with their
value to the Organization.
 Reward Management
It deals with the
DESIGN
IMPLEMENTATION
and MAINTENANCE
of
Reward Processes and Practices
that are geared to the
IMPROVEMENT of
Organizational, Team and Individual
PERFORMANCE
 Reward Management

• The AIM of Reward Management is

to
SUPPORT the Achievement of the
Organization’s Business Goals.
 REWARD
MANAGEMENT
• Reward Management adopts a
Total Reward Approach, which
emphasis the importance of considering
all aspects of Reward as a
Coherent Whole that is Integrated with
other HR Initiatives
designed to Achieve
the Motivation, Commitment, and
Engagement of Employees.
 RM Processes and Activities
• THE BUSINESS/ HR STRATEGY:
The Starting Point of all the Reward Policies
and Practices

• REWARD STRATEGY:
It determines the Direction in which
the RM Innovations and Developments
should Go to Support Business
Strategy, the Priority to the
Initiatives and the Pace at which
they should be Implemented.
 RM Processes and
Activities
• GRADE and PAY STRUCTURE
POLICY:
(a) BASE PAY;
The Fixed Rate of Pay.
It expresses the intention of the
organization on the degree to which
it wants Pay Levels to be
Competitive
( relating it with the Market Rate).
RM Processes and Activities
• CONTIGENT PAY:
It is related to
PERFORMANCE,
COMPETENCE, or
SERVICE.
• VARIABLE PAY:
Bonuses or Cash payments that will
be contingent on
Individual, Team or Company
Performance
RM Processes and Activities

• MARKET ANALYSIS:
Identifying Rates of Pay in the
Labor Market for making informed
decisions.

• JOB EVALUATION:
Establishing the Relative Size of
Jobs within the organization
 RM Processes and
Activities
• GRADE STRUCTURE:
The Sequence or Hierarchy of Grades or
Levels

• PAY STRUCTURE:
Ranges of Base Pay that are attached to
Grades in job. They provide Scope for Pay
Progression
 RM Processes and
Activities
• EMPLOYEE BENEFITS:
It includes the provisions of
Pension, Sick Pay, Holidays, Company Cars
etc.

• NON-FINANCIAL REWARDS:
They do not involve any Direct payments
and often arise from the Work Itself,
e.g.,
Achievement, Recognition, Autonomy,
Scope to Use and Develop Skills, Training,
Career Development Opportunities,
High Quality Leadership.
RM Processes and Activities:
Non-Financial Rewards
-Achievement
-Recognition
-Autonomy
-Scope to Use and Develop
Skills -Training
-Career Development
Opportunities
-High Quality Leadership
 RM Processes and Activities

• PERFORMANCE MANAGEMENT:
Processes based on
Shared Understanding that
-Define Expectations
-Assess Performance against those
Expectations
-Provide for Regular
Constructive Feedback
-Inform about Contingent Pay
Decisions
 RM Processes and
Activities
• TOTAL REMUNERATION:
The Sum of Base Pay
Contingent Pay
(Value of ) Employee Benefits

• TOTAL REWARD:
The Sum of Total Remuneration and
Non-Financial Rewards.
 Compensation System:
Eight (8) Dimensions
1. PAY for WORK and PERFORMANCE:
It includes money that is provided in short
term (weekly, monthly etc.) that permits
employees for the Payment of
Desired Goods and Services.
It is comprised of following Components:
Base Pay
Premiums,
Bonuses,
Allowances.
 Compensation System:
Eight (8) Dimensions

2. PAY for TIME NOT WORKED:

Since last 4 decades workers have
enjoyed more Days Off with pay for
Holidays and paid time off for
other wide variety of Reasons.
--Increases Labor Costs
--Enhances Quality of Work-life
Opportunities
 Compensation System:
Eight (8) Dimensions
3. LOSS OF JOB-INCOME
CONTINUATION:
4.DISABILITY INCOME CONTINUITY
5.DEFFERED INCOME
6.SPOUSE (FAMILY) INCOME
CONTINUATION:
7. HEALTH, ACCIDENT, and LIABILITY
PROTECTION
8. INCOME EQUIVALENT
PAYMENTS
 The Compensation Program
1.BASE WAGES and SALARY
The After Tax amount on our
Paycheck determines the Kind and
Quantity of Food, Clothing,
Housing, and Transportation a
Worker can AFFORD.
- Leisure activities are also
restricted by the Base Salary.
The Compensation Program

2. WAGE and SALARY

ADD-ONS
It includes
Overtime pay, Shift Differentials,
Premium pay for working on
Weekends, Holidays, Stand by…..
The Compensation Program

3. INCENTIVE PAYMENTS

- Payment for Specified OUTPUT

-rising domination of Service Jobs

The Compensation Program

• 4. BENEFITS and SERVICES

Time off with pay,

Retirement pay
-affect current and Future
standard of Living
 NONCOMPENSATION
REWARDS
• These rewards have an almost
Infinite number of Components that
Relate to the WORK SITUATION
and so to the Physical and
Psychological Well-Being of each
Worker.
 NONCOMPENSATION
REWARDS
1. ENHANCE DIGNITY and
SATISFACTION from WORK
PERFORMED
2. ENHANCE PHYSIOLOGICAL
HEALTH, INTELLECTUAL
GROWTH and EMOTIONAL
MATUARITY
3. PROMOTE CONSTRUCTIVE
SOCIAL RELATIONSHIP WITH
COWORKERS
 NONCOMPENSATION
REWARDS

4. ALLOCATE SUFFICIENT
RESOURCES TO PERFORM WORK
ASSIGNMENT

5. GRANT SUFFICIENT CONTROL

OVER THE JOB TO MEET PERSONAL
DEMANDS

6. OFFER SUPPORTIVE
LEADERSHIP and MANAGEMENT
 TOTAL REWARD
• Employees and Potential Employees
have become much more sophisticated
Customers of Total Reward Offerings
and more Questioning of what They
Contain.

• Total Rewards are All of the

Employer’s Available Tools that
may be used to
Attract, Retain, Motivate and
Satisfy Employees
 Total Reward
• The Total Reward concept Emphasizes
the importance of Considering All
Aspects of Reward as an Integrated
and Coherent Whole.
Elements of Total Reward:
-Base Pay
-Pay Contingent on Performance Competence or
Contribution
-Employee Benefits and
-Non-Financial rewards-
which include intrinsic rewards from the
Employment Environment and the Work Itself.
They are LINKED TOGETHER in
Total Reward.
 Elements of Total
Reward:
-Base Pay
-Pay Contingent on
Performance, Competence or
Contribution
-Employee Benefits and
-Non-Financial rewards-which include
intrinsic rewards from the Employment
Environment and the Work Itself.
They are LINKED TOGETHER in
Total Reward.
 TOTAL REWARD

• The Aim is to Offer a

Value Proposition
and Maximize the Combined Impact
of wide range of reward Initiatives
on Motivation, Commitment and Job
Engagement.
 TOTAL REWARD
• Total Reward covers not
only Traditional,
Quantifiable elements like
Salary, Variable Pay and
Benefits, but also more
Intangible non-cash
elements such as:
 TOTAL REWARD
Total Reward covers….
-Scope to Achieve and Exercise
Responsibility
-Career Opportunities,
-Learning and Development,
-Intrinsic Motivation provided by
the Work Itself and
-Quality of Working Life provided
by the organization
 TOTAL REWARD
• The Monitory Values in the reward
package still matters but they are
not the only Factors.

Cash is a weak Tactic in the

overall reward Strategy; it is
too Easily Replicated.
 TOTAL REWARD
• Creating a
Fun, Challenging, and
Empowered Work Environment
in which individuals are able to
use their abilities
to do Meaningful jobs for which they
are shown Appreciation
is likely to be a more certain way
to enhance Motivation and
Performance.
 TOTAL REWARD
A Model by Duncan Brown and
Michael Armstrong:
(A) Transactional Rewards
(B) Relational Rewards
TRANSACTIONAL
REWARD
- Financial in nature and
- Essential to Recruiting and Retaining
staff- can be Copied by
Competitors
 TOTAL REWARD
RELATIONAL REWARDS

- Concerned with Learning &

Development and Work Experience
- Essential to Enhancing the Value of
Transactional Rewards.

Real Power is in the Combination of both the

Transactional and Relational Rewards.
 Total Reward: The Hay
Group Engaged Performance
Model
• Hay Group developed a Model which also focuses
on High Performance Workplace along with
Transactional and Relational Rewards
• Six Key Elements:
1. Inspiration and Values
2. Future Growth/ Opportunities
3. Tangible Rewards
4. Quality of Work
5. Work/ Life Balance
6. Enabling Environment
 Total Reward: The Hay
Group Engaged Performance
Model
1. INSPIRATION and VALUES
(ii) Quality of Leadership
(iii) Organizational Values and
Behaviors
(iv) Reputation of the Organization
(v) Risk Sharing
(vi) Recognition
(vii) Communication
 The Hay Group Model
INSPIRATION and
VALUES
QUALITY OF LEADERSHIP
The Leadership Style and Behaviors
fostered and used in organizations
have a major Impact on the Values of
the organizations and the Way it
Behaves.
A Ruthless Boss creates an organization
filled with Negative
Underachievers who ignore Opportunities
 The Hay Group Model
INSPIRATION and
VALUES
QUALITY OF LEADERSHIP
• Leaders are the Sources of Important
Rewards such as
--Recognition thru Effective Feedback
--Providing the Scope to carry and
Meaningful Work
--Providing Opportunities for Development
and Learning

• Leaders are there to Motivate people

and secure Engaged Performance.
 The Hay Group Model
INSPIRATION and
VALUES
ORGANIZATIONAL VALUES AND BEHAVIORS

• The CORE VALUES of an organization

has a great Significance as a basis
for creating a Rewarding Work
Environment
 The Hay Group Model
1.INSPIRATION and
VALUES
(iii) REPUTATION OF THE ORGANIZATION
• People want to work for a
High-Reputation Employer.
(iv) RISK SHARING

(v) RECOGNITION
 Total Reward: The Hay
Group Engaged
Performance Model
2. FUTURE GROWTH and OPPORTUNITY

(I) Learning and Development beyond

Current Job
(II)Career Advancement Opportunities
(III)Performance Improvement and Feedback
 Total Reward: The Hay
Group Engaged
Performance Model
3. QUALITY OF WORK
(I) Perception of the Value of Work
(II)Challenge/ Interest
(III)Achievement
(IV)Freedom and Autonomy
(V) Workload
(VI)Quality of Work Relationship
 Total Reward: The Hay
Group Engaged
Performance Model
4. ENABLING ENVIRONMENT
(I) Physical Environment
(II)Tools and Equipment
(III)Job Training (Current Position)
(IV)Information and Processes
(V) Safety/ Personal Security
 Total Reward: The Hay
Group Engaged
Performance Model
5. WORK/ LIFE BALANCE

(i) Supportive Environment

(ii) Recognition of Life Cycle Needs/ Flexibility
(iii)Security of Income
(iv)Social Environment
 Total Reward: The Hay
Group Engaged
Performance Model
6. TANGIBLE REWARDS
(i) Competitive Pay
(ii) Good Benefits
(iii)Incentives for Higher Performance
(iv)Ownership Potential
(v) Recognition Awards
(vi)Fairness of Reward
 STRATEGIC REWARD
• Reward Strategy is the
Declaration of INTENT,
which establishes PRIORITIES
for Developing and Acting on
Reward Plans
that can be Aligned to
Business and HR Strategies and to
the Needs of People in the organization.
 STRATEGIC REWARD
• Thus the AIM of Reward Strategy is
to Support the Corporate and HR
Strategies
and Align Reward Policies and
Processes to
Organizational and Individual Needs.

• Four Arguments for Developing Reward

Strategies: pg. no.30
( Class Assignment)
 STRATEGIC REWARD
• Reward Strategy is concerned with the
Direction
the organization should Follow
in Developing the Right Mix of
Financial and Non-Financial Rewards to
Support the Business Strategy.

• It sets out
1. Guiding Principles-(Reward Philosophy)
2. Intentions-
( this is What we propose to DO.)
3. Rationale-
( this is Why we Intend to do it.)
 STRATEGIC REWARD:
Features of Reward
Strategy
• REALITY OF REWARD STRATEGY:
-danger of RS Promising much but
Achieving Little
• CHARACTERISTICS OF RS:
All RSs are Different just as all org. are
different thus all RSs are characterized by
Diversity.
-RSs are conditioned both by
- the Legacy of the Past and
the Realities of the Future.
 STRATEGIC REWARD:
Features of Reward
Strategy

• RS AND BUSINESS STRAGEGY

• RS AND HR STRATEGY
• RS AND LINE MANAGEMENT
CAPABILITY
• RS AND EMPLOYEES
 STRATEGIC REWARD
• Any Strategy must have following major
Elements;
1. There must be Strategic Objectives
that define-
What the Strategy is Supposed to
Achieve?
2. There must be a Plan of Action that
sets out-
How the Objectives will be
Met?
 STRATEGIC REWARD
• Basic Strategic Planning Question:
1. Where are We Going?

2. How are we going to Get There?

3. Why do we want to get there

anyhow?
4. What Values or Guiding principles
should we adopt in Implementing
the Strategy?
 STRATEGIC REWARD:
GUIDING PRINCIPLES
They Express the Philosophy of the
organization- its Values and Beliefs-
about—
How people should be Rewarded?
• While defining Guiding Principles the
Employees should be…
communicated and Involved in
order to
Increase Understanding about the Basis
of Reward Policies and Practices.
 STRATEGIC REWARD:
GUIDING PRINCIPLES
FUNDAMENTAL VALUES
Guiding Principles may
Incorporate or

Be Influenced by
1. Fairness
2. Equity
3. Consistency
 Strategic Reward:
DEVELOPING REWARD
STRATEGY
• Analyze Business Strategy and Business
Needs
• Develop HR Strategy
• Develop Reward Strategy
• Guiding Principles
• Define and Justify Intentions
• Prepare and Implement Plan
• Train
 REWARD POLICIES
• Reward Policies provide Guidelines for
the Implementation of Reward
Strategies and
the Design and Management of
the Reward Process.
REWARD POLICIES
A. Levels of Reward
B. Market Rate and Equity
C. Attraction and Retention
D. Relating Rewards to Business Performance
E. Total Reward
F. Contingent Rewards
G. Assimilation Policies
H. Flexibility
I. The Role of Line Management
J. Involving Employees
K. Communicating to Employees
L. Transparency
 REWARD POLICIES
A. LEVEL OF REWARDS
The policy on the Level of Rewards indicate
whether the Company is a
1. HIGH PAYER,
2. Average Rate Payer
3. Below the Average Rate Payer
It depends on the Extent to which the
organization Demands HIGH LEVELS of
PERFORMANCE from its Employees.
 REWARD POLICIES
B. Market Rate and Equity
• The relative Importance attached to
Market Rates and Equity

• The Policy needs to be Formulated on the

Extent to which Rewards are Market Driven
rather than Equitable.

• Any organizations that have to Attract and

Retain staff who are much in demand and
where market rates are therefore High,
have to Sacrifice their Ideals of Internal
Equity to the Realism of the Market Place.
 REWARD POLICIES:
C. ATTRACTION AND
RETENTION
• The overall policy should be to become the
Employer of Choice.

• The Attraction policy will need to be based on a

Competitive Remuneration Package.
Analyzing the Factors for Specific Occupations or
Categories of Employees that are likely to AFFECT
their Decision to Apply for jobs and to Accept
them when Offered.
 REWARD POLICIES:
C. ATTRACTION AND
RETENTION

• The Market not the company will ultimately

Determine the Movement of the
Employees.

• Any company cannot shield its employees

from Attractive Opportunities and
Aggressive Recruiters.
 REWARD POLICIES: D.
RELATING REWARDS TO
BUSINESS PERFORMANCE
• This reward policy refers to the
LINK between Business Performance
and PAY.

E. TOTAL REWARD
Contingent Rewards +
Non-Financial Rewards
-both types of rewards are regarded
as being Equally Important
 REWARD POLICIES:
F. CONTINGENT REWARDS
• The scope for the Use of Contingent
Rewards related to Performance

G. ASSIMILATION POLICIES
The Introduction of New or Revised Pay
Structure means that policies have to
be Developed on how Existing employees
should be Assimilated into it.
 REWARD POLICIES:
H. FLEXIBILITY
• The Extent to which Reward
Processes should operate Flexibly
 THE PSYCHOLOGICAL
CONRACT
• Managing Reward is about managing
EXPECTATIONS of Employees and
Employers towards each other-
that create Employment Relationship.

• Employment Relationship is defined by

Two Types of Contracts
1. Transactional Contract
2. Relational Contract
 THE PSYCHOLOGICAL
CONRACT
TRANSACTIONAL CONTRACT
• Expressed in Formal Contracts of Employment
• May be Written or Unwritten
• Specify Terms and Conditions of Employment
-well-described terms of Exchange

• have basis in law

• expressed in Financial Terms
• specified Performance Requirements
• also called Economic Contract
 THE PSYCHOLOGICAL
CONRACT
RELATIONAL CONTRACT
( PSYCHOLOGICAL CONTRACT)

• Less well-defined or not defined

• It is Implied rather than Stated
• Not subject to Agreement
• It is used to refer to all those aspects of the employment
Relationship which are neither well-defined nor clearly Understood.
• And these Relational Aspects of employment exert greatest
influence on the
Motivation, Commitment, Morale and
Job Satisfaction.
THE PSYCHOLOGICAL
CONRACT
CHARACHTERISTICS OF
PSYCHOLOGICAL CONTRACT
 MOTIVATION:
PROCESS
• The process of Motivation can be initiated by
1. Recognizing an Unsatisfied
Need
2. A Goal is then Established
( in order to satisfy that need)
3. A Course of Action is
determined which is expected
to Lead towards the Attainment
of Goal.
 MOTIVATION:
PROCESS
• Employees can be Motivated by Rewards and
Incentives which will…
Enable them to Satisfy their Need or
Provide them with Goals to Attain.

• The Needs of Individuals and Goals associated

with them Vary so widely that it is very difficult
if not Impossible to Predict how a particular
Reward will AFFECT individual Behavior.
 MOTIVATION: TYPES
• INTRINSIC:
-It is Derived from the CONTENT of
the Job.
-Motivation by Work Itself in so far
as it Satisfies People’s Needs
• EXTRINSIC:
- this is What is done to People and
for People, to Motivate them.
- It may be Increased Pay,
Praise, or Promotion.
 MOTIVATION:
NON-FINANCIAL
REWARDS
• ACHIEVEMENT

• RECOGNITION

• RESPONSIBILITY

• INFLUENCE

• PERSONAL GROWTH
COMPENABLE FACTORS
• Compensable Factors are paid for,
Measurable Qualities, Features, and
Requirements that are COMMON to
many different kinds of jobs.

• Theses factors are a Combination of

Qualities, Features, Requirements of a
JOB that, when Taken Together Form a
Coherent WHOLE.
COMPENABLE FACTORS
• This Coherent Whole provides Reasons for
and Determine the Amount of MONEY to be
paid to someone to Perform a Specific Task.
• Universal Compensable Factors:
1. SKILL
2. EFFORT
3. RESPONSIBILITY
4. WORKING CONDITION
 COMPENABLE FACTORS
1. SKILL:

The Experience
Training
Education
and Ability
Required to Perform a Job
under consideration