reward-systems

REWARD SYSTEM

IT’S ALL ABOUT PEOPLEAND

RELATIONSHIP

CONTENTS

INTRODUCTION

PURPOSE OF REWARD

CATEGORIES

TYPES OF REWARDS

ADVANTAGES &DISADVANTAGES

CONCLUSION

INTRODUCTION

• Wilson (1995) defines reward systems as follows:“A reward system is any process within an organization

that encourages, reinforces, or compensates people for taking a particular set of actions. It may be formal or informal, cash or noncash, immediate or delayed”

•The reward and recognition industry had its roots in the depression years of the 1930’s.

•It was during that time that pioneers such as E.F. MacDonald and Edward Maritz began to sell their jewellery, watches and other merchandise to corporations as sales incentives and service awards for employees.

PURPOSE OF REWARD

ATTRACT, MOTIVATE AND RETAIN

CATEGORIES

• As referred by Michael Armstrong (2007), all aspects of rewards, namely base pay, contingent pay, employee benefits and non- financial rewards, which include intrinsic rewards from the work itself, are linked together and treated as an integrated and coherent whole .

• Intrinsic reward: is personal, it includes feelings of satisfaction to have finished a particular task.

• Extrinsic reward: outside the control of the employee. It includes incentives, share options, pension schemes, insurance and crèches.

The lack of attention to these details could create de-motivation and dissatisfaction.

Types of

Reward

Payment by results

Time rates

Individual/group performance-related pay

Skill-competency based pay

Cafeteria or felxible bnefit

system

TYPES OF REWARDS

Time rates

This reward system is related to the number of hours worked and it experience rather than performance. It gives importance on the value of the task rather than on the value of the skills, abilities the employee brings to the job, or on the quantity or quality of performance.

Advantages: It is open to inspection; It creates stability and retention of employees. system is easy to administer and allow labour cost to be predicted;

It does not emphasise quantity of output to the detriment of quality.

Disadvantages:

Employees are not motivated to become more productive.

This happens because both good and bad performers are rewarded for the reason why they are in the same grade.

Payment by result

It links pay to the quantity of the individual’s output. The pay is usually linked to the number of units of work produced.

Advantages:

The employee is motivated to put effort so he can increase his income;It is fair because the reward is related to the level of production; wages are linked to production and less supervision is required.

Disadvantages:

It is difficult to measure output in certain jobs, safety standards could be compromised.

Individual/group performance-related pay

It considers not only results or output but also actual behaviour in the job. It consist of a lamp sum, or a bonus as a percentage of basic salary with quality of permormance determing the magnitude of the percentage increase

Advantages:

It combines goals with emotions, there is a congruency between organisational and personal goals, the remuneration packaging is fair, the culture of organisation is supportive, employees receive useful feedback

Disadvantages:

There is not attempts made to relate individual performance to organisational objectives, appraisal is not conducted fairly,open communication between manager and subordinates is descouraged, poor performancers are punished

Skill-competency-based pay

It places the emphasis on inputs that consist of knowleadge, skills and competencies injected into the job by employees

Advantages:Fair amount of consultation and employee participation;

there is a strong encouragement in changing behaviour; there is an appropriate level of training and much time is invested in the process

Disadvantages: Skills obsolence which could be arise in condition of changing

technology; it is possible that this system do not pay attention to the skills that are no longer significant or they are not required at all

Cafeteria or flexible benefit system

The felxible benefit system is a departure from the traditional model of a single system of remuneration for everybody” (Meyer, 2000)

It is calculated within an overall remuneration or compensation package and it includes a lot of benefits.

Advantages:

Employees choose benefits to meet their needs, during periods of change it is an harmonise rewards, employees are given a sense of control and involvment, employers are seen as more responsive to employees’needs.

Disadvantages:

Choices can cause problems , the schemes can be complex to operate

Example

Employee Recognition Gone Wrong , Then Right

http://www.youtube.com/watch?v=KFplP0ZNzjQ&feature=PlayList&p=E9E0E27B199F9547&index=0&playnext=1

CONCLUSION

Thanks for Listening

Queries?