The Nature of Reward Management

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.

Reward (or compensation) management is a core facet of the employment

relationship.

An organization can provide two types of reward: extrinsic and intrinsic.

The mix of extrinsic and intrinsic rewards provided by the employer is

termed the reward system, the monetary or economic element of the reward
system is termed the pay system.

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All pay systems contain two elements that are in
contradiction with each other:
Cooperation between worker and employer or manager
is an essential ingredient of the employment
relationship if anything is to be produced and is fostered
through the logic of financial gain for the worker.
Tensions and conflict are engendered through the logic
that makes the ‘buying’ of labour power the reward for
one group and the cost for the other.
This fundamental tension underlying the employment
relationship makes an unstable contract between the
two parties, who have different objectives when it
comes to monetary rewards.

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Strategic Perspective
A reward system is a key mechanism that can
influence each step of the strategy process. It is also
important in influencing:
Employee goal behaviours
Membership behaviour
Conflict behaviour
The first two behaviours mould an organization in
terms of its competencies and intellectual capital,
and thus can support organizational strategy.
However, the last can undermine organizational
strategy.

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Reward objectives
Any organizational reward system has three
behavioural objectives:
1. membership behaviour to recruit and retain a
sufficient number of qualified workers
2. task behaviour to motivate employees to perform to
the fullest extent of their capabilities
3. compliance behaviour to encourage employees to
follow workplace rules and undertake special
behaviours beneficial to the organizations without
direct supervision or instructions.

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Reward Options

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Reward Options
Base pay – the irreducible minimum rate of
pay for a job; calculated on time worked;
reflects value of the job as measured by job
evaluation. Can be selected for simplicity and
for psychological reasons.
Performance pay – added to base pay and
related to certain work-related behaviours:
performance, learning or experience. Based
on the problematic assumption that pay alone
motivates workers.
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Indirect pay – refers to the total reward package
in addition to base or performance pay such
as health and life insurance, pension plans
and other miscellaneous benefits.

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Reward Options – Indirect Pay

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Reward Options – Indirect Pay

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