PERFORMANCE

MANAGEMENT
SEMESTER-5
UNIT-4

HI COLLEGE
SYLLABUS
UNIT

HI COLLEGE
 REWARD SYSTEMS

A reward system is a set of policies, procedures, and practices that an

organization uses to recognize and reward employees for their performance
and contributions. Here's an overview of a reward system:

1. Define the Criteria:

a. Clearly define the criteria that will be used to determine who is eligible for
rewards.
b. Ensure that the criteria are aligned with the organization's goals and
objectives.
c. Communicate the criteria to all employees.

2. Determine the Rewards:

a. Determine the types of rewards that will be offered.
b. Ensure that the rewards are aligned with the organization's values and
culture.
c. Communicate the rewards to all employees.

3. Determine the Frequency:

a. Determine the frequency of rewards.
b. Ensure that the frequency is fair and consistent.
c. Communicate the frequency to all employees.

4. Determine the Size:

a. Determine the size of the rewards.
b. Ensure that the size is fair and consistent.
c. Communicate the size to all employees.

5. Communicate the Reward System:

a. Communicate the reward system to all employees.
b. Ensure that the communication is clear and concise.
c. Ensure that the communication is consistent across all employees.

6. Administer the Reward System:

a. Administer the reward system fairly and consistently.
b. Ensure that the reward system is transparent.
c. Ensure that the reward system is equitable.

HiCollege Click Here For More Notes 01

 REWARD SYSTEMS AND LEGAL ISSUES
While reward systems can be an effective way to motivate and engage
employees, there are legal issues that organizations must consider to ensure
compliance with employment laws. Here are some legal issues related to
reward systems:

1. Equal Employment Opportunity:

a. Ensure that the reward system is applied equally to all employees, regardless
of their protected characteristics, such as race, gender, age, religion, or
disability.
b. Avoid using subjective criteria that may result in disparate impact on
protected groups.
c. Ensure that the reward system is transparent and communicated clearly to
all employees.

2. Compensation and Benefits:

a. Ensure that the reward system is consistent with the organization's
compensation and benefits policies.
b. Avoid using the reward system as a way to circumvent minimum wage or
overtime laws.
c. Ensure that the reward system is communicated clearly to all employees,
including any tax implications.

3. Confidentiality:
a. Ensure that the reward system is kept confidential, to prevent any potential
claims of favoritism or nepotism.
b. Avoid disclosing the names of the employees who received rewards, unless
required by law.
c. Ensure that the reward system is administered fairly and consistently, to
prevent any potential claims of favoritism or nepotism.

4. Non-Compete Agreements:
a. Ensure that any non-compete agreements are reasonable and necessary to
protect the organization's legitimate business interests.
b. Avoid using the reward system as a way to enforce non-compete agreements,
unless required by law.
c. Ensure that the reward system is communicated clearly to all employees,
including any restrictions on competition.

HiCollege Click Here For More Notes 02

 REASONS, PROBLEMS FOR INTRODUCING
CONTINGENT PAY PLAN
A contingent pay plan is a type of reward system that links an employee's
compensation to their performance. Here are some reasons and problems for
introducing a contingent pay plan:

Reasons:

1. Aligns Compensation with Performance:

a. A contingent pay plan can help to ensure that employees are compensated
based on their performance, rather than just their job title or seniority.
b. This can help to motivate employees to perform at a high level and achieve
organizational goals.

2. Improves Accountability:
a. A contingent pay plan can help to improve accountability by making it clear
to employees that their performance will directly impact their compensation.
b. This can help to ensure that employees are focused on achieving their
performance goals and delivering results.

3. Enhances Employee Engagement:

a. A contingent pay plan can help to enhance employee engagement by
providing employees with a clear path for career advancement and recognition.
b. This can help to foster a positive and productive work environment and
improve employee satisfaction.

Problems:

1. Administrative Burden:
a. A contingent pay plan can be administratively burdensome, as it requires
additional time and resources to implement and manage.
b. This can be a significant challenge for small or resource-constrained
organizations.

2. Fairness Concerns:
a. A contingent pay plan can raise fairness concerns, as it may result in
disparities in compensation based on factors outside of an employee's control,
such as market conditions or business performance.

HiCollege Click Here For More Notes 03

b. This can lead to resentment and dissatisfaction among employees who feel
that they are being unfairly compensated.

3. Communication Challenges:
a. A contingent pay plan can be challenging to communicate effectively to
employees, as it requires clear and concise messaging about the criteria,
rewards, and frequency of the plan.
b. This can be a significant challenge for organizations with a diverse workforce
or multiple locations.

SELECTING A CONTINGENT PAY PLAN

When selecting a contingent pay plan, there are several factors that
organizations should consider to ensure that it is appropriate for their specific
circumstances:

1. Performance Metrics:
a. Identify the key performance metrics that will be used to determine
compensation.
b. Ensure that the performance metrics are aligned with the organization's
overall strategy and goals.

2. Reward Structure:
a. Determine the type and amount of rewards that will be provided for
achieving performance goals.
b. Ensure that the reward structure is fair, transparent, and aligned with the
organization's compensation philosophy.

3. Frequency:
a. Determine the frequency of the contingent pay plan, such as annually,
quarterly, or monthly.
b. Ensure that the frequency is appropriate for the performance metrics and
rewards.

4. Communication:
a. Develop a communication plan to ensure that employees understand the
criteria, rewards, and frequency of the contingent pay plan.
b. Ensure that the communication is clear, concise, and consistent across all
employees.

HiCollege Click Here For More Notes 04

5. Administration:
a. Determine the resources required to administer the contingent pay plan,
such as staffing, technology, and budget.
b. Ensure that the resources are adequate to effectively implement and manage
the contingent pay plan.

6. Legal Compliance:
a. Ensure that the contingent pay plan is legally compliant with employment
laws, such as equal employment opportunity, compensation and benefits, and
non-compete agreements.
b. Work with legal counsel to ensure that the contingent pay plan is legally
compliant and aligned with the organization's overall HR strategy.

PAY STRUCTURES
Pay structures refer to the system by which an organization determines the
compensation for its employees. There are several types of pay structures that
organizations can choose from, depending on their specific circumstances and
HR strategy:

1. Flat Pay:
a. A flat pay structure involves paying all employees the same salary or hourly
wage, regardless of their job duties or performance.
b. This type of pay structure is appropriate for organizations with a simple and
standardized workforce, such as retail or hospitality.

2. Step Pay:
a. A step pay structure involves paying employees a base salary, with the
opportunity to earn additional compensation through promotions or
performance-based bonuses.
b. This type of pay structure is appropriate for organizations with a clear career
path and promotion system.

3. Merit Pay:
a. A merit pay structure involves paying employees based on their performance,
with the opportunity to earn additional compensation through performance-
based bonuses or merit raises.
b. This type of pay structure is appropriate for organizations that place a strong

HiCollege Click Here For More Notes 05

emphasis on performance and want to reward high-performing employees.

4. Market Pay:
a. A market pay structure involves paying employees based on the prevailing
market rates for their job duties and location.
b. This type of pay structure is appropriate for organizations that want to ensure
that they are competitively compensating their employees.

5. Performance-Based Pay:
a. A performance-based pay structure involves linking an employee's
compensation to their performance, such as through a contingent pay plan.
b. This type of pay structure is appropriate for organizations that want to align
compensation with performance and motivate employees to achieve their
goals.

HiCollege Click Here For More Notes 06

 JOB EVALUATION
1. Job evaluation is a process that helps organizations determine the value of
different jobs by comparing their skills, responsibilities, and working conditions.

2. There are different methods of job evaluation, such as ranking, point-factor,

and factor comparison. These methods use specific criteria to assess the relative
worth of each job.

3. Job evaluation helps organizations ensure fairness in compensation by

identifying the importance and complexity of each job within the organization.

4. The criteria used in job evaluation include skill requirements (what

knowledge or expertise is needed), responsibility (level of decision-making and
accountability), effort (physical or mental exertion), and working conditions
(environment and hazards).

5. The results of job evaluation guide the organization in determining fair and
competitive salary structures, promotions, and career development
opportunities for employees.

HiCollege Click Here For More Notes 07

 BROAD BANDING
Broad banding is a job classification and compensation system that groups
together different jobs into broader categories or "bands" based on their
similarity in terms of skill requirements, responsibility, and level of contribution
to the organization. Here's a concise explanation:

Broad banding is a method of organizing jobs into broader categories or bands,

rather than having many distinct job titles. Jobs within the same band share
similar characteristics, such as skill level, responsibilities, and impact on the
organization. This approach allows for more flexibility in job assignments and
simplifies the compensation structure, as employees within the same band are
typically paid within a similar salary range. Broadbanding also promotes career
flexibility and facilitates internal mobility, as employees can move across
different roles within the same band more easily.

LEGAL PRINCIPLES AFFECTING PERFORMANCE

MANAGEMENT
Legal Principles Affecting Performance Management:

1. Non-discrimination: Performance management processes must not

discriminate against employees based on protected characteristics such as
race, gender, age, disability, religion, or national origin. All employees should be
treated fairly and evaluated based on job-related criteria.

2. Due process: Employees should have access to a fair and unbiased

performance management process. This includes providing employees with
clear expectations, regular feedback, and opportunities for improvement before
taking any adverse action, such as termination or demotion.

3. Equal pay: Performance evaluations should not be influenced by gender or

any other protected characteristic. Employees who perform the same job
should receive equal pay for equal work, regardless of their race, gender, or
other protected statuses.

4. Accommodation for disabilities: It is important to consider and make

reasonable accommodations for employees with disabilities in the

HiCollege Click Here For More Notes 08

performance management process. This may include adjusting performance
expectations or providing alternative methods for assessing performance.

5. Privacy and confidentiality: Performance evaluations and related discussions

should be kept confidential to the extent possible. Only authorized personnel
involved in the performance management process should have access to this
information.

6. Documentation: Employers should maintain accurate and objective

performance records for employees. These records should include specific
examples of performance issues or achievements to support any performance-
related decisions.

7. Complying with applicable laws: Employers must ensure that their

performance management practices comply with all relevant local, state, and
federal laws, including employment laws and regulations related to workers'
rights, discrimination, and privacy.

HiCollege Click Here For More Notes 09