REWARD SYSTEM

IT’S ALL ABOUT PEOPLE

AND
RELATIONSHIP

CONTENTS

INTRODUCTION

PURPOSE OF
REWARD

CATEGORIES

TYPES OF
REWARDS

ADVANTAGES &
DISADVANTAGES

CONCLUSION
INTRODUCTION

• Wilson (1995) defines reward systems as follows:

“A reward system is any process within an organization
that encourages, reinforces, or compensates people for
taking a particular set of actions. It may be formal or
informal, cash or noncash, immediate or delayed”

•The reward and recognition

industry had its roots in the
depression years of the 1930’s.

•It was during that time that

pioneers such as E.F. MacDonald
and Edward Maritz began to sell
their jewellery, watches and other
merchandise to corporations as
sales incentives and service awards
for employees.
PURPOSE OF REWARD

ATTRACT, MOTIVATE AND RETAIN

CATEGORIES
• As referred by Michael Armstrong (2007), all aspects of rewards, namely base pay,
contingent pay, employee benefits and non- financial rewards, which include intrinsic
rewards from the work itself, are linked together and treated as an integrated and
coherent whole .

• Intrinsic reward: is personal, it includes feelings of satisfaction to have finished a

particular task.

• Extrinsic reward: outside the control of the employee. It includes incentives, share
options, pension schemes, insurance and crèches.

The lack of attention to these details could create de-motivation and dissatisfaction.
TYPES OF
REWARDS Payment by results

Time rates

Types
of Individual/group
Reward performance-
related pay

Cafeteria or
felxible bnefit
system
Skill-competency
based pay
 Time rates

This reward system is related to the number of hours

worked and it experience rather than performance. It
gives importance on the value of the task rather than on
the value of the skills, abilities the employee brings to
the job, or on the quantity or quality of performance.

Advantages: Disadvantages:

It is open to inspection; Employees are not

It creates stability and
retention of employees.
system is easy to administer
and allow labour cost to be
predicted;
It does not emphasise quantity
of output to the detriment of
motivated to become more
productive.
This happens because both
good and bad performers
are rewarded for the
reason why they are in the
same grade.
Payment by result
It links pay to the quantity of the individual’s output. The
pay is usually linked to the number of units of work
produced.
Advantages:

The employee is
motivated to put effort
so he can increase his
income;
It is fair because the Disadvantages:
reward is related to the
level of production; It is difficult to measure
wages are linked to output in certain jobs,
production and less safety standards could be
supervision is required. compromised.
Individual/group performance-related pay

It considers not only results or output but also actual

behaviour in the job. It consist of a lamp sum, or a
bonus as a percentage of basic salary with quality of
permormance determing the magnitude of the
percentage increase

Disadvantages:
Advantages:
There is not attempts made to
It combines goals with
relate individual performance to
emotions, there is a
organisational objectives,
congruency between
appraisal is not conducted fairly,
organisational and personal
open communication between
goals,
manager and subordinates is
the remuneration packaging
descouraged,
is fair, the culture of
poor performancers are punished
organisation is supportive,
Skill-competency-based pay

It places the emphasis on inputs that consist of knowleadge,

skills and competencies injected into the job by employees

Advantages:
Fair amount of consultation and employee participation;
there is a strong encouragement in changing behaviour;
there is an appropriate level of training and much time is
invested in the process

Disadvantages:
Skills obsolence which could be arise in condition of changing
technology; it is possible that this system do not pay
attention to the skills that are no longer significant or they
are not required at all
Cafeteria or flexible benefit system
The felxible benefit system is a departure from the traditional model of a
single system of remuneration for everybody” (Meyer, 2000)
It is calculated within an overall remuneration or compensation package and
it includes a lot of benefits.

Advantages:

Employees choose benefits to meet their needs, during periods of change it

is an harmonise rewards, employees are given a sense of control and
involvment, employers are seen as more responsive to employees’needs.

Disadvantages:

Choices can cause problems , the schemes can be complex to operate

Example

Employee Recognition Gone Wrong , Then Right

http://www.youtube.com/watch?v=KFplP0ZNzjQ&feature=PlayList&p
=E9E0E27B199F9547&index=0&playnext=1
CONCLUSION
Thanks for Listening

Queries?