8.1: Explain an organization’s strategic considerations in developing a strategic rewards program. Flashcards
What is direct compensation?
Employee wages, salaries, bonuses, and commissions.
What is indirect compensation?
Non-wage rewards such as extended health and dental plans, insurance, and other services or perks.
What is total rewards?
The full range of direct, indirect, and non-financial compensation provided to employees.
Why are total rewards important in a company’s strategy?
They align employee motivation with business goals, support recruitment and retention, and improve business performance.
What are examples of non-financial compensation?
Employee recognition programs, services like free parking, or wellness programs.
How can total rewards impact the talent pool?
High rewards can attract a larger and better-qualified applicant pool, giving the organization more selective hiring power.
What is a strategic reward approach?
Structuring rewards to align with business objectives, such as attracting hard-to-find talent or promoting specific behaviors.
What elements beyond pay are part of the total rewards concept?
Career development opportunities
Work environment and culture
Work–life balance
Transparent reward structures
Why is transparency in total rewards important?
It builds trust and ensures employees understand compensation and growth opportunities.
What key considerations should be made when evaluating a reward system?
Type of rewards and recognition used
Link between program cost and results
Metrics and data for performance and ROI
Employee satisfaction and trust
What role do metrics play in reward systems?
They quantify performance outcomes and track ROI, supporting decisions like pay increases or program changes.
Why should reward systems be aligned with organizational goals?
To ensure rewards drive desired behaviors and outcomes such as motivation, retention, and equity.
What are 6 typical goals of a compensation program?
Rewarding past performance
Staying competitive in the labor market
Maintaining salary equity
Controlling compensation budget
Attracting and retaining staff
Influencing work behaviors and attitudes
What are 4 forces currently reshaping total rewards?
Digital transformation of the workplace – changing where/how work is done
Multigenerational workforce expectations – differing values and personalization
New legislative/regulatory developments – changes around equity and diversity
Urgency to improve ROI – measuring impact of reward programs on results
What does pay represent in an organization?
A quantitative reward in exchange for an employee’s contributions and value to the organization.
What is equity in the context of compensation?
Equity refers to fairness in pay relative to others’ contributions, ensuring employees are rewarded appropriately.
What is equity theory?
A motivation theory stating employees compare their inputs (skills, effort) to their outcomes (pay, benefits) and to others doing similar work.
What happens if an employee perceives inequity in compensation?
They may reduce input (work less), seek greater rewards, or become demotivated.
What is internal equity?
When employees feel their pay fairly reflects the worth of their job within the organization.
What is external equity?
When wages and benefits are competitive with those offered by other employers for similar work.
What role do managers play in equity issues?
Even if they don’t design pay systems, they must respond to concerns and ensure perceived fairness.
What is hourly work?
Compensation based on the number of hours worked; typically paid weekly or biweekly.
What is piecework?
Compensation based on the number of units produced.
Who are salaried employees?
Employees paid a fixed amount per pay period, regardless of hours worked; they often receive additional benefits not offered to hourly workers.
How does compensation differ between salaried and hourly employees?
Hourly employees are paid only for hours worked, while salaried employees receive consistent pay and often more benefits.
