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HUMAN RESOURCE MANAGEMENT

IN

PRACTICE

Reward Management

MMag. Almina Bei

Department of Human Resource Management


Winter Term 2011 6 December 2011

Department of Human Resource Management

Outline
1. Reward 2. The reward management system

3. Total reward
4. Rewarding special groups 5. Managing reward systems 6. Summary

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1. Reward

Reward refers to all of the monetary, non-monetary and psychological payments that an organization provides for its employees in exchange for the work they perform.
Bratton & Gold (2007: 358)

The design and management of reward systems constitute one of the most difficult HRM tasks for the general manager.
Beer et al. (1984: 113)

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2. The reward management system

An organization can provide two types of reward


Extrinsic Intrinsic

Reward system

the mix of extrinsic and intrinsic rewards

Pay system

the monetary or economic element of the reward system

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2. The reward management system

Reward system processes and activities Reward strategy Reward policies Total reward

Base pay Contingent pay (performance pay, variable pay) Employee benefits (indirect pay) Non-financial rewards Individual Team organizational

Type of reward

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3. Total reward

Figure 1: Types of employee reward Source: Bratton & Gold (2007: 373)

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3. Total reward

Figure 2: Compensation Philosophies Source: Mathis & Jackson (2011: 363)


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3. Total reward
Extrinsic

PAY/REWARD
Base pay Contribution pay Shares/profit sharing Recognition LEARNING AND DEVELOPMENT Workplace learning Training Performance management Career development Pensions

BENEFITS
Health care Perks Flexible benefits WORK ENVIRONMENT Core values Leadership Employee voice Job/work design (autonomy)

Figure 3: Model of total reward (Towers Watson) Source: Armstrong (2011: 745)

Intrinsic
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3. Total reward

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4. Rewarding special groups

Directors and executives

Figure 4: Components of executive compensation packages Source: Mathis & Jackson (2011: 415)

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4. Rewarding special groups

Sales representatives

Salary only Salary + commission Salary + bonus Commission only Additional non-cash rewards

Manual workers

Time rates Payment-by-result schemes

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5. Managing reward systems

Determining the right pay through


Job analysis

Information about the tasks, responsibilities and the context of a specific job

Job evaluation processes

Figure 5: The point system matrix Source: Bratton & Gold (2007: 385)

Market pay data

Pay levels based upon the market (supply/demand)


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Almina Bei HRM in Practice Winter Term 2011 Reward Management (6 December 2011)

Department of Human Resource Management

5. Managing reward systems

Controlling reward

Reward forecasting

Forecast future payroll costs Impact of pay reviews and contingent pay awards Pay review budgets set out the increase in payroll costs for either general or individual pay Based on the number of people employed and their present and forecast rates of pay Maintain control over payroll costs

Reward budgets

Evaluating reward practices

Compa-ratio analysis

Measures the relationship between actual and policy rates (midpoint or reference point) of pay as a percentage

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6. Summary

A Reward package is typically comprised of three key elements: financial reward, non-financial reward and perks or benefits An organization's reward strategy outlines the philosophy, principles and underpinning values that inform its reward system and the types of employee behaviors it wishes to promote Total reward includes extrinsic and intrinsic reward, as well as individual and organizational reward systems Groups like directors, sales representatives and manual workers have special reward systems The right pay can be determined through job analysis, job evaluation processes and market pay data It is necessary to consider the strategic, labor market, political, social, economic and legislative factors that act to shape the viability and acceptability of reward

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Bibliography
Basic Literature
Bratton , J. & Gold J. (2007). Human Resource Management. Theory and Practice. 4 th ed. London: Palgrave Macmillan.

Supplemental Literature
Armstrong, M. (2009). Armstrongs Handbook of Human Resource Management. 11th ed. London: Kogan. DeCenzo, D.A. & Robbins, S.P. (2010). Human Resource Management. 10th ed. Hoboken: Wiley. Harzing, A. & Pinnington, A.H. (Eds.) (2011). International Human Resource Management. 3rd ed. London: Sage. Mathis, R. L. & Jackson, J. H. (2011). Human Resource Management. 13th ed. Mason (USA): SouthWestern, Cengage Learning. Nieto, M.L. (2006). An Introduction to Human Resource Management. An Integrated Approach. London: Palgrave Macmillan. Wilton, N. (2011). An Introduction to Human Resource Management. London: Sage. York, K.M. (2010). Applied Human Resource Management. London: Sage.

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