Reward System
HR Management Strategy
Model
Select
Attract
HR Strategy
Desired
Results
Rewards
Engage
Retain
Develop
Employee Compensation
Compensation: An Overview
CompensationThe total of all rewards provided
employees in return for their services.
Direct Financial Compensation Consists of the pay
that a person receives in the form of wages, salaries,
bonuses, and commissions.
Indirect Financial Compensation All financial
rewards that are not included in direct compensation.
Non-financial Compensation Consists of the
satisfaction that a person receives from the job itself or
from the psychological and/or physical environment in
which the person works.
All such rewards comprise a total compensation program.
Wages versus Salaries
Wages
generally refer to hourly
compensation paid to
operating employees;
the basis for wages is time.
Salary
is income that is paid to an
individual not on the basis of
time, but on the basis of
performance.
Total Compensation
Hourly Wages
Salary
Monetary
Bonuses
Rewards Commissions
Pay Incentives
Extrinsic
Rewards
Compensation
of
Employees
Intrinsic
Rewards
Insurance
Retirement
Paid Vacations
Benefits Food Services
Credit Union
Recreation
Recognition
Promotion Opportunities
Working Conditions
Interesting Work
Consequences of Pay
Dissatisfaction
Performance
Desire for
more Pay
Strikes
Grievances
Absenteeism
Turnover
Search for job
Psychological
Withdrawal
Pay
Dissatisfaction
Lower
Job
Attractiveness
Dissatisfaction Dispensary
of job
Visits
Absenteeism
Poor Mental
Health
Pay for Performance /
Competence
Pay for performance refers to any
compensation method that ties pay to the
quantity or quality of work the person
produces.
Variable pay plans are pay for performance
plans that put a portion of the employees pay
at risk, in return for the opportunity to earn
additional pay.
Individual
Team
Company
Individual-Based Plans
Individual-based plans are the most widely
used pay-for-performance plans in industry.
There are several plans that can be used:
merit pay, bonus programs, and awards.
Advantages of individual-based plans:
rewarded performance is likely to be repeated
financial incentives can shape an individual's goals
they help the firm achieve individual equity
they fit in with an individualistic culture.
Team Based Plans
Team-based plans attempt to support other
efforts to increase the flexibility of the
work force within a firm.
These plans normally reward all team
members equally based on group
outcomes.
The advantages of team based pay-forperformance plans include they foster
group cohesiveness and they facilitate
performance
Companywide Plans
Companywide plans offer a feasible alternative to
the incentive plans discussed in previous slides.
Profit Sharing: A compensation plan that results in the
distribution of a predetermined percentage of the
firms profits to employees.
Employee Stock Option Plan (ESOP): A defined
contribution plan in which a firm contributes stock
shares to a trust/employees.
Gain Sharing: Plans that are designed to bind
employees to the firms performance by providing an
incentive payment based on improved company
performance
Planning Reward Program
Step
Step
Step
Step
Step
Step
Step
Step
Step
One Target Your Audience
Two Choose the Goal
Three Build a Budget
Four Develop Criteria
Five Choose the Awards
Six Communicate the Program
Seven Measure the performance
Eight Present the Award(s)
Nine Evaluate the Program
Improving Reward Effectiveness
Effectiveness of the rewards can be
improved by considering the following
factors.
Link rewards to performance
Ensure rewards are relevant
Use team rewards for interdependent
jobs
Ensure rewards are valued
Beware of unintended consequences
Essentials
Simple
Equitable
Economical
Flexible
Supported by workers and unions
Motivating
Prompt payment
