Recognizing Employee

Contribution with Pay &

Employee Benefits
Group 2
Karantina Marhaeni
Nadya Karinadewi
Windraya Adikara
Yohanes Princen
Recognizing
Employee
Contributions w/
Pay
Why should organizations recognize employee’s contributions ?
a. Purpose : energize, direct, sustain and control the behavior of employees (incentive
effects)
b. Some approaches : Reinforcement Theory, Expectance Theory, Agency Theory

• Thorndike’s law of effect : a
response followed by reward is
more likely to recur in the
future
• Rewarding high performance
will result higher performance
• Not giving reward to high
performance, will less likely to
happen in the future
• Emphasis on expected reward
• Behavior (performing) is
function of ability and
motivation
• Motivation is function of
expectancy, instrumentality,
valence perception
• Intrinsic & extrinsic motivation
• Principal : person who direct other
person’s behavior
• Agent : person who expected to
perform on behalf of principal
• Agency cost : different goals of
principal & agent, asymmetric
information, interest divergent,
risk aversion
How do organizations recognize employee’s contributions?
a. Employee’s performance as basis
for pay increase (known as Merit Reward &
Recogniti Employee
Pay or Pay for Performance (P4P) on contributio
b. Key Success Factors : ns

• Align rewards with

organizational goal and culture
• Reliable performance
management system
Warning
• Tie meaningful rewards to
• Differentiation/intensity is a
performance
promise and peril situation.
• Performance levels
• The strongest the motivation,
differentiation
the greater for unintended,
• Accountable measurements
undesirable consequences.
Programs for Recognizing Contributions

Merit Pay ● Pays better performers more over time Individual

Changes in base pay, appraisal ● Well-developed appraisal system competition
Pay/performance connection varies ● Management style: Participation desirable

Incentive Pay ● Pays higher performers more Individual

Bonus, output/productivity ● Set & maintain acceptable standards competition
Clear pay/performance connection ● Management style: Control

Profit Sharing ● Can benefit all employees Business

Bonus, company profit ● Company’s ability to pay knowledge &
Stronger in smaller firms ● Management style: Fits participation cooperation
Programs for Recognizing Contributions

Ownership ● Helps locking in employees Sense of

Equity changes, stock returns ● Company’s ability to pay ownership &
Stronger in smaller firms ● Management style: Fits participation cooperation

Gain-Sharing ● Can benefit all employees Supports

Bonus, production cost ● Set & maintain acceptable standards cooperation
Stronger in smaller unit ● Management style: Fits participation

Skill-Based ● Attracts learning oriented employees Learning &

Changes in base pay, skill acquisition ● Training & certification flexible
Encourages learning ● Management style: Fits participation
Employee
Benefits
REASON FOR BENEFITS GROWTH

Law Wage & Tax Grouping Organized

Price Treatment Means Less Labor
Control Expensive

REASON FOR BENEFITS GROWTH

Unemployment
Social Security Workers Compensation
Insurance

Legally required by Social
SOCIAL Security Act 1935, and later
INSURANCE be complemented by other
healthcare insurance facilities
(i) Offset lost income during
involuntary unemployment;
(ii) helping unemployed
workers find new job; (iii) an
incentive for employers to
keep employing; (iv)
investment in worker skills
Covers job-related injuries
and death, including but not
limited to: (i) disability
income; (ii) medical care; (iii)
death benefits; (iv)
rehabilitative services.

MEDICAL INSURANCE
3 types of medical expenses
PRIVATE GROUP are covered: (i) hospital
INSURANCE expenses, surgical expenses,
physician visit.
DEFINED BENEFIT
Promise specified retirement
benefit based on a
RETIREMENT combination of years of
service and age. Insulating
employees from investment
risk.
FAMILY-FRIENDLY
POLICIES
A number of days unpaid
PAY FOR TIME leave or paid leave to
NOT WORKED accommodate family matters
DISABILITY
INSURANCE
Short-Term & Long-Term
DEFINED
CASH BALANCE PLANS
CONTRIBUTION
Not promise a specific benefit Tools to combine advantages
level for employees upon of defined benefit plans and
retirement. Guaranteed size defined contribution plans.
of contribution. Preferred in Combining defined benefit &
small companies. defined contribution with
separate individual account.
CHILD CARE
Providing child care facilities
within company environment.
 Managing Benefits: Employer Objectives
and Strategies
SURVEYS AND
BENCHMARKING
Survey information on benefits
packages is availables from private
consultants
A good sources provide information
on benefits cost for specific
categories, breakdown by industry,
occupation, union status and
organization size
COST CONTROL
Considering Factors:
- The larger the cost of a
benefit category, the greater
opportunity for saving
- The growth trajectory of the
benefit category is important
HEALTH CARE
Shift costs to employees through the
use of deductibles, coinsurance,
exclusions and limitations
Reducing costs to employees, using
alternative providers like HMO
(Health Maintenance Organization)
and PPO (Preferred Provider
Organization)
“Medical Tourism” benefit, sending
patients to other countries where
medical procedures might cost less
EMPLOYEE WELLNESS
PROGRAM
Focus on changing behaviors that
could lead to future health problems.
Preventive in nature
Passive wellness: fitness facility
Active wellness: provides a counselor
Providing employees with a good
food (Google example)
 Managing Benefits: Employer Objectives
and Strategies
COMMUNICATING
WITH EMPLOYEES
AND MAXIMIZING
BENEFITS VALUE
Awareness of benefits information
can be increased through several
media, memoranda, Q-A meetings
and detailed brochures
More awareness of benefits, might
have positive or negative impacts
FLEXIBLE BENEFITS
PLANS
Flexible benefit plans allow
employees to choose the benefits
they want or need from a package of
programs offered by an employer
Flexible employee benefit plans may
include health insurance, retirement
benefits, etc
Cafetaria-style plan
FLEXIBLE SPENDING
ACCOUNTS
A flexible spending account (FSA) is a
tax-deferred savings account
established by an employer to help
employees meet certain medical and
dependent-care expenses that are
not covered under the employer's
insurance plan
 Performance-based
pay, procedural justice
and job performance
for R&D professionals:
evidence from the
Taiwanese high-tech
sector
Overview

● 258 R&D professionals in Taiwanese high-tech organizations

● Examines how extrinsic rewards motivate employees & the role of perceived justice in the reward
allocation
● Agency Theory : Principal (Management) can motivate R&D Professionals (agents) by controlling their
incentives
Performance Based Organizational Organizational
Pay & Job Justice & Justice Moderating
Performance Performance Effect

● Hypothesis 1: ● Hypothesis 3: ● Hypothesis 5:

Performance-based
pay will be positively
associated with an R&D
professional’s task
performance.
● Hypothesis 4:
● Hypothesis 2:
Performance-based
pay will be positively
associated with an R&D
professional’s
contextual
performance
Procedural justice will Procedural justice will
be positively positively moderate the
associated with an R&D relationship between
professional’s task performance-based
performance. pay and task
performance
Procedural justice will ● Hypothesis 6:
be positively Procedural justice will
associated with an R&D positively moderate the
professional’s relationship between
contextual performance-based
performance. pay and contextual
performance.
Conclusion
1. Performance-based pay could enhance R&D professionals’ job performance
a. Performance-based pay is positively related to task and contextual performance

1. Organizational justice could be conducive to the effectiveness of

performance-based pay.
a. Task Performance
i. Performance-based pay is only marginally associated with task performance when the
moderating effect of organizational justice is not considered
ii. Organizational justice is a critical antecedent for task performance
b. Contextual Performance
i. Organizational justice only positively moderates the relationship between performance-
based pay and contextual performance >> only a contextual factor