Week 6: HR Reward Management
Definition of reward Bratton (2007: 360)?
All of the monetary, non-monetary, and psychological payments that an organization provides to its employees in exchange for work they perform
Employee satisfaction with the composition of their reward package is a key determinant of attitude towards their job how do employees assess/compare their reward package?
Basic pay Constitutes the single largest component of their financial reward and represents the minimum compensation expected for carrying out a particular job. ( Collective Bargaining, Market Pricing, Job Evaluation) Incremental pay-length of service drives pay increases (alongside periodic cost-of-living increases) Variable or Contingent pay- used for forms of remuneration which are conditional upon the achievement of predetermined objectives mostly related to individual, group, or organizational performance. Benefits- indirect pay, (occupational retirement or pension plans) Non financial reward- addresses the basic psychological needs of employees and can unlock latent effort and engender greater organisational commitment. Achievement, recognition, responsibility, influence, and personal growth. (flexible working, pleasant working environment, employee of the month)
What's the role of basic pay and how is it determined?
Basic pay- the largest element of fixed labour costs for employers and, consequently how much to pay incumbent (experience with the job)
What is the role of non-financial rewards? (+ 3 examples of non-financial rewards)
Benefits, promotion (change in job) - Opportunities for personal and career development - Flexible working hours - Pleasant working environment - Employee communication, involvement and participation
Main points of "the legal perspective of rewards"?
Contractual right for employees / obligation for employers to pay employee for duration of contract or until termination Pay includes salary, holiday, pension, and benefits - also contingent and discretionary pay
How do competitors influence own reward considerations?
Creating different rewards to attract employees by "different or better options. It is a means for the firm to gain a competitive advantage.
Why are labor costs often a significant element in the financial planning process of a firm?
Disputes over pay are a significant reason for causing workplace conflict and are a key cause for industrial action in the EU. ADDITIONALLY: total labor costs are a large portion of a firm's total cost. This can affect the firm's ability to enact organisational in the future. Reward systems should be designed to support the achievement of strategic objectives
What are incremental pay schemes and what is - on the contrary - variable/contingent pay?
Incremental is an annual progression up the pay scale(annual raises in salary). Following this are rewards and promotion. Variable is conditional, based on reaching pre-determined objectives including individual targets, performance standards, organizational profit
Reward in international context 2 examples of differences between countries/cultures?
International approaches are shaped by culture. Culture shapes the value placed on particular forms of reward. Cultural differences are particularly pronounced when considering performance-related pay. PRP tends to be individualized and to emphasise short-term objectives and competition between coworkers. Pg 228
What is intrinsic motivation? What is extrinsic motivation?
Intrinsic - concerned with satisfying employee psychological needs (ex. Opportunity for personal development) Extrinsic - addressed through financial reward (ex. Pay and bonuses, company cars)
What are drawbacks of incentive-based rewards?
It does not engage the employees.
Differences between "new" approaches to managing reward VS classical/older systems?
New - incentivized reward system based more on employee and organization performance or development; satisfy a range of employee needs to generate increased contribution to organizational objectives Old - inflexible, bureaucratic with hierarchical pay scales that promotes loyalty and length of service
What are benefits?
Non-pay elements that make up the individual "reward package" Includes 1. Pensions(deferred payment systems) 2. Healthcare 3. Company car 4. Flexible working arrangements 5. Enhanced maternity/paternity leave
What are financial/monetary rewards?
Pay or earnings Includes 1. Basic pay 2. Bonuses 3. conditional/variable pay 4. Commission or overtime pay
What is the psychological contract about?
Reward represents an explicit indicator of employee's worth to the employer Also implicit to feelings of fairness, equity, and trust Non-financial rewards, like praise and recognition, are really important, but only if they are intrinsically motivating to enhance performance
When designing a reward system, what are main points to be considered?
The ability to fit with HR and corporate strategies→ - Objectives of the reward strategy - Types or range of rewards to be offered - Composition of the total reward package - Formal processes that are used to manage reward - Underpinning concern for fairness, effectiveness and value-of-money (Pg. 228; beginning of reward systems)
Main points of "the economic perspective of rewards"?
The employer "buys" the work of the employee for as long as it is needed Employee reward = "price" of their labor Employers seek to minimize financial costs and employees seek to maximize the cost of their labor Things employers consider: labor scarcity, competitors' reward offerings, and range of other benefits/non-financial incentives Things employees consider: labor market climate, possible reward from other prospective employers, short-term financial gains vs long-term job security
What are non-financial/non-monetary rewards?
The psychological or intrinsic rewards that people get from doing their work/work relationships/work environment Includes 1. Feeling valued 2. Receiving praise for achievement 3. Job satisfaction 4. Promotion 5. Personal/professional development
