Reg-11901819 Name-Pramjeet Kumar Chauhan Section-REOM56A26

Q1) Identify the “employee reward plan” of an organization/ firm.

 Ans- In designing a reward program, a small business owner needs to separate the

salary or merit pay system from the reward system. Financial rewards, especially

those given on a regular basis such as bonuses, profit sharing, etc., should be tied to

an employee's or a group's accomplishments and should be considered "pay at risk" in

order to distance them from salary. By doing so, a manager can avoid a sense of

entitlement on the part of the employee and ensure that the reward emphasizes

excellence or achievement rather than basic competency.

 Merit pays increases, then, are not part of an employee reward system. Normally,

they are an increase for inflation with additional percentages separating employees

by competency. They are not particularly motivating since the distinction that is

usually made between a good employee and an average one is relatively small. In

addition, they increase the fixed costs of a company as opposed to variable pay

increases, such as bonuses, which have to be "re-earned" each year. Finally, in

many small businesses’ teamwork is a crucial element of a successful employee's

job. Merit increases generally review an individual's job performance, without

adequately taking into account the performance within the context of the group or

business.

 DESIGNING A REWARD PROGRAM

 The keys to developing a reward program are as follows:

 Identification of company or group goals that the reward program will support

 Identification of the desired employee performance or behaviour’s that will

reinforce the company's goals

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 Determination of key measurements of the performance or behaviour, based on

the individual or group's previous achievements

 Determination of appropriate rewards

 Communication of program to employees

 TYPES OF REWARD PROGRAM

 There are a number of different types of reward programs aimed at both individual

and team performance.

 Variable Pay
 Variable pay or pay-for-performance is a compensation program in which a portion of

a person's pay is considered "at risk." Variable pay can be tied to the performance of

the company, the results of a business unit, an individual's accomplishments, or any

combination of these. It can take many forms, including bonus programs, stock

options, and one-time awards for significant accomplishments. Some companies

choose to pay their employees less than competitors but attempt to motivate and

reward employees using a variable pay program instead. Good incentive pays

packages provide an optimal challenge, one that stretches employees but remains in

reach. If too much is required to reach the goal, the program will be ignored.

 Bonuses
 Bonus programs have been used in American business for some time. They usually

reward individual accomplishment and are frequently used in sales organizations to

encourage salespersons to generate additional business or higher profits. They can

also be used, however, to recognize group accomplishments. Indeed, increasing

numbers of businesses have switched from individual bonus programs to one which
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reward contributions to corporate performance at group, departmental, or company-

wide levels.

Q2) Analyze the identified Employee reward plan and explain firm`s objective
behind introducing this plan.

 Ans- In the context of compensation, the term ‘reward’ is generally applied at the
managerial levels. Reward systems and their role in organizations have been studied
from many perspectives and by multiple disciplines. Economists, sociologists, and
psychologists, in particular, have contributed to the growing literature on reward
system. Reward systems, like compensation system, have a wide-ranging impact on
organizations, and their impact is greatly affected by their design and by the
organizational context in which they operate.
 Thus, to understand reward systems in organizations, it is necessary to focus on the
characteristics of both the organizations and the pay system. Often, new lines of
businesses require a different approach, and therefore, a different reward system.
Simply put, the old reward system in the new business sphere is often not good
enough, and indeed, can lead to failure. On the other hand, developing a new
reward system for one part of an organization can cause problems in other parts
because of comparisons made between different parts.
 Reward management is about the development, implementation, maintenance,
communication, and evaluation of reward processes. A substantial literature review
focuses on the relationship between reward systems and the degree to which
participative management is practised in the organization. If an organization
encourages participative management, it needs to change all its systems, including
its rewards system. It stands established that effective participative management
demands a different approach to pay for performance.
 It is also seen that the correct approach is to pay bonuses based on group-wise or
plant-wise performance. The argument for this essentially rests on the point that
traditional pay plan supports individual excellence at the cost of team performance.
However, modern approach emphasizes working in teams and using collective
wisdom. Team performance needs to be rewarded for success of participative
management.
 Reward system influences the attraction and retention of employees. Organizations
that given the most rewards are seen to be successful and attract and retain the most
people. These obviously occur because high reward levels lead to high satisfaction,
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which, in turn, leads to lower turnover and create more job applicants. The best
performers of an organization are generally prone to leave the organization for
better prospects and rewards.
 The reward system of an organization is a tool of recognizing talent. Reward system
includes ‘group incentive plan’ which means giving bonuses to workers in a team.
The group incentive schemes are designed to promote teamwork, encourage
synergy, and making the team work effectively. The performance and output of the
team as a whole determine the rewards to be given to the team.
 Employee Rewards – Purpose of Employee Rewards in Organizations
 Reward systems serve several purposes in organizations. Effective reward systems
help an organization be more competitive, retain key employees, and reduce
turnover. Reward systems also can enhance employee motivation and reinforce the
image of an organization among key stakeholders or future employees. Reward
system is developed to make performance more effective. Reward is based on
performance which is outcome of efforts and environmental factors.
 It may be even harder in the nonprofit and public sectors where flexibility in
providing financial rewards may be more limited than in a commercial context.
Retaining employees saves money on retraining costs, improves the consistency of
services, and allows for relationships to develop between clients and the
organization.
 Finally, reward systems can also help with recruiting efforts. Just as happy
customers may be the best advertisement for a particular product, happy employees
are often a great tool for recruiting new employees and making the organization a
workplace of choice. Think about the kind of job you want.


Q3) Define the impact of employee reward plan on employee`s motivation.

 Ans- Rewards are things that boost some one's morale to do something; it is

observed in our daily life that whenever an individual or a team is being
given reward for their good work the motivation of the employee increases to do
more good work in order to get more rewards.
 Most organizations view rewards as a means of motivating certain behaviours in
employees. Specifically, rewards are intended to motivate employees to perform
effectively and efficiently towards achieving organizational goals. kind of
organization one looks at, ‘rewards play an important role in building and
maintaining the commitment among employees that ensures a high standard of
performance and workforce stability’.
 The rationale for the use of rewards is to motivate or induce certain behaviours
among employees which are viewed as beneficial for enhanced performance while
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inhibiting other behaviours which they perceive as detrimental to organizational

growth and performance. This is best achieved under what Vroom terms as
expectancy models. Martin argues that the ‘the basis of expectancy models is that
motivation is a function of the desirability of the outcome of behaviour.
 Searle, John G. (1990), rewards are basically to motivate the behaviors of
employees towards their work. Rewards should be given as a result to effective
performance. Following are some conditions that are necessary for the creation of
motivation among employees;

 Employees must have faith that their effective performance will surely be
appreciated and rewarded.

 The rewards that will be being offered by management are attractive.

 The believe of employees that their effort is really contributing worthwhile to attain
the organization’s goals.
 Organizations must pay attention towards the Monetary as well as Non-Monetary
rewards, because the balanced combination of both creates motivation. An
individual’s goals and organization’s goals are independent goals that are linked by
the work motivation. Individuals provide their services to organizations to attain
organization’s goals in order to meet their personal goals. So, we can say that an
individual’s goals are directly proportional to the organizational goals.
 Robert (2005), while studying the Baron’s work (1983) reports that motivation not
only can influence the performance but the performance can also be influenced by
rewards, i.e., direct rewards to true performance. ‘Total reward system’ is the
system in which salaries and other rewards are given to the employees on the basis
of their performance. Therefore, ‘total reward system’ is one of the important
elements, Wilson (1994).
 Mosley, Megginson, Pietri (2001), reports that the there are three levels of
employee motivation;

 Behaviour: the direction of those behaviors of an employee that he selects to

perform.

 Effort: the level of willingness of an employee to put their effort on their work.

 Persistence: the level of willingness to work regardless of difficult situations.

 Need for motivation

 The satisfaction or the dissatisfaction levels of an employee are directly

proportional to his good or bad performance. Employee dissatisfaction may lead to
poor performance. Petcharak (2004), it is the responsibility of the human resource
management of the organization that employee may not dissatisfy from his job, so
HR management should take steps to motivate employees otherwise employees will
not perform up to expected standards of the organization. Cheng (1995), says that it
is one of the larges test challenge for service providing organizations to motivate
their employees in order to satisfy their customers. The HR department’s major task
is to develop strategies to motivate its employees.
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 Human capital rather than financial capital plays a significant role in meeting the
goals of the organization. It is the responsibility of the top executives to motivate
the employees of the organization. Human capital is the basic source of competitive
advandage for any service providing organization these days. Organizations which
actually pay attention towards the motivation of its employees assures its success,
Dale Carnige (1985). This shows that employees who are motivated are best for the
organizations to attain its goals, it is the duty of managers and supervisors to
motivate them, Roberts (2005).