Week 5: Reward management

Question 1

Main goals for reward management

Answer 1

*Attract quality of applicants.
*Retain employees who achieve this performance objective.

Question 2

Objectives of reward management system

Answer 2

->support organisation by designing policies aligned w/ organisations strategy & goals.
->attract/retain employees who add value
->motivate employees
->integrate with other HR policies (career development ; work-life balance)
->legislation match

Question 3

Financial rewards

Answer 3

1. Direct pay
   *Base pay- by contract; hourly, monthly weekly.
   (incl. Overtime, Premium pay)
   *Performance related pay- only achieved when the goals are met
   a)Consolidated (into base pay)
   merit pay
   b)Unconsolidated
   individual (piecework, bonuses, commission) and group performance (team-based, share ownership…) divisions
2. Indirect pay
   *Statutory - legally required
   (holiday pay; maternity leave; carers leave; parental leave)
   *Organisation specific (health insurance, sickness days, pension, employee assistance programs, subsidised content, cache)

Question 4

Non- financial rewards

Answer 4

Job security, career development, recognition awards, work-life balance.

Question 5

Forms of PRP (Performance related pay)

Answer 5

PRP- predefined objectives are reached and is linked to the performance of an individual team or employee.
*Merit pay-higher performers rewarded additionally.
*Piecework- pay for every piece produced
*Commission
*Bonuses
*Team-based pay- employees in formally established team are given payment linked to team perf.
Team needs to be clearly defined, goals:specific, performance:measurable.
*Profit sharing schemes- proportion of firms profit is paid to employee in for of bonus. Also share buying in company instead of cash.
*Employee share ownership plans- share distribution to employees.
*Gain sharing schemes- company attempts to accrue savings by changing work practices

Question 6

Merits/demerits of PRP (Performance related pay)

Answer 6

Merits:
*can recognise high performance through pay
*reward management is responsible for organisations needs
*behaviours are being valued

Demerits:
*works well for routine tasks, less effective for complex tasks
*works as a bribe- value issues.

Question 7

How does PRP work? (effects)

Answer 7

1. Sorting effect-
   *Attraction- people who want their pay differentiated by performance will be more attracted to organisation offering PRP.
   *Retention- low performance has low pay…thus more likely to leave.
2. Incentive effect
   *Motivation- signals to individuals that their effort is valued and appreciated and provides direction in what they should focus effort on.
   ex. pizza vs bonus pay vs verbal thanks.
   Intensity, direction, persistence of effort.

extrinsic motivation–>money
intrinsic motivation—>thank you letter

Question 8

How to develop pay structure?

Answer 8

1. Internal alignment-
   based on job evaluation. Hierachy of relative jobs in the organisation
2. External alignment- examination assessed on competitors, determining competitive markets.

Question 9

Job evaluation

Answer 9

Internal alignment process.

*Non analytical methods- simple compared whole jobs
–>ranking
–>paired comparison (matrix)
*Analytical methods- complex, characteristics of jobs, degrees of presence of them in a job

Question 10

Classification systems

Answer 10

describe set of jobs, called “class” or job family using common set of characteristics. Then divided into grades differentiated.
ex. “accounting”; “administrative support”

Question 11

Point method

Answer 11

Analytical method for job evaluation.
Hierarchy based points gathered for each job. All factors identified and numerally evaluated.
+equal jobs = equal pay
+strong legal defense for unfair pay
- more complex than non-analytical methods.

Question 12

3 characteristics of motivation

Answer 12

1. Intensity of effort
2. Direction of effort
3. Persistence of effort

!!! Short-term incentives increase intensity did not encourage persistence.

Question 13

Benefits (indirect pay)

Answer 13

1. Statutory benefits- legally required
   ex. holiday pay, maternity leave etc.
   2.Organisation specific benefits- specific for each organisation, competitive advantage.
   ex. Sickness days, health insurance, subsidised canteen etc.

Goal of benefits- attraction and retention levels to reach organisational goals

Question 14

Benefits are influenced by

Answer 14

*Strategic goals & benefits
*National characteristics
*Workplace demographics
*External influences (ex. recession/crisis, trends in similar companies, traditional family role policies)

Question 15

Flexible benefits

Answer 15

Employees construct benefit package themselves.

Question 16

Benefits of pay transparency

Answer 16

+Removes uncertainty/asymmetric info
+Trust and fairness promotion in an organisation
+Promotes motivation and performance

Question 17

Benefits/downfalls of pay secrecy

Answer 17

+Organisational control (avoiding conflicts if differences in pay are large)
+protection of privacy
+decreases labour mobility
- pay is determined relatively on others–> forced ranking
- when performance is objectively measured (based on sales and etc.)
- perception that organisation is hiding something

Question 18

Types of pay secrecy

Answer 18

*Distributive pay nondisclosure- restrictions on info about pay levels.
*Pay communication restriction- stopping employees from talking about their pay
*Procedural pay nondisclosure- restricting info about how decisions are made.