© 2024 JETIR June 2024, Volume 11, Issue 6 www.jetir.

org (ISSN-2349-5162)

A STUDY ON EFFECTIVENESS OF REWARD

SYSTEM
SUBALAKSHMI TS – STUDENT – MBA – MANAKULA VINAYAGAR INSTITUTE OF TECHNOLOGY
DR. BAIG MANSUR IBRAHIM – PROFESSSOR – MBA- MANAKULA VINAYAGAR INSTITUTE OF
TECHNOLOGY

Abstract : Rewards are a powerful motivational tool for employees, crucial in aligning strategic goals with business objectives to
enhance performance and productivity. This project explores various organizational reward systems and their impact on employee
performance, aiming to suggest improvements based on findings. Using a descriptive research design and simple random sampling,
data from 123 employees were collected through questionnaires and interviews. Statistical tools like Percentage method, Chi-square,
Correlation, and Weighted average were used for analysis. The study reveals that employees are satisfied with the company's
remuneration, bonuses, incentives, and promotion criteria, feeling these are competitive with current market trends. Both monetary
and non-monetary rewards are valued, with a preference for bonuses, incentives, and quality control awards. The study suggests
focusing on these preferred rewards to further enhance employee performance.

Key words- Reward system, motivational, employee satisfaction, employee performance

I. INTRODUCTION
A reward system is a vital tool for managers to influence employee motivation, attract new hires, reduce turnover, and boost
performance. Rewards can be monetary or non-monetary, including job security, working conditions, relationships,
autonomy, training opportunities, recognition, and company policies. Effective reward systems enhance employee
contributions.
To meet obligations to shareholders, employees, and the public, senior management must develop a relationship that
addresses the evolving needs of both the organization and its employees. Organizations expect employees to fulfil their duties
and adhere to rules, while also taking initiative and continuing to learn. In return, employees expect fair pay, safe conditions,
and proper management. Expectations may vary based on individual needs for security, status, involvement, challenge,
power, and mission.

OBJECTIVES OF THE STUDY

The study aims to evaluate employee attitudes and satisfaction with the current reward system, assess its impact on motivation
and performance, and identify key factors influencing its success or failure. Additionally, it seeks to provide valuable
suggestions to enhance the existing reward system adopted by the organization.

LITERATURE REVIEW
1. Reward systems: Emerging trends and issues: The article provides an overview of key considerations for developing
organizational reward systems, examining four emerging approaches: skill-based pay, broad banding, variable pay, and
team rewards. It discusses relevant design issues for implementing these approaches and concludes that the underlying
logic is sound. Industrial-organizational psychologists and behavioral scientists are noted as crucial in addressing these
design challenges.

2. This study examines the effectiveness of reward management systems on employee performance, focusing on the
mediating role of employee motivation. It highlights the importance of understanding incentive schemes and reward
systems, covering topics such as the goals, principles, types, and characteristics of rewards and punishments. The section
explores individual and group incentive systems, reward-to-payment management methods, and the concept of the
reward system. It then discusses motivation and performance, and reviews applied studies on how rewards and incentive
schemes affect job performance, satisfaction, motivation, and related variables

3. The strategic design of organizational reward systems is reviewed, considering objectives like motivation, attraction,
retention, culture development, and skill development. The relationship between these objectives and design options—
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such as performance pay, skill-based pay, flexible benefits, market position, and internal versus external pay
comparisons—is examined. The importance of openness and participation in pay system administration is also
discussed. The conclusion emphasizes that pay system design is crucial for an organization's effectiveness in relation to
its external environment.

4. This chapter delves into the design of effective reward systems, emphasizing their significance as a key aspect of
organizational management. Rather than focusing on specific pay system technologies, it explores the choices involved
in managing a reward system and their impact on organizational effectiveness. The underlying premise is that a well-
designed reward system can significantly contribute to organizational success. However, achieving this requires careful
analysis of the role that reward systems should play within the strategic plan of the organization.

5. Increasing the effectiveness of reward management: an evidence- based practice. This paper seeks to explore the reasons
why many organisations do not evaluate the effectiveness of their reward policies and practices, examines the approaches
used by those organizations which do evaluate, and develops a model of evidence‐based reward management which
describes how evaluation can take place.

6. Nirma Sadamali Jayawardena and Darshana Jayawardena (2020) Studied on the extrinsic and intrinsic rewarding system
on employee motivation. The study contributed to identify the employee motivational factors in the selected company
and to reduce current labour turnover ratio by identifying the factors which motivate the current workforce.

7. In a study by Walters T. Ngwa (2019), the impact of reward systems on employee performance was examined,
particularly focusing on profit sharing's effect on employee commitment. The study emphasized the need to explore how
reward systems influence performance specifically in service firms, where tasks tend to be more routine and creativity
levels may be lower. Additionally, it highlighted the significance of wages and salaries as a substantial expense for firms
and the importance of using reward systems to attract, retain, and motivate employees effectively.

8. Belachew Kassahun (2019) highlighted the critical importance of employee motivation in business organizations.
Specifically focusing on one and two-star rated hotels, the study emphasized the need for adequate motivation to enhance
service quality and promote tourism development. However, findings revealed that the reward systems in these hotels
were inadequate, leading to negative perceptions among employees. The study identified shortcomings in payment,
promotion, recognition, benefits, work content, and conditions. Employees felt the reward system lacked transparency,
fairness, competitiveness, and appropriateness.

9. Zhen Zhang, Lianying Zhang, Aibin Li(2019) found that reward system as aneffective tool to manage NPD(new product
development) collaboration. Yet, our understanding about what types of rewards should be used for NPD collaboration
is still unclear. This research examines the effects of reward interdependence and nonfinancial incentives on NPD
collaboration, as well as the moderating roles of team size and deep-level heterogeneity.

10. In their 2017 study, Felista Ngozi Abasili and Abdu Ja’afaru Bambale explored the correlation between rewards and
employee performance. They used variables like salary, bonus, incentive, promotion, recognition, pension, and gratuity
to gauge this relationship, with performance as the dependent variable. Their findings emphasized the direct impact of
compensation packages and reward systems on employee performance, job satisfaction, and commitment. They
highlighted the importance of adequate compensation, incentives, and motivational techniques in fostering employee
commitment and enhancing performance. Rewards were identified as pivotal for nurturing a robust employee-employer
relationship, valued by both parties.

RESEARCH METHODOLOGY

Research methodology serves as a structured approach to solving research problems. Research involves investigating a
problem to find solutions that inform future actions. Research design outlines the framework guiding data collection and
analysis. It encompasses various types such as exploratory, descriptive, and experimental. The study described here
utilizes a descriptive research design, which portrays existing conditions without manipulating variables. Sampling
design involves fieldwork at Hindustan Unilever Limited (HUL) with a sample size of 123 chosen through simple

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random sampling. Data collection methods include primary data obtained through questionnaires and secondary data
sourced from company records, discussions, and literature. The questionnaire consists of open-ended and closed-ended
questions, including Likert scale and dichotomous questions. Analysis tools such as percentage method, chi-square,
correlation, and weighted average were employed, with SPSS software version 17 used for analysis and interpretation.

DATA ANALYSIS AND INTERPRETATIONS

PERCENTAGE ANALYSIS
Demographic variables Group Frequency Percentage
Gender male 87 70.7%
female 36 29.3%
total 123 100%
Age segmentation 18-29 51 41.5%
30-39 32 26%
40-49 22 17.9%
50 & above 18 14.6%
Total 123 100%
Education qualification HSC 31 25.2%
ITI & Diploma 43 35%
UG 26 21.1%
PG 23 18.7%
Total 123 100%
Income level Below 10,000 38 30.9%
10,001 – 20,000 32 26%
20,001 – 30,000 26 21.1%
30,000 & above 27 22%
Total 123 100%
Experience 0 -1 year 52 42.3%
2 – 5 years 36 29.3%
5 – 10 years 23 18.7%
10 & above years 12 9.8%
Total 123 100%

DEMOGRAPHIC FINDINGS:
 Majority (70.7%) of respondents are male, with 29.3% female.
 Most respondents (41.5%) are aged 18-29, while 14.6% are 50 & above.
 Education-wise, 35% have ITI & Diploma, and 18.7% are PG.
 Income-wise, 30.9% earn below 10,000, and 21.1% earn between 20,001 – 30,000.
 Experience-wise, 42.3% have 0-1 year in the organization, and 9.8% have 10 & above years.

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EMPLOYEE PERCEPTION AND SATISFACTION

Highly
Highly
FACTORS satisfied neutral dissatisfied dissatisfie
satisfied
d
Rewards boost my profit 22% 37.4% 26% 13% 1.6%

Rewards retain top performers 17.1% 39% 30.1% 10.6% 3.3%

Aligned rewards reinforce desired
21.1% 29.3% 32.5% 10.6% 3.3%
behaviors and outcomes
Transparent criteria promote fairness
26% 30.9% 18.7% 20.3% 4.1%
and motivation
Fair rewards boost motivation and
45.5% 26% 17.1% 8.9% 2.4%
commitment
Consistent rewards enhance
30.1% 35% 18.7% 13% 3.3%
motivation and goal achievement
Inclusive rewards boost belonging and
23% 28.5% 34.1% 12.2% 1.6%
engagement

Inference:
 A significant majority (59.4%) of respondents are satisfied or highly satisfied that rewards boost profit.
 A majority (56.1%) are satisfied or highly satisfied that rewards help in retaining top performers.
 While a plurality (50.4%) are satisfied or highly satisfied with aligned rewards reinforcing behaviors, a notable
portion remains neutral.
 A majority (56.9%) find transparent criteria promote fairness and motivation, but dissatisfaction is relatively
high (24.4%).
 The highest satisfaction levels (71.5%) are seen here, indicating strong belief in fair rewards boosting motivation
and commitment.
 A clear majority (65.1%) agree that consistent rewards enhance motivation and goal achievement.
 While 51.5% are satisfied or highly satisfied with inclusive rewards, a significant portion (34.1%) remain
neutral.
I. CORRELATION
CORRELATION BETWEEN TRANSPARENCY OF PRESENT REWARD SYSTEM AND SATISFACTION
TOWARDS CURRENT REWARD SYSTEM
HYPOTHESIS:
NULL HYPOTHESIS:
There is no significant relation between the transparency of present reward system and satisfaction towards current reward
system.
ALTERNATIVE HYPOTHESIS:
There is a significant relation between the satisfied with the precent reward system and provided in the company.

CORRELATIONS:
Correlations
Satisfaction
Transparency of towards current
present reward reward
system system

Transparency of present reward Pearson Correlation

1 .906**
system
Sig. (2-tailed) .000
N 123 123
Satisfaction towards current Pearson Correlation
reward system .906** 1
Sig. (2-tailed) .000
N 123 123
**. Correlation is significant at the 0.01 level (2-tailed).
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INFERENCE:
From the above table , it is seen that the correlation value is r = 0.906 . The results indicates that there exist a strong
relationship between the transparency of present reward system and satisfaction towards current reward system.
CHI – SQUARE
I. CHI – SQUARE BETWEEN EXPERIENCE AND IMPROVEMENTS TOWARDS EMPLOYEE
PERFORMANCE OF THE RESPONDENTS

HYPOTHESIS:
NULL HYPOTHESIS (Ho):
There is no significant association between experience and improvements towards employee performance.

ALTERNATIVE HYPOTHESIS(H1):

There is a significant association between experience and improvements towards employee performance.

CHI-SQUARE:
Case Processing Summary

Cases

Valid Missing Total

N Perce N Perce N Perce

nt nt nt

experience* improvement
towards employee
123 100. 0 .0% 123 100
performance
0% .0%

Experience * improvement towards employee performance Crosstabulation

Count

improvement towards employee performance

training any
to counselling
terminat pay/
develop been done
ion salary
their
demoti cut
skills Tot
on al

experience 0 - 1 year 51 1 0 0 0 52
2 - 5 years 0 36 0 0 0 36
5 - 10 years 0 5 11 3 4 23
10 & above
years 0 0 0 0 12 12
Total 51 42 11 3 16 123

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Chi-Square Tests
Asymp. Sig.
(2-
Valu df sided)
e

Pearson Chi-Square 2.788E2a 12 .000

Likelihood Ratio 253.133 12 .000
Linear-by-Linear 106.865 1 .000
Association
N of Valid Cases 123

a. 13 cells (65.0%) have expected count less than 5. The minimum expected count is .29.
INFERENCE:
Since, the SPSS generated value 0.000 is less than the significance level 0.05, the null hypothesis is rejected. Therefore, there
is a significance association between experience and improvements towards employee performance.

I. CHI – SQUARE BETWEEN EXPERIENCE AND SATISFACTION TOWARDS CURRENT REWARD

SYSTEM OF THE RESPONDENTS

HYPOTHESIS:
NULL HYPOTHESIS (Ho):
There is no significant association between experience and satisfaction towards current reward system.

ALTERNATIVE HYPOTHESIS(H1):

There is a significant association between experience and satisfaction towards current reward system.

CHI-SQUARE:

Case Processing Summary

Cases

Valid Missing Total

N Perce N Perce N Perce

nt nt nt
Experience * satisfaction
towards Current reward 123 100. 0 .0% 123 100
system 0% .0%

Experience * satisfaction towards Current reward system Crosstabulation

Count

Satisfaction towards Current reward system

yes,occasio
yes, no neutr nall
Tot
regularly al y al

experience 0 - 1 year 52 0 0 0 52

2 - 5 years 1 15 20 0 36

5 - 10 years 0 0 12 11 23

10 & above 0 0 0 12 12
years
Total 53 15 32 23 123
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Chi-Square Tests

Asymp. Sig.
Valu df (2-
e sided)

Pearson Chi-Square 2.081E2 9 .000

a

Likelihood Ratio 226.881 9 .000

Linear-by-Linear 105.347 1 .000
Association
N of Valid Cases 123
a. 6 cells (37.5%) have expected count less than 5. The minimum expected count is 1.46.
INFERENCE:
Since, the SPSS generated value 0.000 is less than the significance level 0.05, the null hypothesis is rejected. Therefore, there
is a significance association between experience and satisfaction towards current reward system.

SUGGESTIONS:
 Encourage gender-balanced participation by actively involving more females in surveys and organizational activities.
 Customize communication and development programs to cater to diverse age groups' needs and perspectives.
 Provide tailored skill development opportunities and educational support for employees with varying education
levels.
 Ensure compensation structures meet the expectations of employees across different income brackets, fostering
fairness and competitiveness.
 Foster employee engagement and retention through transparent feedback channels, diverse recognition programs, and
equitable performance management processes.

CONCLUSION
Rewards are considered as a powerful tool which is used by an organization to motivate its employees and it is an important
part of an organization's human resource planning. Reward system is always link reward to performance. Workers who work
hard and produce more or give better quality results would receive greater rewards. Hence, the employees should have a
thorough knowledge about the criteria for receiving rewards. The Research discloses that the remuneration, bonus and
incentives offered by the company is satisfactory and even the employees feel it is equivalent to the current market trend. In
addition to that, the employees feel satisfied with the promotion criteria and they are receiving continuous motivation from
superior in the organization. The awareness about the reward system among the employees is high. But it should be useful
in improving their performance. While designing the reward system; the company organization can give more importance
bonus and incentives for monetary reward and quality control award for non-monetary reward as they are more preferred by
the employees.

REFERENCES:
1. Agarwal, N. C. (1998). Reward systems: Emerging trends and issues. Canadian Psychology/Psychologie Canadienne,
39(1-2), 60.
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employee performance through the mediating role of employee motivation case study: Isfahan Regional Electric
Company. International Journal of Academic Research in Business and Social Sciences, 3(9), 327.
3. Lawler, E. E. (1984). The strategic design of reward systems. Strategic human resource management, 9(1), 7-16.
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School of Business Administration, University of Southern California.
5. Armstrong, M., Brown, D., & Reilly, P. (2011). Increasing the effectiveness of reward management: an evidence‐based
approach. Employee Relations, 33(2), 106-120.
6. Jayawardena, N. S., & Jayawardena, D. (2020). The impact of extrinsic and intrinsic rewarding system on employee
motivation in the context of Sri Lankan apparel sector. International Journal of Business Excellence, 20(1), 51-69.
7. Ngwa, W. T., Adeleke, B. S., Agbaeze, E. K., Ghasi, N. C., & Imhanrenialena, B. O. (2019). Effect of reward system
on employee performance among selected manufacturing firms in the Litoral region of Cameroon. Academy of Strategic
Management Journal, 18(3), 1-16.
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8. Kassahun, B. (2019). Reward System and its Effect on Employees Work Motivation in One and Two Star Rated Hotels in
Amhara Region, Ethiopia. Journal of Tourism, Hospitality and Sports, 40, 30-42.
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