Chapter 2 Reward System

Reward system

Reward system refers to the procedures, rules, and standards associated with allocation of benefits and compensation to employees.

Characteristics of reward system

Reward must be offered in proportion. Reward must be equitable. Reward must be balance and comprehensions in design and application It should give dual result- motivation and fulfillment of objective and aims. Reward should performance driven.

Objectives of Reward System

1.

2.

3.

Attraction : attract and retain Great performance : e.g. In Canada 70% organization reward is based on performance and given 3 types of reward- Individual, team and organization Commitment :

Achieving the aims

It should align with the business and HR strategies. 2. It should be in accordance to changing needs of the business. 3. Employees should be valued according to their skill, competency and performance. 4. Transparent 5. Should build mutual trust 6. Should develop equity and fairness.
1.

How a Reward system operates

Environment
Business strategy HR strategy Environmen t

Environment

Reward Strategy

Reward Policies

Reward Practices

Reward Procedures

Reward Processes

Component Reward Management

1.

2.
3. 4. 5. 6.

7.
8.

Financial reward Non financial reward Reward policies Psychological satisfaction Pay structure Base pay Job evaluation Contingent pay

Component Reward Management

9. Allowances 10.Total earnings 11.Total Remuneration 12. Total Reward

1. Financial reward
Salary Wage Incentive commission

2.Non financial reward

Medical insurance Life insurance Subsidize canteen Transport Free uniform Interest free loan

3. Reward policies
Level of reward External competitiveness versus internal equity Assimilation policies- revised pay structure. Protection policies transparency

4.Psychological satisfaction
Job training Career advancement Recognition Job security Commitment

5.Pay structure
1. 2. 3.

Exempt and Non exempt pay structure Pay structures based on job family Pay structures based on geography

6. Base pay Salary/ wage + additional pay + pension +life insurance 7. Job evaluation

8. Contingent Pay
1.

2.
3. 4.

5.
6. 7.

8.
9.

Individual Performance-Related Pay Bonuses Incentives Commission Service- related pay Competence- related pay Contribution-related pay Skill based pay Career development pay

Component Reward Management

9. Allowances 10.Total earnings : base pay + add pay 11.Total Remuneration : total earning + benefit 12. Total Reward

Asst. Prof. Shirufi Daruwala