TOTAL REWARD STRUCTURE

FORMULATION

Unit 1
Unit Learning Objectives
1. Describe the purpose and role of a
total rewards system.
2. Evaluate steps to effective total
rewards structure.
3. Explain why a compensation
system must be viewed in the
context of the total rewards
system.

2
 Discussion Question

Explain significance of total rewards from

employees and employers perspective.

3
 Discussion Question

Explain total rewards domains and their

concepts.

4
 An economic concept
 A psychological concept
 A sociological concept
 A political concept
 An equity concept
 A communication concept

5
 Discussion Question

Explain parties who are involved with total

rewards.

6
 Discussion Question

Does compensation represent an asset or

liability?

7
 Some Stats

 40 -70% of operating budgets.

 The single largest operating expenditure.

 Canada employers spend over $800 billion

on wages and salaries.

 Another $100 billion on employee benefits.

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 TERMINOLOGY

 Reward System – mix of intrinsic and

extrinsic rewards.
 Reward Strategy – the plan for the mix of
rewards.
 Compensation System – the monetary part of
the reward system.
 Compensation Strategy – the plan for the
mix and total amount of base, performance
and indirect pay.

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 Discussion Question

What is the purpose of compensation

strategy?

10
To help create a willingness among
qualified persons to join the
organization and to perform the tasks
needed by the organization.

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Discussion Question

How would you describe a

reward?

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 Anything provided by the job or the organization
that satisfies an employee need.

Extrinsic Intrinsic
Factors that satisfy basic Factors that satisfy higher-
human needs for : order human needs for:

 survival  self-esteem
 security  achievement
 growth
 social needs
 development
 needs for recognition

Copyright (c) 2010 by Nelson Education

Ltd 13

Copyright (c) 2010 by Nelson Education Ltd

 Complete the blanks
Intrinsic Extrinsic
Pay

How would you describe reward?

Amount of challenge
provided
Working Conditions

Autonomy

Benefits

Feedback

14
 Discussion Question

Explain the difference between a reward

and an incentive and provide examples of
each.

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 Reward – the positive consequences of
performing behaviours desired by
organization.

 Incentive – promise that a specified

reward will be provided if the employee
performs behaviours that they might not
otherwise perform.

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 Performance
Intrinsic
pay

Base pay
Extrinsic

Indirect
pay

Total Reward Compensation

system System
Copyright (c) 2010 by Nelson Education
Ltd 17
Discussion Question

What are the three types of

compensation/pay?

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 Direct Performance Indirect
• Base Pay • Individual • Mandatory
• Merit pay • Group benefits
• Incentives • Organization • Compulsory
• Pay for time
not worked
• Employee
services

19
 Discussion Question

Based on your knowledge and experience

what are the goals of the reward and
compensation system?

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 Attract and retain qualified individuals.
 Promote desired behaviour.
 Comply with the law.
 Be seen as equitable.
 Support the orgazniation’s strategy and
structure.
 Be within the financial means of the
organization.

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 Steps to Effective Total Reward
Structure
1. Understand your organization and your
people.
2. Formulate reward and compensation
strategy.
3. Determine compensation values
4. Design performance pay and indirect pay
5. Implement, manage, manage,
communicate, evaluate, and adapt the
compensation system.

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