13 Rewards And Remuneration

Rewards and remuneration

Rewards management Process of developing and implementing strategies, policies and systems which help the organisation to achieve its objectives by obtaining and keeping the people it needs and by increasing their motivation and commitment - Armstrong & Murlis

Performance-rewards exchange  Employment contract  Extrinsic rewards  Provided by the organisation and other people  Include recognition, promotion, pay, benefits

 Psychological contract  Intrinsic rewards  Come from within  Feelings of accomplishment and self-worth  Include interesting work, growth, responsibility

Rewards and remuneration  Should support achievement of business and other objectives  Should provide rewards for past performance  Should provide incentives for future performance

Range of rewards Tangible

Intangible

 wages and salaries  bonus, commission or incentive payments  performance pay  paid holidays  company cars  superannuation schemes  medical insurance  other ‘perks’

   

job itself job enrichment job enlargement interpersonal and work group relationships  growth of skills and abilities  opportunities to use talents and make a contribution

Approaches to rewards  Stick and carrot  provide performance and behaviour incentives and rewards

 Deferred gratification  promise of future rewards in return for present efforts and achievement

 Prerogatives  rewards or increments paid to employees as of right

The ‘new’ pay  Concept, not a set of practices  Reward strategies and policies should be based on organisation’s goals, strategies, values and culture  Pay can be used to influence employees’ behaviour  More pay ‘at risk’  No risk  Some risk  Moderate risk  Total risk

Pay policies: internal influences  Organisation’s mission and strategies  Type of organisation  Organisational culture  Bargaining strength of individuals and groups  Employee attitudes  Organisation’s ability to pay  Existing rewards system

Pay policies: external influences  Labour markets and market relativities  Economic and industrial change  Labour force changes  Decline in union power, but stronger bargaining power for other groups  Government policies  Simplicity versus complexity  Pay differentials and harmonisation

Pay policies: traditional aims  Attract and retain employees  Increase employee commitment  Encourage performance and development  Reward long service  Avoid anomalies  ‘Fair day’s pay for a fair day’s work’

Pay policies: changing aims Reward employees  for customer service and quality  for business productivity gains  for innovation and creativity

Trends in remuneration and rewards          

Increasing proportion of variable pay More pay at risk Finding ways to share success with employees Performance pay Paying for team performance Contingent workers Paying the person not the job Increased use of market comparisons Increasing harmonisation More decision power for line managers

Base pay  Time  Job size  Service  Skills or knowledge  Competencies  Career development

Variable pay  Assume behaviour and performance can be influenced by financial benefits  Individual bonus schemes  Output-based collective bonuses  Profit-based collective bonuses  Merit or performance pay

Performance pay Improve performance by converting the paybill from an indiscriminate machine to a more finely tuned mechanism, sensitive and responsive to the needs of a company and its employees.

Performance pay  Focuses effort where organisation wants it  Supports performance culture  Emphasises individual performance or teamwork as appropriate  Strengthens performance planning process  Rewards right people  Motivates all the people  Shares success  Employees identify with organisation

Making performance pay work Management tool, not a quick fix Introduce for right reasons Management commitment Employees trust management Part of overall rewards strategy Meets organisation's specific needs Clear performance criteria with clear link to performance pay  Significant rewards must be significant  Communication, information and review       

Performance-pay link problems  Weak and unreliable performance appraisals  People are paid for more than performance  Performance planning and review focuses on areas for improvement  Timing issues  Budget constraints  Do stars really get rewarded?

Performance pay criticisms  Performance is very difficult to measure  Money is not a good motivator  Performance pay schemes are not a substitute for good management  Expensive to design, implement and maintain  Has no effect on performance!!