HUMAN RESOURCE MANAGEMENT

REWARD AND COMPENSATION

WHAT IS REWARD?

• Literature Review• Reward is the ‘oil’ of the entire

Human Resource process shields

• Reward is = Is concerned with the formulation and implementation of strategies and policies that are to reward people fairly, equitably and consistently in accordance with their value in the organization.

• From Oxford Definition1. A sum of money offered for the

detection or capture of a criminal, the recovery of lost or stolen property.

2. Something given or received in return or recompense for services, merit hardship

3. To make return or requite.

• Other components of reward system including:a) Organization Strategy

b) HR Strategy

c) Pay and Grade Structure

d) Performance Management

e) Total Remuneration

• The main objective organization give rewards to the employee is;• To attract, maintain and retain, good, efficient, motivated and high performing

employees.

TYPES OF REWARDS

• Money• Gift cards• Property• Medical coverage• Promotion to new position• Increment

• Grades• Performance based incentives• Employee Recognition• Protection Programs• Profit sharing• Overtime and Holiday

packages

PERFORMANCE REWARD AND COMPENSATION

• The most effective reward and compensation systems align with objective, outcome-based evaluations of employee performance.

• Each employee's performance measurement should reflect the organization's business strategy and financial goals.

• Compensation should also reflect the employee's performance level and his or her contributions to the organization's success.

• Approaches to do including:1. Reflect an employee's performance

and contributions

2. Improve employee and customer engagement

3. Increase productivity

4. Focus employees on clear, objective, and measurable outcomes

5. Link to the organization's strategic direction and business goals

6. Reward employees who achieve results

• With this approaches its expected the relationship between employees and employers to be stronger and maximization of employees performance.

WHAT IS COMPENSATION?

• DEFINIT ION

• Any form of payment made to an individual for services rendered as an

employee for an employer; services performed as an employee

representative; and any separation or subsistence allowance paid.

• The money receive by an employee from an employer as a salary or wages.

• Synonyms: Repayment, reimbursement, remuneration.

WHY COMPENSATION?

• Attracting Staff

• Retaining Staff

• Motivating Staff

• Driving Changes

• Corporate Reputation

• Affordability

• Employee Objectives

• Purchasing Power

• Fairness

• Recognition

• Composition

WHY COMPENSATION?

1. Attracting staff – benchmark with labour market to secure the good candidates.

2. Retaining staff – competitive pay package will ensure that effective performers stay with you.

3. Motivating staff – ‘necessary evil’ to motivate staff to work.

4. Driving change – higher base-pay, bonuses, and promotion can tie to new behavior, attitude & skill gained by staff.

5. Corporate reputation – Good compensation packages may be perceived as good company in the eyes of public and industry hence establish positive image.

6. Affordability – Compensation package must suit with company’s affordability.

7. Employee objective – If company’s objective is to maximize profit, then the employee objective is to maximize earning or income.

8. Purchasing Power – Total remuneration should meet the general standard of living of that particular area.

9. Fairness – Every employee had a strong feeling about the level of payment that was fair for the job so that he will not feel underpaid.

10.Recognition – Employee feel that their contribution or expertise is recognised through pay package.

11.Composition – Different group of employees have different priorities. • E.g. younger staff – opt for maximising cash earning; mid-career staff –

opt for child care benefits, transport facility coz have family; older staff–opt for retiring benefits, golden hand- shake, etc.

HOW TO SET BASE PAY?

1. External market comparison – i.e. ‘follow the market’ or ‘above the market’ rate.

2. Job evaluation – i.e. each job is assigned with certain value which tie up with certain pay level e.g. Hay Job Evaluation Methods.

3. Collective bargaining – i.e. employee union and employer mutual agreement on the type and amount of compensation to be given to staff.

TOTAL COMPENSATION PACKAGE

Total Compensation Package = Salaries + Benefits + Incentives +

Allowances

REMUNERATION ELEMENTS

1. Salaries • i.e. combination of monthly or frequent payments, annual increment, and

annual or other infrequent bonuses.

• 2 components – fixed pays (e.g. basic salary); and variable pays (e.g. overtime).

2. Benefits • i.e. extras to the working conditions that have cash value e.g. lunch coupon,

subsidized meal, staff discounts.

• Can be classified into quantifiable (e.g. annual leave, sick leave, company car, further study sponsorship) and non-quantifiable (e.g. recognition for full attendance, long service awards, employee of the month, retirement benefits).

4. Incentives • i.e. element of additional remuneration that linked to working performance of

an individual or group as a result of prior engagement e.g. piecework, production bonuses, attendance allowance, commission to salesperson or team, profit sharing.

5. Allowances • i.e. a form of supplementary income to compensate employees for

performance of additional duties, possession of additional skills/equipment or endurance of certain work condition.

• Once this condition cease to exist, the allowance can be ceased to be paid as well. E.g. shift allowance, housing allowance, transport allowance, uniform allowance, hardship allowance.