HRM At Work: Student Notes

Chapter 13: Equity and Fairness in Reward Management

Chapter overview
This chapter extends the topic of motivation and reward introduced in Chapter 12, focusing
more explicitly on the need to deliver fairness, and supplements study of influential theories
of motivation with a discussion of other relevant theory. After working through this chapter,
you should be able to argue the case for introducing flexible benefits and to advise
management on how job redesign may be implemented. You should also be able to assess the
costs and benefits of implementing workplace harmonisation, as well as being able to explain
how benefits contribute to the total reward package. Additionally, you should be able to list
the pros and cons of job evaluation and assess how non-financial reward contributes to
understanding HR practice.

Chapter objectives
After studying this chapter, you should be able to:
prepare a case for introducing flexible benefits
assess the costs and benefits of implementing harmonisation between blue- and white-
collar workers
advise management on how job redesign can enrich jobs and motivate workers
And you should understand and be able to explain:
the pros and cons of different methods of job evaluation
the nature of employee benefits and their contribution to the total reward package
the principal characteristics of non-financial rewards and their implications for HR
practice.

Chapter outline

Job evaluation
The chapter begins with a discussion of job evaluation, differentiating between non-analytical
(job ranking, pay comparison, job classification) and analytical (points rating, factor
comparison, broadbanding) types of scheme. The chapter lists some common objectives that
employers may have in mind when conducting job evaluation: establishing a pay structure;
deciding pay relationships between jobs that are seen as fair by employees; reducing
grievances and disputes over pay; deciding pay levels for new or changed jobs; providing pay
information in a form that allows for meaningful comparison with other organisations.

Equal value considerations

After this discussion of job evaluation, consideration is given to the issue of equal pay/value.
This comprises discussion of the Equal Pay Act 1970, as well as the 1983 amendment. You
will be aware that job evaluation can be prone to bias.
Pensions
The topic of pensions is then discussed these can be seen as a form of deferred pay or as a
fringe benefit. The two main types of pensions scheme (defined benefit and defined
contribution) are discussed, and the legislative background for these schemes is detailed.

Flexible benefits and harmonisation

The chapter then moves on to a discussion of flexible benefits. Sometimes called cafeteria
benefits, these may involve a range of rewards or bonuses (including company car, health
insurance and holidays). Findings from the recent CIPD report relating to flexible benefits
schemes are summarised. Discussion of harmonisation relates the ways in which this process
of reducing difference based on status can take place harmonising payment systems and
methods, overtime, times of work, sick pay, pension arrangements. The chapter next
discusses the historical context of harmonisation. More recent evidence on harmonisation is
examined and several case studies are introduced. Factors seen to increase moves towards
harmonisation are new technology, legislation on discrimination/equal pay and growth in
single-table bargaining.

Non-financial rewards and recognition

The chapter concludes with a discussion of the role of non-financial rewards and recognition.
Hackman and Oldmans influential job characteristics model is discussed. This lists five core
job characteristics believed to influence satisfaction and motivation:
skill variety (range of skills used)
task identity (whether something involves the completion of a whole piece of work)
task significance (how much the task can be seen to affect other people)
autonomy (freedom in choosing how to work)
feedback (clear information relating to performance).
Jobs that maximise these characteristics can lead to experienced meaningfulness (resulting
from skill variety, task identity, task significance), experienced responsibility (from
autonomy), and knowledge of results (from feedback). This is followed by a discussion of the
roles of recognition and feedback, and involvement and autonomy and responsibility.
Recognition and feedback incorporates ideas from total quality management (TQM) and
Stredwicks (2002) formal recognition scheme. The recognition scheme has several aspects,
including publicity and recognition on success through company magazines, swiftness in
deciding on recognition, training for employees in putting forward proposals. Involvement
and autonomy and responsibility incorporates discussion of the practice of job redesign: any
attempt to alter jobs with the intent of increasing the quality of work experience and
productivity (Wilson, 1999). Several forms of redesign are discussed: job rotation, job
enlargement, job enrichment, autonomous workgroups and teamworking.

Conclusions
When reviewing reward systems, you should be aware that care must be taken not only with
the choice of suitable payment schemes and benefits packages but also with the processes by
which they are implemented. Management has to take into account a number of key factors
when implementing reward systems. This is based on the view that a careful systematic
analysis, which addresses potential problems, is more likely to succeed than an ad hoc
approach. Firstly, it is important to analyse what is wrong with the existing reward system
and separate out symptoms from causes, and establish whether or not the scheme is
fundamentally flawed or just plagued by implementation problems. Secondly, it is essential to
involve employees and their representatives in the process of change because they may add
useful knowledge on the issues which affect them and about which management is unaware.
Finally, it is not enough simply to install the system. It must be monitored and reviewed to
ensure that it operates in the way that was intended, and that it is judged against established
criteria. Given that all reward systems tend to have unintended consequences and decay over
time, regular review is critical..

Feedback on mini-questions

Before reading the remainder of this chapter, gather information about the pay levels
for a sample of five occupations for example, Member of Parliament, train driver,
checkout operator, nurse, HR manager. Place these in rank order. Do you consider these
pay levels to be fair in relation to each other? Why/why not? Discuss with your
colleagues notions of fairness and differentials.

Your exact ranking will depend to some extent on interpretation. Assuming these five
occupations are the ones selected, a reasonable ranking would be (highest-paid first) MP, HR
manager, train driver, nurse, checkout operator. Alternative rankings are possible depending
on the grade of the nurse, the level and seniority of the HR manager, etc, but of course the
purpose of this question is not to get the ranking correct, rather to see whether the likely
pecking order (in terms of salary) is in some sense fair.

There are different ways in which to assess the level at which someone is paid
consideration will include economic factors, labour supply and demand, and the need to pay
someone a salary commensurate with the other potential jobs they could undertake. You may
feel that nurses deserve more money than MPs, for example. However, two things would
make this situation difficult to redress: first, leaving MPs salary the same and increasing
every nurses pay so that it was at or above the level of an MP would have serious financial
consequences for the country (there are approximately half a million nurses); second,
reducing MPs salary to make every MP paid the same as a junior nurse might make it
difficult to attract suitable candidates to Parliament, given that it is already the case that many
MPs could earn considerably more elsewhere. It is also possible to argue that MPs work
longer hours, under greater stress, with far more responsibility than nurses. Exploring issues
such as this should illustrate that the level of pay for a job is not necessarily the same thing as
its value. Similarly, one would imagine that paying people more would not necessarily result
in their doing more valuable work.

What are the main strengths and weaknesses of analytical and non-analytical schemes
of job evaluation?

The preceding section in the chapter introduces the idea of job evaluation, differentiating
between non-analytical (job ranking, pay comparison, job classification) and analytical
(points rating, factor comparison, broadbanding) types of scheme. The chapter lists some of
the common objectives employers may have in mind when conducting job evaluation. This
should furnish you with ways of talking about a specific organisations method of evaluating
jobs. The discussion of common organisational objectives that inform job evaluation
exercises should also enable you to see if you can identify the rationale behind job
evaluation in your company, or one with which you are familiar. Common criticisms of job
evaluation schemes are that they can be costly, bureaucratic and inflexible, inappropriately
assuming the organisation is a stable hierarchy and inconsistent with ideals of high
commitment and high performance, or the need to go beyond contract.

Do you think cafeteria benefits are a good idea?

What would make an ideal package for you?

Cafeteria benefits could include any or all of the following: childcare vouchers, company
cars, dental insurance, gym membership, health insurance, health screening, holidays, life
assurance, private car leasing, retail vouchers and sick pay. The rationale for including these
as part of an overall salary package is that these can maximise flexibility and choice, allowing
employees to pick and choose which benefits are most appropriate to their personal situation.
Additionally, it may offer companies the potential to control costs. Assuming that you do not
work in an organisation where flexible benefits are used, you should be able to point to ways
in which such a system would have benefits over a standard, homogenous package. One
could potentially conclude that such a system may well be a way of encouraging greater
diversity, as well as allowing greater scope for companies to offer employees tailored pay
packages consistent with the idea that people should be managed on an individual basis.
Some of the limitations of these schemes are that they can involve complexities in
administration and calculation of tax, and you may like to explore whether the relatively low
uptake of this form of reward is a sign that it is impractical in many cases, or that many
organisations lack the political will and imagination to implement such schemes. Compare
notes with your colleagues. Do you all have the same wants at the same time?

What differences in terms and conditions still exist between groups of workers in your
organisation or one with which you are familiar?
Do you think that it is possible to justify these?

The previous passage lists conditions of employment that offer scope for harmonisation, and
these can be used as a benchmark against which to examine the extent to which
harmonisation has occurred. As listed in the text, these are: payment systems and methods of
payment; overtime and hours of work; shift premiums; actual times of work; clocking or
overtime recording procedures; sick pay schemes; holiday entitlement and holiday pay;
pension arrangements; period of notice; redundancy terms; canteen facilities; and fringe
benefits (as discussed in the answer to the previous mini-question). The standard arguments
to justify difference will probably involve reference to the external context or market
pressures. It is very difficult to justify treating different groups of people differently if the
sole basis for it is what goes on within an organisation, because that can always be changed.
However, if external comparators are used, it becomes easier to justify treating different
groups differently because the argument can then be made that if there were complete
harmonisation, the organisation would only be able to afford to pay an average salary, and
offer a standard (again average) system of reward. In these conditions it would be very
difficult to retain highly valued staff because they could attract superior terms and conditions
elsewhere. If managers and trade union officials could agree that there are necessarily some
elements of difference, there is a basis for discussion and negotiation. It is easier to see how
this situation could be resolved than one in which no quarter was given. One could also argue
that rewarding everybody equally would necessarily be unfair, given that in any community
people will offer differential levels of contribution and it will be harder to motivate people to
perform well if they are not rewarded adequately.

As is argued in the text, divisions between manual and non-manual workers still inform how
we think about people at work, and even though it is becoming increasingly difficult to
present a coherent case for [this] the roots of such distinctions are deep. Aspects of this
division can be seen through the lens of the industrial bureaucracy, and the separation of brain
from brawn. Allied to this industrial division, bureaucratic elements and the imposition of
tiers or layers of management imply the possibility of progress and promotion. This cannot be
fully understood without reference to class structure, and the inherent stability and resilience
of accepted social norms. For example, although the Equal Pay Act was passed more than 30
years ago, there are still differentials in pay between men and women doing the same work.
At an organisational level, reforms in working conditions can be facilitated by changes in the
way the work is done for example, increased use of teamworking or the implementation of
TQM. There is also an important role to be played by leaders within the organisation.

Consider the following questions:

Why do we come to work?
When we are at work, what influences our behaviour and performance?

This question encourages you to think about a real context (the things that motivate you,
personally) and thereby to learn by reflecting on experience. By performing a simple listing
and ranking exercise you should quickly be able to identify how your motivators are
different from those of others. You may find that some tasks that you are motivated to do
well cause difficulty for others, and you are likely to benefit from thinking how these people
could be motivated to do those tasks. A tangible incentive might be used, but it is hard to see
how people can be encouraged to overcome lack of motivation in the long term in other
words, might an incentive (or bribe) work initially, but over time lose its value? Even a
cursory examination of other peoples lists or rankings should enable you to see that there are
likely to be limits to any one size fits all account of motivation.

One way to do this is if you first of all list exciting or interesting jobs you have done, and try
to offer as rich a description as possible of the elements of these jobs that were rewarding.
After consideration, and sufficient time for such brainstorming, then explore whether
Hackman and Oldmans model of job characteristics is of any use in interpreting what makes
these jobs satisfying. Then think whether these elements can possibly form part of your day-
to-day job, or whether particularly satisfying moments are necessarily fleeting. This will help
you consider whether designing jobs to be enriching is ever really possible, or whether the
most rewarding jobs are likely to have been designed in large part by the people who are
undertaking them.
 Do you think that job redesign makes work more satisfying by rewarding and
recognising employee contributions, or has it just made work more intensive and
stressful?

Of the five types of job redesign (rotation, enlargement, enrichment, autonomous groups and
teamworking), rotation is unlikely to make work more satisfying, given that it emphasises
maintaining a similar skill requirement through a variety of jobs. It may provide a relief from
boredom, but some people may not even welcome rotation if they are paid by results and
have found a job that they can perform well. Job enlargement often merely means adding to
workload. Where enrichment is possible, it could enhance satisfaction however, some
employees may feel threatened by having additional responsibilities or may feel that learning
new skills, for example, is an imposition. Autonomous workgroups and teamworking can
both be criticised insofar as they substitute one form of control (peer pressure) for another.
These forms of job redesign are likely (given that they involve substantive change) to be
effective only where such change takes place alongside wider changes in the way more senior
managers behave.