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HUMANRESOURCEMANAGEMENTINPRACTICE
Reward Management
MMag. Almina Bei
Department of Human Resource Management
Winter Term 2011
6 December 2011
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Almina Bei HRM in Practice Winter Term 2011 Reward Management (6 December 2011)
1. Reward
Reward refers to all of the monetary, non-monetary and
psychological payments that an organization provides for itsemployees in exchange for the work they perform.
Bratton & Gold (2007: 358)
The design and management of reward systems constitute one ofthe most difficult HRM tasks for the general manager.
Beer et al. (1984: 113)
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Almina Bei HRM in Practice Winter Term 2011 Reward Management (6 December 2011)
2. The reward management system
An organization can provide two types of reward
Extrinsic
Intrinsic
Reward system
the mix of extrinsic and intrinsic rewards
Pay system
the monetary or economic element of the reward system
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2. The reward management system
Reward system processes and activities
Reward strategy
Reward policies
Total reward
Base pay
Contingent pay (performance pay, variable pay)
Employee benefits (indirect pay)
Non-financial rewards
Type of reward
Individual
Team
organizational
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3. Total reward
Figure 1:Types of employee rewardSource: Bratton & Gold (2007: 373)
f
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3. Total reward
Figure 2:Compensation PhilosophiesSource: Mathis & Jackson (2011: 363)
D t t f H R M t
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3. Total reward
PAY/REWARD
Base pay
Contribution pay
Shares/profit sharing
Recognition
BENEFITS
Pensions
Health care
Perks
Flexible benefits
LEARNING AND DEVELOPMENT
Workplace learning
Training
Performance management
Career development
WORK ENVIRONMENT
Core values
Leadership
Employee voice
Job/work design (autonomy)
Extrinsic
Intrinsic
Figure 3:Model of total reward (Towers Watson)Source: Armstrong (2011: 745)
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3. Total reward
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4. Rewarding special groups
Directors and executives
Figure 4:Components of executive compensation packagesSource: Mathis & Jackson (2011: 415)
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4. Rewarding special groups
Sales representatives
Salary only
Salary + commission
Salary + bonus
Commission only
Additional non-cash rewards
Manual workers
Time rates
Payment-by-result schemes
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5. Managing reward systems
Determining the right pay through
Job analysis Information about the tasks, responsibilities and the context of a specific job
Job evaluation processes
Market pay data
Pay levels based upon the market (supply/demand)
Figure 5:The point system matrixSource: Bratton & Gold (2007: 385)
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5. Managing reward systems
Controlling reward
Reward forecasting Forecast future payroll costs
Impact of pay reviews and contingent pay awards
Reward budgets
Pay review budgets set out the increase in payroll costs for either general orindividual pay
Based on the number of people employed and their present and forecast ratesof pay
Maintain control over payroll costs
Evaluating reward practices
Compa-ratio analysis
Measures the relationship between actual and policy rates (midpoint orreference point) of pay as a percentage
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6. Summary
A Reward package is typically comprised of three key elements:
financial reward, non-financial reward and perks or benefits An organization's reward strategy outlines the philosophy,
principles and underpinning values that inform its reward systemand the types of employee behaviors it wishes to promote
Total reward includes extrinsic and intrinsic reward, as well as
individual and organizational reward systems
Groups like directors, sales representatives and manual workershave special reward systems
The right pay can be determined through job analysis, job
evaluation processes and market pay data
It is necessary to consider the strategic, labor market, political,
social, economic and legislative factors that act to shape the
viability and acceptability of reward
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