Reward Management Flashcards
What is reward managment?
How much and in what form are employees paid (part of organisation’s total cost)
Why is Reward management so important?
- central to employment relationship
- reward policy determines profitability and competitive advantage
- Incentivise employee motivation and discretionary effort
- Recruit/retain effective stand in competitive labour markets
Aim of reward management
Design competitive reward packages that serve to attract, retain and motivate staff whilst keeping attention on costs to ensure financial visibility
Consequences of bad reward management
Demotivate, departure of good performers, higher absences, less effort and decay of employee relations climate - all lead to damage to org performance/effectiveness
Factors that shape reward management approach
- Contextual factors: international, national and corporate level
- Theories: economic theories, institutional theories, human capital theories
International level - how it influences reward management
- Extent of global competition within markets (global competition for talent)
- Increase desire for flexible work
- Differing cultural and institutional norms (MNCs)
National level - how it influences RM
- Changing demand for skills
- Working landscape: fragmented, moved towards contingent forms of reward
- Legislation (NMW, equal pay and pension auto-enrolment)
Corporate level - how it influences RM
- Ability to pay (financial position)
- Maintain position i market and reward level
- Whether/how reward strategies may be used to bring organisational change
- How individual pay rises and bonuses are best calculated
Economic theories - how it influences RM
Wages are determined based on balance of supply and demand for labour
Institutional theories - how it influences RM
Argue for an ‘open-systems’ approach
Human capital theories - how it influences RM
Workers invest in themselves through learning and training - different levels of reward used to attract workers depending on their level of accumulated capital
2 elements of the reward package (above base pay)
- Incentive payments
2. Employee benefits
5 core objectives - how to apportion monies between elements
- Need to attract and retain staff of desired calibre, experience and qualification
- Motivate workforce to maximise organisational performance
- Direct effort and enthusiasm in specific directions to encourage employee behaviour
- Underpin and facilitate mgmt of organisational change
- Minimise expenditure on wages and salaries over long term
Categories of rewards (Armstrong & Brown, 2009)
- Transactional (tangible)
- Relational (intangible)
- Individual
- Communal
- Each has equal potential as source of reward from employee perspective
Transactional (tangible) rewards
Financial
- Pensions
- Holidays
- Health care
- Perks
- Flexibility
Communal rewards
Leadership, organisational values, voice, recognition, achievement, job-design, work-life balance
Relational (intangible) rewards
Learning and development (as human being and as a professional), training, career development
Individual rewards
Base pay, contingent pay, bonuses, incentives, shares, profit-sharing
Total reward - define
Reward policies and practices extending beyond realms of payment - equal account of tangible and intangible rewards
2 key decisions of RM strategies
- How much should we pay each person
- How should payment package be made up
Setting base pay using external relativities - alternatives
- Estimation of ‘going rate’ for particular job
- ‘Market value’ of particular individual
Pay systems that focus on external market rates - pros
- allows employer to recruit ppl with required skills/experience
- helps retain ppl
- allows vacancies to be filled quickly
- helps employers project positive labor market image
- enhances motivation and satisfaction at work
- inexpensive and straight-forward method of determining pay rates
Alternative tools/approaches to obtain external market rates
Many sources, which is simple and inexpensive:
- Published data
- commercial salary surveys
- web-based sources
- bespoke salary surveys
- Salary clubs
- informal methods
Reasons against external relativities
- Viable alternative approaches are available
- Labour markets are imperfect
- Equal value argument
- Affordability issues