Organizations today realize that employees are part of their competitive advantages. Along with effective business strategies and sufficient capital, investments for developing highly skilled human resources have been part of most companies’ road towards success. In order to obtain this unique competitive advantage, organizational management must be able to give sufficient motivation to their employees (Creech, 1995).One of the considered approaches of management in motivating their employees is through reward system. Primarily, the goal of this paper is to provide an analysis of the aims of organisation in setting reward system. In addition, this will also provide discussions of some of the trends in reward practice and the emerging laws that affect employee rewards.
Aims of Organisation for Setting Reward System
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In Human Resource Management, the employee reward policy is intended to align employees with organizational strategy by providing incentives for employees to act in the firm's interest and perform well over time. Expectancy theory carries a clear message that employees must feel confident that their effort will affect the rewards they receive. Perceptions of equity are therefore crucial in an employee's decision to remain and produce valuable work.
Equity is a multidimensional construct, embracing external equity (the degree to which a firm pays employees the rate they would find in the external labour market), internal equity (the degree to which a firm differentiates pay between employees on the basis of performance in similar jobs), and individual equity (the degree to which employees are rewarded proportionately to their individual performance) (Dean and Snell, 1993).
Because of the changing demands of performance on employees in high- velocity companies, perceptions of equity in its three forms may become confused, as job roles and job interdependence become more varied and flexible. Since employees would expect that as their job changes, so will their rewards, designing reward systems in high-velocity environments presents a major challenge to organizations. In high-velocity environments, a premium is placed on individuals who are able to operate in ambiguous circumstances and who are able to take advantage of loose job descriptions provided by their employers.
Organizations in high-velocity environments are willing to pay proportionally higher salaries to individuals who have such skills. We would expect, therefore, that emphasis on individually equitable rewards as a means of recruiting and retaining highly capable employees would be required (Gomez-Mejia and Welbourne 1990; Snell and Dean 1992).
Employee Rewards Policy amended by the Human Resource Management can be classified under three broad headings: performance-contingent rewards, which explicitly reward through performance outputs; job-contingent rewards, where pay is contingent on job classification; and person-contingent rewards, in which pay is dependent on the competencies a person has (Dean & Snell, 1993). Because both output orientation and job classification may be difficult to measure accurately in high-velocity conditions, the prospect of person-contingent rewards, which may encourage the values of learning, flexibility, and creativity, would seem to be best suited to fast-changing conditions.
In addition, Employee Reward Policy can be one of the greatest foundations of control available to a company in its quest to increase organizational performance and effectiveness, yet remain one of the most underutilized and potentially complex tools for driving organizational performance. The importance and complexity of linking reward strategies to business goals in a systematic manner has been a recurrent argument in the study in this field, as has the importance and difficulty of linking rewards to the longer-term view (Hambrick & Snow, 1989). In describing the strongest level of linkage the emphasis has been placed on Lawler's (1990) description of reward processes which are capable of reinforcing the behaviours crucial to business strategy like long-term versus short-term, customer focus versus financial results.
People do work for money, but they work even more for meaning in their lives. In fact they work to have fun. This statement can be evaluated using the physiological needs of people. Human beings have needs which can be classified as physiological, safety and security, social, esteem and status, and self-actualization. This means that although employees work because they want to ear incomes, there are still needs that should be fulfilled to ensure their contentment and happiness in what they are doing.
If any of the needs is unmet, or unsatisfied a person, the individual can be motivated if provided with an opportunity to satisfy the unmet need or needs. The most motivating opportunities are the most valued. The most valued opportunities are those designed to provide satisfaction of the most intense unmet needs. What needs are most intense varies from individual to individual. One person's most dominant need may be the need to be happy (Romzek, 1989).
In order to motivate and encourage the workers and employees to render their performances and to help them enjoy more of what they are doing, the employers should are giving recognition to those employees whose works is exemplary or that employee who has contributes to outstanding achievements and accomplishments of the mission and objectives of an organization as a whole. Rewards and recognition go a long way to keeping employees motivated, satisfied, and committed. Management should recognize employees for both their progress toward and achievement of desired performance goals. It should show appreciation for small accomplishment as well as big ones.
The recognition must be ongoing to reinforce employees' need to feel that they're doing a good job. Moreover, the best forms of recognition typically have little or no cost (Nelson, 1998). The statement just justifies the saying that people become more devoted to work when they feel that their environment likes them and appreciate the things they are doing.
According to Skinner (1953), the reinforcement theory suggests the behaviors of the employees directly impact the outcome of their work or their performance. Thus, an employee with a positive behavior will bring about positive outcomes, whereas those with negative behaviors will lead to negative results. Thus, the positive behaviors of the employees should then be reinforced by their managers so as to generate more positive outcomes.
Trends in Reward Practice
Being able to recognise the needs for highly motivated individuals, human resource management has been able to develop different ways in rewarding their employees. The trends in reward practice include the broadbanding and performance-related pay and competency based pay or skill-based pay. This paper will focus on the broadbanding and performance-related pay. Broadbanding is a manner of reducing the number of narrow grades in a certain pay structure into a smaller number of broader bands. This reward practice is based on the view that narrow ranges cannot reward employees who have reached their range maximum but who are still performing effective. The main goal of this reward practice is to provide greater flexibility to reward the acquisition of wider skills as well as competencies without need to promote the employees in each case or situation (Payment Practices, 2008).
On the other hand, the performance-related pay is a common term for various approaches to warding or rewarding discretionary payments to employees on the basis of their contribution to the company. Among this common approach include the pay awards for successful meeting work objectives or for showing work-related competences or the integration of the two. it can be said that each of this reward practice can be helpful for motivating and retaining skilful employees (DeWitt & Hamel, 2002).
For rewards to be valued, the human resource management must see to it that the Employee Reward Policy includes the proper scheduling on when would be the most accurate time to give the rewards. Generally rewards received by an individual soon after accomplishment of a goal, or soon after attainment of a given targeted performance level, are the most valued rewards and the rewards that serve best to install a desire for further achievement or continued good performance, when the reward is tied to performance in time that reward is closely associated with the performance. It becomes an extension of the performance. It has real meaning because one can vividly see that it was received for performance.
Laws that Affects Employee Rewards
If the employers are thinking of giving employees special rewards as incentives for having good attendance records, there are some legal and laws which prohibits them to do so. For instance, the royal mail introduced a reward system for staff which did not take time off sick. Under this system, employees with full attendance records will be included into a prize draw to win Ford Focus cars or holiday packages. In the staff incentive, this system can be perceived as a workable reward to let the employees minimize or totally avoid their absences. However, this kind of system has some serious ramifications from certain employment law. This can be attributed to the employment discrimination law (Coopers, 2005).
Herein, the management of Royal mail can be given discrimination charges for disability or age. The success of these claims depends on the specific situation of employees and their needs. This discrimination of age or disability may happen if, for instance, an employee had time off associated to the age and disability and this was not taken into consideration by the management under the reward system. Herein, there is an existing law that says that the failure of the management to set-aside such employee’s absence due to age or disability related reasons can be considered as less favourable treatment. Hence, this would hinder the company to provide reward for those individual who have no absences for this would not be fair for other employees. In this regard, if the company would like to continue the reward system, they must have some list of exceptions in the reward system. In this regard, it is safer for employees to give bonuses and rewards based on the performance and not by the number of absences.
Regardless of the targeted employees, the organization today is attempting to become employers of choice. In order to become one, the management of the organization shall create an Employee reward system where potential job candidates feel that it will be an accomplishment to earn a job with the organization, and that once they have a job, the individual’s performance will be rewarded.
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