Rewards

The Reward Process

Ability & Intrinsic

Skill Rewards

Motivation to Performance: Performance

exert effort Evaluation
Satisfaction
Individual

Extrinsic
Experience
Rewards
 total reward model

total
rewards strategy
organisational
• compensation
culture employee business
• benefits attract satisfaction performance
• work/life motivate
business strategy and and results
• performance and retain
engagement
recognition
HR strategy
• development and
career opportunities
 The Reward Process
• Satisfaction with a reward is a function of both how much is
received and how much the individual feels should be
received.
• An individual’s feelings of satisfaction are influenced by
comparisons of what happens to others.
• Satisfaction is influenced by how satisfied employees are with
both intrinsic and extrinsic rewards.
• People differ in the reward they desire and in the relative
importance different rewards have for them
• Rewards must be valued and must be related to a specific
level of job performance
Total Reward Model - Michael Armstrong

base pay

transactional total
contingent pay
rewards remuneration

employee benefits

total reward
learning and development

relational non-financial
rewards the work experience rewards

recognition, achievement, growth

Components of Financial Rewards…

• Basic salary • Allowances

• Performance related – Substitution allowance
pay – Shift allowance
– Team-based pay – Danger money
– Bonus – Cost of Living Allowance
– Incentives – Disturbance allowance
– Commission – Dearness Allowance
– Competence based – Special Allowance
– Expenditure allowance
Components of Financial Rewards
– Qualification allowance
– Fuel allowance
– On-call allowance
– Clothing/kit allowance
– Company cars
– Insurance
– Club/Institute
membership
– Holidays
– Mobile phones and
telephone bills
• Other Financial
Components
– Profit-sharing schemes
– Employee share
ownership schemes
– Pension schemes
 Non Financial Rewards
• Training
• Career development
• Empowerment
• Recognition
• Promotion
 Non Traditional Rewards
• Cafeteria benefits
• Time off
• Gainsharing vs. profit sharing
Profit sharing: “Occurs when individual employees or work groups
are granted a specified portion of any economic profits earned by
the business as a whole.”
Gainsharing: “Involves a measurement of productivity combined
with the calculation of a bonus designed to offer employees a
mutual share of any increases in total organizational productivity.
Usually all those responsible for the increase receive the bonus.”
Why Do Rewards Fail to Motivate?
• Too much emphasis on monetary rewards
• Rewards lack an “appreciation effect”
• Extensive benefits become entitlements
• Counterproductive behavior is rewarded
• Too long a delay between performance and rewards
• Too many one-size-fits-all rewards
• Continued use of demotivating practices such as layoffs,
across-the-board raises and cuts, and excessive executive
compensation
 Reward System Design Features
Design Feature Definition

Person/Job Based vs. The extent to which rewards are based on the person, the
Performance Based job or the outcomes of the work
Market Position The relationship between what an organization pays and
(External Equity) what other organizations pay
Internal Equity The extent to which people doing similar work within and
organization are rewarded the same
Hierarchy The extent to which people in higher positions get more and
varied rewards
Centralization The extent to which reward system design, decisions and
administration are standardized
Rewards Mix The extent to which different types of rewards are available
and offered to people
Security The extent to which work is guaranteed

Seniority The extent to which rewards are based on length of service

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