Reward and benefits systems need to be tailored to fit the organisation Essay


Administration is said to be a Social agreement or group of people who work with each other to accomplish corporate ends. Peoples are really of import in any organisation and play a critical function in success or failure of any administration. For the single employee, the wage check at the terminal of the month is primary beginning of income, which determines the buying power of that employee, and it besides concludes the criterion of life of an employee and will hence be the most of import consideration for the bulk of the employees.Concept of wagess and benefit is really closely related to motivational factor of employees.

Employees are provided with wage and other installations and so rewarded merely for the maximal use of their abilities or merely to actuate them to work expeditiously for the best of the organisation because with the proper wagess and benefit system, we can increase the overall efficiency of employees to better the public presentation of organisation. Reward system should be knotted every bit much as possible to want public presentation of employees because employees must see a direct relationship between their efforts and their fiscal wages. It is in the best of organisation to associate wages with the chief aim of organisation.

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What is reward system?

Reward system is set of processs or policies of any organisation to honor the employees harmonizing to the accomplishments and part made by the employee into the organisational success or net income. Basically, it is a tool to actuate the employees and acquire best out of their abilities. ( Thomas G. Cummings, Christopher G.

Worley 2009 )

Why wages system is of import in organisation?

Now a twenty-four hours ‘s most of the organisations operate through decentralized concern units and squads and are much closer to their client so the strategic or corporate direction. These organisations admit that competitory advantage comes from cognition, accomplishments and links created by employees with clients. ( Robert S.Kaplan & A ; David P.

Norton 2001 )From the organisation ‘s point of position, it ‘s extremely suited to hold motivated employees as theyDo n’t blow clipWork harderGenerate less wasteMake few errorsTogether these should ensue in higher quality, improved productiveness and lower cost. ( Kaplan 2009 )Reward system should besides assist toAttract and retain staffTo promote desirable behaviorSupply a just and consistent footing for actuating and honoring employeesWilliam James of Harvard absorbed that usually people operate or work merely at 20-30 % of their capablenesss. With proper motive this can leap to 80-90 % . Reward and benefits are provided to the employees to allow them experience that they are portion of the organisation and are of import for the organisation. Organizations use a different wagess and benefits system to fulfill the demand of an employee and to actuate them.

( Thomas B. Wilson 2007 )

Vroom anticipation theory

Harmonizing to Vroom ‘s theory factor of motive depends on the valency which is how much you want the result and expectance that how many opportunities are at that place or your appraisal of chance of the result. ( Kaplan Financial Publications 2009 )Therefore to acquire highest possible motive in employees organisation should offer some value and wagess and something they want with a sensible opportunity that they will acquire that. ( Kondalkar 2009 )Wagess and benefits are of different sorts and non merely in fiscal footings it could be insurance policy, adjustment, shopping price reduction, occupation expansion or paid vacation, etc.

Does one wages system fit all?

One wages does n’t suit all organisations.

A proposition that has worked good for a company will non needfully work good for another. Assume a hotel reserve Centre wants to put inducements for employees to increase productiveness by take downing the clip spent on each call. If that decrease is merely the step quality of client services and the figure of reserve made might drop as employees rush companies in order to cut down talk clip. Therefore, the Centre should see legion steps such as talk clip.

Reservation booked and the consequence of the client satisfaction study.If improved quality of service is the serious concern aim, this should be portrayed in a payment system which rewards front-line staff which provides the best criterions of service to clients. Alternatively, if increased productiveness is searched for, so a payment system which rewards efficiency would be more appropriate.

( Derek Torrington, A Laura Hall, A Stephen TaylorA – 2008 )For some organisations to pull new and efficient and retain the extremely skilled employees might be the manner to acquire the competitory advantage like In the service sector like consultancy houses, attorneies, and physicians companies do n’t hold assets like workss and machineries ‘ but these companies depend entirely on the rational plus like accomplishments and capablenesss. So the wagess and benefit should be harmonizing to the organisational demand which in instance is long term keeping of employees.For illustration, Boeing found that their wages system was expansive, complex and confusing and was non actuating employees, so they came up with the new wages system based on fiscal public presentation, client satisfaction and good corporate citizenship. The consequences are successful.The success of the wages system relies on its thickness with civilization of organisation. For illustration, if an organisation is Autocratic and adheres to classical attack, a wages system which rewards flexibleness and teamwork is likely to neglect.

( Robert L. Mathis, J. H. Jackson 2008 )

Types of Rewards System

Basically there are two wagess doctrines which are opposite to each other viz.Entitlement DoctrinePerformance DoctrineEntitlement Philosophy expects that persons which have worked another twelvemonth are entitled to pay addition with small respects to public presentation. On the other manus, Performance doctrine constrains that wagess alterations reflects public presentation differentiations.

Almost all reward systems fall someplace in between.

Base Pay:

Wagess are straight calculated on the sum of clip work by employee whereas wages based on the periods irrespective of the hours worked.


For illustration, the base pay for machine operators may be $ 12 an hr, but some single operators may have more because of their experience and/or public presentation and company may engage them for good and can offer experient staff on the monthly salary alternatively of hourly rewards to maintain them happy and to give them occupation security.


It helps organisations to score new employees and maintain old employees.It is a really easy to easy to utilize systemLess complicated as comparison to other payment systems.It exists blunt to review.More friendly for employees as It provide surety of incomeEqual chances for all the employees irrespective of the accomplishments


Sometimes employees are less motivated, and they do n’t work in the best of organisation, and they merely spent their clip at the occupation to acquire paid and blow the clip and money of the organisation.It ignores the public presentation and accomplishments of employees and handle all the employees every bit ignores the motivational factors and pay all employees every bitSome clip it might be less productive for organisations as non all the employees work with full attempts

Variable wage:

Variable wage is compensation linked to single, group/team or organisational public presentation.

Traditionally besides known as Incentives provide employee wages on their input in the overall moneymaking cape of the organisation.It is based on some of these premises thatSome people perform better and are more productive than others.Employees who perform better should have more compensation.Some of employee ‘s entire compensation should be tied straight to the public presentation and consequences.Some occupations contribute more to organisational success than others.Main desires of employers to follow variable wage or public presentation based wage might be following.

Link schemes concern ends and employee public presentationEnhance organisational consequences and reward employees financially for there part.

Examples of Incentives:

Team fillipStock optionsBonussService awardsTopographic point fillipsPraiseRecognition and wages plansMonetary inducementsTrips ( Robert L. Mathis, J. H. Jackson 2008 )

Three classs of variable wage:


Individual Incentives:

Basic intent of single inducements is to bind single attempt to extra wagess. Harmonizing to Robert L. Mathis, There are some conditions, which are necessary for the usage of single wages systems.

Individual public presentation must be identifiedIndividual fight must be desiredIndividuality must be stressed in the organisational civilization.

Piece-rate system:

It is a wage system in which rewards are decided by multiplying the figure of units manufactured by the piece rate for one unit. Wage for each employee can easy be decided that how many units he produced and multiplying with per unit rate.

There are two types of piece rate systemStraight piece rate systemDifferential piece rate systemUnder a consecutive line piece rate system rewards are paid on all units produced by an employee at the same rate, whereas under differential piece rate system employers set a criterion of end product on which employees are paid at normal piece rate system and out put on entree of that criterion are usually paid at higher piece-rate system.Directors usually determines the criterions or quotas by utilizing clip and gesture surveies


Let say a criterion set for worker is=200 units/day at standard rate of ?0.10 for all units produced over that criterion, employee receive ?0.20 inducement.

Under this system worker who produce 400 units will acquire ?60 ( 200 x 0.10 ) + ( 200 x 0.20 )


It help organisation to increase end product as all person will seek to maximise their rewards and will work really hard to acquire inducementsLess supervising is required which result in low costIncrease productivenessMotivate employees to work hardEmployees use all attempts to accomplish marks


Difficult to useDetermining criterion is complexNot possible in some occupations to mensurate the end product


Organization can besides remit persons some excess wagess in form of fillip. A Bonus is one clip payment by direction to honor an employee on his/her good public presentation. When public presentation of an employee is the good organisation may denote a surprise fillip or pre determined fillip. It can be either of squad or person.


A fiscal services house provide a hebdomad wage as a fillip to employee who master the occupation relevant computing machine accomplishments.


Motivate employees to work hardCreate competition among employees which result in good end productEmployees take more involvement in occupation to affect direction


It may make green-eyed monster among employeesOther may believe that they are were meriting but did non acquire

Group/Team Wagess

Organizations may offer some group or squad based wagess to employees in order toTie wage to team public presentationImprove productivenessIncrease employee keepingIt can be in pecuniary term like hard currency or it can besides be some particular trip, or stock option.

Group/Team consequences:

Erstwhile organisations reward their employees in Group or squad basses in which all persons of that squad are paid when desired ends are met. It can be Cost salvaging or choice improvement. Money is fundamentally used to honor all members.


Addition sharing is besides called squad sharing or end sharing. In different organisations workers are non paid for the discretional but are paid to run into the meet the minimal degrees of effort/performance required.

When worker input more attempts which result in productiveness organisations can afford to pay them traveling rates, which are gain sharing.Normally labour cost, overtime hours, and quality of end product are used to mensurate.There were two older attacks for the gainsharing every bit good viz.

ImproshareScanlon Plan

Net income Sharing:

In net income sharing wagess scheme some of the net income of the company is distributed among its employees. The degree of net income to portion is usually decided at the terminal of the twelvemonth and so segmented in employees. Whereas in some companies net incomes are postponed and so paid at the clip of the retirement. Often the degree of net income is in related to employees someway like accounting determinations, selling attempts and competition.


It helps organisations improve productivenessIncrease organisational public presentationImprove merchandises qualityEncourage squad work


Not simple to utilize as some organisations do n’t desire to unwrap their net incomesDegree of net incomes fluctuate from twelvemonth to twelvemonth

Employee stock options:

Some of the organisations use employee stock option programs, which give employee right to buy a fixed figure of portions of company stock at a monetary value. The intent of this program is to acquire employees to believe and move as proprietors.


It gives favorable revenue enhancement intervention to organisationIt gives piece of action to employees and they can portion in growing of the organisation.Employee ownership may actuate them to be more productive and do best for organisation


It makes employees rewards and salary and benefits dependant on employer


A benefit is a secondary wages given to the employees or group of employees. It includesSecurity benefitsRetirement benefitsHealth attention benefitsFiscal benefitsTime off benefitsBenefits can besides be used to acquire competitory advantage like wages system. Organizations should non look at the cost of benefits as benefits contribute more in HR pattern and assist direction to actuate employees.

Government Mandated benefits:

There are many benefits in UK mandated by Government like National Insurance and some pension programs and wish medical and household related benefits.Some of them areUniversal wellness attentionChild attention aidPaid clip off

Voluntary Benefits:

Different organisations offer some other types of benefits to pull and retain employees.


In this complex universe of concern now a twenty-four hours ‘s different organisations are seeking to acquire the competitory advantage over others by utilizing all possible agencies. Reward and benefits system can besides be used for the growing and organisations overall success.However, if one wages system work good for one organisation it can non be guaranteed that it ‘ll work for other organisations efficaciously. Different organisations need the different wages system which should be specifically designed harmonizing to the overall aims of the organisation. Like in a Culture of classical attack of pull offing people wagess presuming team/group is non meaningful. Another illustration is in call Centres where the mark of gross revenues is really of import it is useless to offer wages system on the period of service because if offered employees will merely go through their clip on the occupation and will non set their attempts to sell merchandises.

Whereas in some organisations long term keeping is necessary for these organisations reward systems should be based on a period of employment.Organizations can take a wages system harmonizing to demand of the organisation, but it should reflect the company ‘s overall aims and ends. Some impermanent wagess can besides be used to decide some timely struggles and can give a long term benefit in the form of motive of an employee. Proper wages system is every bit good capable of pull offing the public presentation of employees. Proper wages systems motivate employees and assist them to work for the best of organisation. In order to do the wages system more effectual it should be tied with public presentation of employees and civilization and aims of organisation.


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