• Employer’s point of view

Organizations pay employees for their potential, their input-in the form of competencies, their output like meeting targets & to maintain both internal as well as external relativities like market competitiveness.

• Employees’ point of view

Apart from receiving monetary rewards, employees expect to be involved as stakeholders in the organization with fair treatment and good communication on how their expectations are met by the reward policy in place.

Hence, Reward characteristics differ not only in terms of the expectations on both sides but also on the type of organization.

In Traditional organizations, the concept of collective pay bargaining is still used. Centralised policies are applicable which allow progression up the reward scale only by the length of service in the company. Widespread use of job evaluation makes the performance rewards small & mainly available to senior staff. The response to market influences is also quite cautious.

In Leading organizations, pay is mostly directly related to individual and corporate performance. Decentralised policies allow line managers the freedom to use performance management as a criteria to higher attainment of organizational goals as well as rewards. Hence, there are a lot of flexi-benefits available with broad branding of the pay grades. Increased variable pay is also seen based on team & individual performances and competencies.

In Small Startups, there are no specialist HR policies or Reward management structures. Spot salaries are given wherein the owner decides the amount with no actual time period for a job evaluation. Salary hikes are given at will or when staff threaten to leave while ownership share happens only incase of a ptential for capital gain.

1. Financial eg. a pay increase
2. Non-Financial eg. praise from a manager

Terms such as ‘Reward’ , ‘Remuneration’ and ‘Compensation’ are often interchangeably used to denote financial reward.

‘Total Reward’ refers to financial + non financial reward.

Reward Management refers to the strategies, policies and processes to develop and maintain an organization’s financial reward systems. It is an integral part of the HR management in alignment with organizational goals.

For eg. In a call centre if the Business Strategy is to improve customer service then the HR Strategy would be to improve the skills of employees in dealing with customers. Accordingly a Reward Strategy would be to reward  competency & skill acquisition while a Reward Policy would be skills & competence based pay.

Not that tough! If attention is paid

The Reward Strategy of an organization could be influenced by numerous factors like-

• Intense competition
• Flexi-employment
• Performance based Culture
• Government funding
• Manufacturing to Service industries
• High demand for certain skills
• Job mobility
• Breaking up of big Public organizations

A CIPD Reward Survey (2005) identified 6 most important goals while formulating a Reward Strategy as-

1. Supporting Organizational goals
2. Rewarding high performers
3. Controlling Costs
4. Recruitment & Retention
5. Maintaining market competitiveness
6. Ensuring internal equity

While supporting business goals & rewarding high achievers remained the highest in priority in both the Public sector & private sector, other goals differed in the order mentioned above.

The objective of reward management is to support the achievement of business strategy and encourage other Human Resource initiatives like development, resourcing and employee relations.It is concerned with developing a positive employment relationship and psycological contract which embraces both financial and non-financial rewards in accordance with the value that people create.