Aims of Reward Management

Reward management consists of analyzing and controlling employee remuneration,

compensation and all of the other benefits for the employees. Reward management aims to
efficiently operate a reward structure for an organization. Reward structure usually consists of
pay policy and practices, salary and payroll administration, total reward, minimum wage,
executive pay and team reward. The following are the aim of reward management policies:

 Rewards must be given to the employees according to the values of the organization
and in accordance with what the organization wants to pay to the employees. The
organization must develop the guidelines and on the basis of that rewards must be
given to employees.
 People or employees of the organization must be rewarded for the value that they
have added to the organization by contributing effectively and efficiently to the
activities or the tasks assigned to them by the managers. In order to make them feel
that they are a valuable part of the organization as they contribute towards the growth
of the organization.
 The rewards must be always given for the right things. The right things here mean the
tasks that are very important for the organization for the growth prospects of the
employees as well as the organization in the future. The rewards must not be given
for every small achievement, these must be given only when the tasks or activities of
utmost importance are completed so that the employees understand which tasks are
very crucial.
 Reward management aims to develop the culture of performance in the organization.
As the rewards are very helpful in motivating and encouraging the employees. When
some of the employees are rewarded, the others who are not rewarded start dedicating
more time towards work and as a result, the culture of performance is developed in
the organization.
 Reward management aims to motive and encourage employees of the organization
such that the employees are more dedicated and engaged in the work that has been
assigned to them by their managers. Motivation form the employers help in making
the employees more committed towards the tasks assigned to them.
  Reward management makes the employees satisfied as all their needs are taken care
of by the employer in the form of intrinsic as well as extrinsic rewards. This helps in
retaining the employees who have skills and knowledge. Reward management also
helps in attracting more people to the organization. Through the effective
implementation of reward management, the organization is capable of creating its
reputation in the industry which helps in bringing more talent to the organization.
 Reward management must be transparent between employees and employers. The
employer or the managers must clearly define the process of reward management to
the employees so that there are no conflicts among them.

Total reward framework:

Pay/Reward Benefits
Basic pay Pensions
Contribution pay Health Care
Profit Sharing Perks
Recognition Flexible Benefits
Reward
Framework
Learning & Development Work Environment
Workplace Learning Core Values
Training Leadership
Performance Management Employee Voice
Career Development Job Design

Pay/Reward

Pay is a broad category that refers to the monetary compensation that is provided to an employee
in exchange for their work. The terms "pay" or "Reward" generally refer to several different
forms of pay.  Cash Compensation is monetary pay that employees receive in exchange for their
work. However, Cash Compensation can be provided in many different forms.
  Base Pay includes salary or hourly wages. This category is the most common and readily
understood and observable form of rewards.

 Contribution Pay can include performance-based rewards such as bonuses and

commissions, as well as longer-term equity rewards such as stock options. The important
thing to remember is that Cash Compensation refers to the direct monetary pay given to
an employee in exchange for their contributions to the organization.

 Profit-sharing plan is a retirement plan that gives employees a share in the profits of a
company. Under this type of plan, also known as a deferred profit-sharing plan (DPSP),
an employee receives a percentage of a company's profits based on its quarterly or annual
earnings.

 Employee recognition is the acknowledgment of a company's staff for exemplary

performance. Essentially, the goal of employee recognition in the workplace is to
reinforce particular behaviors, practices, or activities that result in better performance and
positive business results.

Employee Benefits

In addition to cash, Total Rewards systems in organizations have evolved to offer additional
benefits and services to their employees. While these portions of the compensation package are
known as "fringe benefits" or perks, as firms compete in the labor market, many of them have
become quite central to compensation plans. In addition, some of these benefits have become
mandated by local governments. Employee benefits include company health benefits, retirement
plans & flexible benefits.

Learning & Development

Employee training and development can help employees become better at their jobs and
overcome performance gaps that are based on lack of knowledge or skills. This can help
organizations and teams to be more productive and obtain improved business outcomes, leading
to a competitive advantage over other companies.
 Workplace learning

Workplace learning is the way in which skills are upgraded knowledge is acquired at the
place of work. This is also known as On-the-Job training. On-the-job training, is a
program designed to help employees gain hands-on knowledge in the workplace. This
type of training involves employees using the resources available for them at their
workplace, and it allows them to learn while integrating into their everyday work
environment.

 Training

Employee training is a program that helps employees learn specific knowledge or skills
to improve performance in their current roles. It is a systematic process of changing the
behavior, knowledge and motivation of present employees to improve the match between
employee characteristics and employee requirements. It is the art of increasing the
knowledge and skill of an employee for doing a particular job.

 Performance Management

Performance management is a corporate management tool that helps manager to monitor

and evaluate employees' work. Performance management's goal is to create an
environment where people can perform to the best of their abilities and produce the
highest-quality work most efficiently and effectively.

 Career Development

A career development path provides employees with an ongoing mechanism to enhance

their skills and knowledge that can lead to mastery of their current jobs, promotions and
transfers to new or different positions.
Work Environment

Work environment is used to describe the surrounding conditions in which an employee

operates. The work environment can be composed of physical conditions, such as office
temperature, or equipment, such as personal computers. It can also be related to factors such as
work processes or procedures. It includes:

 Core Values

The core values of an organization are those values we hold which form the foundation
on which we perform work and conduct ourselves. The values underlie our work, how
interact with each other, and which strategies we employ to fulfill our mission.  The core
values are the basic elements of how we go about our work.  They are the practices we
use every day in everything we do. It helps us to make decision, inform us how to reward,
clarify who we are, guide business processes & build personal relationship.

 Leadership

Leadership is the ability of an individual or a group of individuals to influence and guide

followers or other members of an organization.

 Employee Voice

Employee voice means by which employee communicate their views to their employer
and influence matters that affect them at work. For employers, effective voice contributes
to building trust with employees, innovation, productivity and organizational
improvement.

 Job design
 Job design is the process of creating a job that enables the organization to achieve its
goals while motivating and rewarding the employee. This means that a well-designed job
leads to higher productivity and quality of work, while also leading to higher job
satisfaction, lower absence, and lower employee turnover intentions.

Components of Total Reward

Basic Pay

Transactional Total
Reward Contingent Pay Remuneration

Employee Benefits
Total
Reward
Learning & Development

Relational Non-Financial
Rewards Work Experience Reward

Recognition, Achievement & Growth

Elements of Total Rewards

There are five elements of total rewards, each of which includes programs, practices, elements
and dimensions that collectively define an organization’s strategy to attract, motivate and retain
employees. These elements are:

 Compensation
 Benefits
 Work-Life
 Performance and Recognition
 Development and Career Opportunities
The elements represent the “tool kit” from which an organization chooses to offer and align a
value proposition that creates value for both the organization and the employee. An effective
total rewards strategy results in satisfied, engaged and productive employees, who in turn create
desired business performance and results.

The elements, as World at Work has defined them, are not mutually exclusive and are not
intended to represent the ways that companies organize or deploy programs and elements within
them. For instance, performance management may be compensation-function- driven activity or
may be decentralized in line organizations; it can be managed formally or informally. Likewise,
recognition could be considered an element of compensation, benefits and work-life. These
elements are described below:

Compensation

Compensation pay provided by an employer to an employee for services rendered.

Compensation comprises four core elements:

 Fixed pay — Also known as “base pay,” fixed pay is nondiscretionary compensation that
does not vary according to performance or results achieved. It usually is determined by
the organization’s pay philosophy and structure.

 Variable pay — Also known as “pay at risk,” variable pay changes directly with the
level of performance or results achieved. It is a one-time payment that must be re-
established and re-earned each performance period.

 Short-term incentive pay – A form of variable pay, short-term incentive pay is designed
to focus and reward performance over a period of one-year or less.

 Long-term incentive pay —Long-term incentive pay is designed to focus and reward
performance over a period longer than one year. Typical forms include stock options,
restricted stock, performance shares, performance units and cash.
Benefits

Programs an employer uses to supplement the cash compensation that employees receive. These
programs are designed to protect the employee and his or her family from financial risks and can
be categorized into the following three elements:

 Social Insurance
 Unemployment
 Workers’ compensation
 Social Security
 Disability (occupational)

 Group Insurance
 Medical
 Dental
 Vision
 Prescription drug
 Mental health
 Life insurance
 Disability
 Retirement
 Savings

 Pay for Time Not Worked — these programs is designed to protect the employee’s
income flow when not actively engaged at work.

 At work (breaks, clean-up time, and uniform changing time).

 Away from work (vacation, company holidays, personal days).

Work-Life
A specific set of organizational practices, policies, programs, plus a philosophy, which actively
supports efforts to help employees achieve success at both work and home. There are seven
major categories of organizational support for work-life effectiveness in the workplace. These
categories encompass compensation, benefits and other HR programs. In combination, they
address the key intersections of the worker, his or her family, the community and the workplace.
The seven major categories are:

 Workplace flexibility
 Paid and unpaid time off
 Health and well-being
 Caring for dependents
 Financial support
 Community involvement
 Management involvement/culture change interventions.

Performance and Recognition

Performance
Performance is a key component of organizational success, alignment of organizational, team
and individual performance is assessed in order to understand what was accomplished, and how
it was accomplished. Performance involves the alignment of organizational, team and individual
effort toward the achievement of business goals and organizational success.

 Performance planning – is a process whereby expectations are established linking

individual with team and organizational goals. Care is taken to ensure goals at all levels
are aligned and there is clear line of sight from performance expectations of individual
employees all the way up to organizational objectives and strategies set at the highest
levels of the organization.
 Performance – is the manner of demonstrating a skill or capacity.
 Performance feedback – communicates how well people do a job or task compared to
expectations, performance standards and goals. Performance feedback can motivate
employees to improve performance.

Recognition
Acknowledges or gives special attention to employee actions, efforts, behavior or performance.
It meets an intrinsic psychological need for appreciation for one’s efforts and can support
business strategy by reinforcing certain behaviors that contribute to organizational success.
Whether formal or informal, recognition programs acknowledge employee contributions
immediately after the fact, usually without predetermined goals or performance levels that the
employee is expected to achieve. Awards can be cash or non-cash like-verbal recognition,
trophies, certificates, plaques, dinners, tickets, etc.

Development and Career Opportunities

Development

It is a set of learning experiences designed to enhance employees’ applied skills and

competencies, development engages employees to perform better and leaders to advance their
organizations’ people strategies.

Career Opportunities

A plan for an employee to advance their own career goals and may include advancement into a
more responsible position in an organization. The organization supports career opportunities
internally so that talented employees are deployed in positions that enable them to deliver their
greatest value to their organization.