REWARD SYSTEM

TO:- BY:-
SHEETAL MAM Samriti Sharma
M.com II
5829
MEANING:-
A "rewards system" is a planned and
structured approach to reward one or more
persons who act in a desirable way.
 Reward is the attractive and motivational
property of a stimulus that induces
appetitive behavior – also known as
approach behavior – and consumatory
behavior.
 DEFINITIONS:-
 Employee “compensation’, ‘remuneration’ or “reward” (terms that may be used
interchangeably in the literature0 may be defined as “all forms of financial returns and
tangible services and benefits employees receive’
Milkovich and Newman
Employee reward may be perceived as an “effort bargain” between the parties to the
employment relationship, needing to be continuously renewed on both sides.
Behrend
 A reward system is the standard, rules and procedures associated with the
compensation and allocation of benefits or rewards to employees for a job well done. It
also refers to the collection of brain structures that try to control and regulate behavior
by inducing pleasure.

 Rewards refer to all of the monetary, non- monetary and psychological payments that
an organization provides for its employees in exchange for the work they perform.
OBJECTIVES OF REWARD
SYSTEM:-
 Attraction and Retention
 Motivation of Performance
 Create Positive Organizational Culture
 Improve on Skills and Knowledge
 Reinforce and Define Organizational
Structure
COMPONENTS OF THE REWARD
SYSTEM:-

Processes
Practices:
Structures
Schemes
Procedures
FACTORS TO BE CONSIDERED WHEN
ESTABLISHING A REWARD PHILOSOPHY:-
 Reward Criteria:- Does the compensation system emphasize fixed
role status and seniority or does it value performance
attainments.
 System Focus:- does the compensation system focus on individual
or group when calculating its key matrics.
 Delivery Schedule:- Does the compensation system reinforce its
reward criteria in a fixed or variable way.
 Degree Of Standardization:- is the compensation system
homogeneous in design or are arrangements tailored to individuals
and work units.
 Reward Mix:- Does the compensation system utilize monetary
rewards or non-monetary rewards or combination of both.
 Others:- level of requisite knowledge and skill, union vs. non-
union status, philosophy of management, profitability of the
organization, employment stability, employee tenure and
performance.
 ELEMENTS OF EMPLOYEES
REWARD:-
 Base Pay:- Base pay is the initial rate of compensation an employee receives in
exchange for services. It excludes extra lump sum compensation such as bonuses
or overtime pay, as well as benefits and raises. An employee's base pay can be
expressed as an hourly rate or as a weekly, monthly or annual salary.
 Contingent Pay:- A type of installment sale in which either the price or payment
period for the asset has not been fixed. Contingent payment sales entail a special
set of rules that vary according to whether the price or the schedule is the fixed
amount. For example, if you sell your business and part of the price includes a
share of future revenues or profits, this would be a contingent payment sale.
 Allowances:- Allowances are elements of pay in the form of a separate sum of
money for such aspects of employment as overtime, shift working, call-outs and
living in London or other large cities. London or large city allowances are
sometimes consolidated: organizations which are simplifying their pay structure
may “ buy out” the allowance and increase base pay accordingly.
 Types of contingent pay:-
 Individual performance –related pay:- in which increase in base pay or cash bonuses are
determined by performance assessment and ratings. It is also called merit pay.
 Bonuses:- rewards for successful performance which are paid as cash (lump) sums related to the
results obtained by individuals, teams or the organization.
 Incentives:- payments linked with the achievement of previously set targets which are designed
to motivate people to achieve higher levels of performance; the targets are usually quantified in
such terms as output or sales.
 Commission:- a special form of incentives in which sales representatives are paid on the basis of
a percentage of the sales value they generate.
 Service-related pay:- which increases by fixed increments on a scale or pay spine depending on
service in the job; there may sometimes be scope for varying the rate of progress up the scale
according to performance.
 Competence-related pay:- which varies according to the level of competence achieved by the
individual.
 Contribution-related pay:- which relates pay to both outputs (performance) and inputs
(competence).
 Skilled-based pay:- (sometimes called knowledge-based pay) – which varies according to the
level of skill the individual achieves.
 Career development pay:- which rewards people for taking on.