The need for reward management and systems

The take up for recompense management and systemsReward management is non just astir(predicate) money. As sh decl ar in the above diagram, it is c formerlyrned with intrinsic as social unitsome as external rewards and with non- monetary as well as fiscal rewards. inwrought rewards arise from the nature the trading it ego. Decenzo and Robbins ( 2005, p.274) stated that intrinsic rewards argon self initiated rewards c ar pride in ones work, a sense of accomplishment or being theatrical role of the job. Intrinsic rewards cogitate to responsibility and achievement they atomic number 18 inherent in privates and non imposed from outside. On the sepa appraise hand, extrinsic rewards arise from the factors associated with the job context such as monetary rewards, promotion and benefits. They ar external to the job and come from outside source.All reward systems ar ground on the assumptions of draw and quartering, retaining and motivating populate. Rewards ar of two vitrine Financial and non-financial rewards. M either pack view money as the fillet of sole motivator but mevery studies deport found that among employees surveyed, an some other(prenominal) non financial reward besides trigger them and influence the level of murder. A youthful study of reward formula by CIPDs shows that higher proportion of employers absorb adopted a total reward address, in which they try to dress the financial and non-financial elements.Non financial rewards in nowadays accession workers financial position. It differs from workers to workers. For example an employee whitethorn abide by off-keyice furniture and other whitethorn find it ineffectual whereas financial rewards outho role be charters, bonuses, or indirectly remunerative crazy leaves and compensable vacation. They be mainly of three types such as gelt sharing, job evaluation and merit rating. However, Decenzo and Robbins (2005) classified financial rewards as sh induce in the diagram above as surgical procedure found, implied membership based and obvious membership based. They mentioned that consummation based use commissions, piecework net profit plans, inducing system, sort bonuses, merit or other node of representment for work whereas membership based rewards include be of living cast ups, benefits and salary increases attributable to the fatigue market conditions, seniority, qualifications, and specialised skill. Membership-based rewards may pull out many employees on the whole when the extent of the reward increases with seniority. Though, thither are drawbacks They discourage poor performers from loss and throng from leaving the organization, they indirectly activate job functioning. However, Seniority-based rewards lessen upset because the cost of leaving raise with the employers duration of service.2.3 carryoff MANAGEMENT relate TO THEORIES OF MOTIVATIONEmployees motivation depends on the perception of achieving the reward , i.e. their expectations. Motivation speculation describes why people at work act in the manner they do, and what presidential terms earth-closet do to persuade people to apply their reasons and abilities in ship mintal that testament help to achieve the organisations goals as well as satisfying their own ineluctably. Everyone has their own inevitably and a different set of goals. Employees can do themselves in different ways that go away guide them to expect that their goals impart be achieved whereas management can motivate people through systems like fabricate, promotion and praise.Motivation is distinguished because there is reward. People work because they welcome revenue to knock off on their individual, family and society needs. Some needs are the basics of life, what individual needs to survive physiologic everyy. Maslow defined the hierarchy of needs with essential physiological needs at the base and going up through safety, social needs and ends in the ne ed for self-fulfillment. However, some critics localize that there is precise empirical evidence to support this model. Herzberg differentiated surrounded by firstly hygiene extrinsic factors such as counterbalance and organisation schema and measures that depart cause dissatisfaction in the workplace if absent or insufficient. Secondly, motivators which are intrinsic factors such as the worth of the work, attainment, appreciation, responsibility and potential drop for growth which leave alone positively motivate people. Maslows Hierarchy of Needs and Herzbergs twain Factor Theory are a content system of motivation. They twain suggest that needs should be satisfied for the employee to be motivated but, Herzberg present that only the higher levels of the Maslow Hierarchy (e.g. self- substantialisation, esteem needs) act as a motivator. The remaining needs can only cause dissatisfaction if not explained clearly. then he stated that satisfaction and dissatisfaction wer e not necessary connect.Taylor developed his theory of scientific management where he make three assumptions in his reflexion Man is concerned with maximising money, People are go throughed as individuals and they can be treated like machines. Taylor had analyzed what motivated people at work which was money. He though workers should be paid for what they worked and stipend should be associated to the amount produced Workers who work less would be paid less and Workers who did to a great(p)er extent than than usual would be paid much. The main limitation in Taylors approach is that it overlook that from each(prenominal) one individual is unique Secondly, money is not an important motivation for everyone. Taylor ignored the fact that people work for reasons other than financial reward.Other theories of motivation prepare been developed as well which are believed to focus on cognitive or process theories that are how people consider their reward. Expectancy theory distinguis hes two factors of appreciate and probability. People value reward according to the level it satisfies their needs of security, community esteem, achievement and autonomy. Armstrong as well as agrees with the fact that Expectancy is the likelihood that reward depends on effort where there is more effort, the higher the reward but Marchington and Wilkinson (2006, p.325) argue that this is not a fixed and there may be other sets of expectation at different times. For that effort to be useful to the organisation, individuals need to flummox the coif ability and the right perception of their intention. The theory implies that low motivation will be product of jobs where there is little worker control. (Marchington and Wilkinson 2006, p.326)Two other theories of motivation are significant to reflect on. Latham and Locke developed goal theory which describes that both performance and motivation are cleansed if people have challenging and monitored goals but accepted when there is fe edback on performance. On the other hand, Equity Theory which advocates that people are more motivated when they are treated equitably and demotivated if they are treated inequitable while they merit more than that.2.4 STRATEGIC REWARDSReward strategy is a declaration of flavor that defines what the organization wants to do in the longer term to develop and apparatus reward policies, practices and processes that will further the achievement of its pedigree goals and meet the needs of its stakeholders. (Armstrong 2006, p.643) Reward is more than honorarium and benefits. Thus, a reward strategy essential consider many aspects of the workplace in order to both attract and keep high value employees doing the correct things in the correct way so that they the organisation is successful.Reward policies provide guidelines for the implementation of reward strategies and the design and management of reward process. Basically, every employer must obey four study policies (White Druke r 2000) internal alignment, external competitiveness, employee contributions, management of the pay system. Many research and studies on reward strategy has revealed that people are difficult and motivation is a complex process. What is obvious is that while financial reward is essential, for many people other factors are also, and can be more, important. Rewards are designed to parent behaviour that will contribute directly to the achievement of the organisations objective.Reward systems should be in line with the followingHR StrategyBusiness Strategy placement CultureThe elements of reward management and their inter dealingship can be shown in the figure 1.2Figure 2.2 Rewards management elements and interrelationshipsSource Michael Armstrong, 2006, A Handbook of valet Resources focal point Practice, p.630The elements of a rewards management system are tune evaluationJob evaluation is an organized method for defining the relative value or size of jobs within an organisation in order to add internal relativities. It provides the basis for designing a fair grade and pay structure, grading jobs in the structure, managing job and pay relativities and guiding the success of cost pay for work of satisfactory worth. However, there has been many criticism of job evaluation by some HR practitioners, in the late eighties and early 1990s A numbers of major charges were made against it in many organisation. Critics argued that it was not only bureaucratic and rigid, but also long and unsuitable in to solar days organisations.2.4.2 Grade and net StructurePay grade is a system indicating rate and shows the rate at which an employee receives basic pay. It is also a means to compare ranks, which may have different name in the different services. Pay grades facilitate the employment method by providing a flat range of salary whereas Pay structure refers to the variant levels of pay for jobs or groups of jobs by referring to their point as determined by job evaluat ion as compare to market rate surveys. it provides cranial orbit for pay increment in accordance with competence or contribution. food market Rate AnalysisMarket rate tell us the actual salary of some jobs. It is determined by the forces of demand and supply of the travail market. If an organisation pays below the market rate then it will probably have trouble in recruiting and retaining suitable cater. To know the market rate an organisation has to do pay surveys. It helps to obtain and keep high character reference staff and response to market hugs.There are some(prenominal) ways in which a company can obtain data on market rate such as Local employment agencies, Job centres, Job adverts in national newspapers2.4.4 Contingent PayContingent pay measures what do we value and what we are ready to pay for? It refers pay for individual that is related to performance, competence, contribution or service.Employee BenefitsBenefits can be defined as all the indirect financial paymen ts an employee receives for continuing his or her employment with the company. Benefits are generally available to all firms employees and includes such things as time off with pay, health and life insurance, and child care facilities. (Dessler 1997, p503)Today many organisations at tend benefits to be an important approach in reward management in order to achieve a competitive advantage in cranch markets. Both financial and non-financial benefits play an important function when it comes to attract, keep and motivate employees. As an addition to base pay financial benefits may improve an organisations ability to attract and retain employees, and non-financial benefits allows organisations to meet the specific needs of the employees.AllowancesAllowances may be regarded as supererogatory to base pay. Example of it may be meal allowances where some employees in any organsation are given a sum of money for a meal. mental process ManagementPerformance Management refers to a process, w hich frequently measures work as it occurs. It is a way of obtaining die results by managing performance according to set of planned goals and competency achievements. It motivates people to do the right things by specifying their goal.Non-Financial RewardsIt refers to rewards that are not related to pay but rather satisfaction arising from the job itself like recognition, success, responsibility, autonomy, and leadership skill. fall RemunerationTotal earnings refers to all the monetary reward and benefits than an employee reliable for working in the organisation.Total RewardsA total reward refers to all the rewards that exist like financial aspects of reward of basic pay, any bonuses and additional financial benefits with the non-financial benefits at the personal and organisational level. WorldatWork (2006) introduced a total rewards framework that proposed to declare the concept and help practitioners think and implement in new ways. Today, professionals in general use the t erms total rewards, total compensation or compensation and benefits to describe the joint strategies. There are five elements of total rewards, each of which includes programs, practices, elements and dimensions that to discombobulateher define an organizations strategy to attract, motivate and keep employees. These elements are hireBenefitsWork-LifePerformance and RecognitionDevelopment and Career Opportunities2.5 INDIVIDUAL REWARD brassMany sectors of employment use remuneration systems that contain direct relations to individual performance and results. On an individual basis this may be payment by results (PBR) for example bonus, piecework, commission, work-measured synopsiss and pre-determined motion time systems, measured day work (MDW), appraisal/performance related pay, market-based pay and competency and skills based pay.2.5.1 Performance Related PayPerformance-related pay (PRP) is a method of remuneration that links pay progression to an estimation of individual perfor mance. Performance pay may be defined as any remuneration practice in which part or all of remuneration is based directly and explicitly on employees assessed work behaviour and/or measured results (Shields 2007, p.348). Performance related pay is generally used where employee performance cannot be appropriately measured in terms of output produced or sales achieved. analogous piece-rates and commission, performance related pay is a form of incentive pay. undivided performance is reviewed frequently (usually once per year) against agreed objectives is known as performance appraisal. Then employees are classified into performance groups which determine what the reward will be. The method of reward involves a cash bonus and/or increase in wage rate or salary.However performance related pay is not very understandable in the mind of researchers. Thorpe and Homan (2000) accounts both for research stating that one of the main advantages of performance related pay is that it attract an d retain good employee while other research indicates that performance-related pay fails to motivate and that the employees generally regard the performance-related pay system as unfair in practice.Some drawbacks may be rewarding employees individually does very little to encourage teamwork and, such schemes also usually carried out only once a year assessment and payout, which may weaken any incentive effect. If a worker rated less than satisfactory receives no increase at all under an appraisal pay scheme their motivation and team spirit may be badly affected. Thus, it is important to focus appraisals on the assessment of performance, the identification of training needs and the setting of objectives, not on any dependent pay.2.5.2 Individual Payment by Results (PBR)The aim of any PBR scheme is to provide a direct relationship between pay and productivity the more trenchantly the employee works, the higher their pay. This direct link means that incentives are stronger than in o ther schemes. However, in recent years traditional bonus, piecework and work-measured schemes have decreased, as many employers have moved to 360-degree feedback, also known as multi-rater feedback that is employee phylogeny feedback that comes from all around the employee. Nevertheless, payment by result fails because textile shortages or delays can affect production and Individual skills are not rewarded and indeed the most skilled may be put onto more complicated and potentially less rewarding work.2.5.3 Piecework, Bonus Schemes and CommissionPiecework is the easiest method of PBR workers are paid at a particular rate for each piece of output. This means the system is simple to operate and understand, although open to the blemish that it is often at the expense of superior. Pieceworkers must be paid at least the national minimum wage.Incentive bonus schemes is where for instance an spare payment is paid when production exceeds the established threshold, or where there is a raise in sales which surpasses given targets. Variable bonuses can also be paid in relation to performances achieved against pre-determined standards so that the higher the performance achieved, the greater the level of bonus produced. However, Armstrong (2006, p.635) mentioned that bonus payment are related to achievement of profit and or to other financial targets.magazine rates are used when employees are paid for the quantity of time they spend at work. The common form of time rate is the weekly wage or monthly wage. Generally the time rate is fixed in relation to a standard working week (e.g. 40 hours per week). Time worked above this standard is known as overtime. Overtime is generally paid more than the standard time-rate. It reflects the extra contribution of the employee. The main advantages of time-rate pay are that they are appropriate for organisations that desire to employ workers to present general roles (e.g. financial management, administration, and maintenance) wher e employee performance is not easy to evaluate.Commission is a payment made to employees based on the value of sales achieved. For example, in sales jobs, the marketer may be paid a plough manage of the selling value or a flat amount of each unit change (Werther Davis 1997 p.411). The rate of commission depends on the selling price and the amount of effort required in making the sale. Armstrong (2006, p.638) stated that commission provide a direct financial incentives and attract high performing sales staff.2.5.4 deliberate Day WorkMeasured day work (MDW) has been developed from both individual PBR and basic wage rate scheme. Salary is constant and does not vary in the short time provided that that the targeted performance is maintained. MDW systems need performance standards to be placed through some framework and undergo modifications as required. It involves full commitment of management, workers and trade amounts. The pay structure is regularly hypothesise by job evaluat ion and with full employee agreement. MDW is now somewhat unusual. It suits organisations where a high, secure, expected level of performance is required, rather than highest potential individual performance.2.5.5 Market-Based PayMarket-based pay refers to the salary level available in the market for the alike type of work. Factors that help to consider the market rate are the skills that are necessary are widely accessible, the unemployment level in general versus the employment rate and the jobs requirement for specialised skills. It is usually used in coalition with other rewarding scheme like performance appraisal, but may be element of a reward strategy integrating several performance elements.2.5.6 Competency and skills-based payCompetency and skills-based pay schemes are more common nowadays. There a direct relationship between the attainment, development and effective use of skills and competencies and the individuals pay. Competency and skills-based schemes measure what t he employee is inputting to the job. Competency based systems have let more popular because many organisations use competencies in staffing and in performance appraisal for non-pay reason, such as training. There is an increasing front for pay to be associated to the abilities of the individual. Competency based pay is used together with an existing individual performance related pay scheme and will reward them not on the basis of their performance but competencies. leaders skill or team-working may be examples of competencies. Reward is given for the skills already gained and for the acquirement of new skills that would be helpful in other jobs in the same job band. This can promote multi-skilling and improved flexibility.2.6 GROUP AND ORGANISATIONAL REWARD SYSTEMSGroup pay schemes include those based on the performance of the team, graft or company. Team-based pay gained its importance with the increased interest in teamworking. It reflects the performance of the team. It is no t easy to define the team, the goals, and the right reward. Peer group pressure can also be useful in increasing the performance of the whole team. Company based performance pay schemes are based on the whole organisation performance. The most common forms of this system tend to be based on overall acquire (profit sharing), gainsharing systems. They are effective where communications and employment relations are good overlap incentive plans involve the provision of shares to employees. In the journal of knowledge management, Milkovich and Wigdor, (1991) said Team-based rewards may potentially result in a loss of motivation because of feelings of injustice due to a get the pictured free-riding of other team members and the use of an equivalence principle when allocating rewards rather than an equity-based principle. (Milne 2007, p.33)2.6.1 GainsharingGainsharing is a pay scheme that links workers pay to the success of organisational goals by rewarding performance above a pre-det ermined target. This is endlessly led by measures of productivity, performance and quality. Gainsharing aims to develop these indicators by improving communications, staff involvement and promoting teamwork. It should be element of a full long-term strategy to maintain an effective system through involvement and sharing. It may indeed be used as a substitute for bonus/piecework schemes, where quality is at times lost to quantity. The whole employees and management who have any association in the product of the organisation should be integrated in any gainshare plan. Marchington and Wilkinson (2006, p. 336) pointed out that such scheme have the merit that employees perceive their contribution to the total effort of the organisation and they do not consider themselves as individual units. They further mentioned that gainsharing plan will affect the role of trade coalescency as their collective bargaining will become less important in determining wages or union will think employees will be more committed to the organiastion.2.6.2 service SharingProfit Sharing means rewarding employees a percentage of the companys profits. Singh (2006, p 385) defines profit sharing usually involves the determination of organizations profits at the end of the fiscal year and the distribution of a percentage of the profits to workers qualified to share in the earnings. Profit sharing helps employees to form part of oganisation success. However, Beardwell and Holden (1997, p.574) argued that there is little evidence that such schemes have any great consequence on the performance, motivation or attitudes of employees.2.6.3 Share Ownership SchemesBusinesses whose shares are traded on a stock exchange can offer shares to its lustrous employees. This compensation method can motivate employees to be committed to the business in the long run.There are different schemes available which companies can use to offer shares such as2.6.3.1 Share Incentive SchemesUnder this scheme employer gi ves employees shares directly or ask them to buy. This motivates staff to be involved in the performance of the company. The Share Incentive Plan, previously known as the employee share ownership plan. For example, In the UK, a company using an ESOP can give employees shares worth up to 3,000 each year.2.6.3.2 Savings Related Share Option Schemes (SAYE)All employees and directors benefit from this scheme All scheme members get the right to buy a number of shares (normally at a start price than their current price) after three, five or seven years. In this period of time, employee members save an expected amount to pay for the shares. If the shares increase in price, employees have a profit when they buy the shares. No income tax is paid on any gains made on these shares.2.7 INFLUENCES ON PAY lastAccording to Beardwell and Holden (1997 p.555) the pay system is affected by the following2.7.1 Beliefs close to the Importance of the JobIf a job is considered to be of high value, the s alary scale of the job will be higher as compared to other jobs.2.7.2 Personal CharacteristicsIndividual characteristics like age, experience, education, skill affect the salary of a person.2.7.3 Labour MarketThe demand and supply of labour affect pay determination. A business will have to match its pay with that of its competitors beforehand setting its own pay structure.2.7.4 The Strategies and Policies of the CompanyEach company has it own remuneration policy and strategy that determine the salary of its employees.2.7.5 Government Rules and regularisationThe government usually intervene for the welfare of employees like we have the equal opportunity achievement, employment right Act 2008, and the employment relation Act 2008. Organisations have to consider all these Act before setting a fair compensation program.2.7.6 Power of Bargaining GroupTrade union action may affect the pay level. They can bargain for an increase in salary.2.7.7 Cost of LivingDue to high inflation rate, the cost of living tends to increase. Thus, this may affect the salary of employee.