This document discusses different types of reward systems used by organizations. It defines a reward system as any process that encourages, reinforces or compensates employees. The main types of rewards discussed are time rates, payment by results, individual/group performance pay, skill-competency based pay, and cafeteria/flexible benefit systems. For each type, the advantages and disadvantages are outlined. The overall purpose of a reward system is to attract, motivate and retain employees.

1. REWARD SYSTEM
IT’S ALL ABOUT PEOPLE
AND
RELATIONSHIP
CONTENTS
INTRODUCTION
PURPOSE OF
REWARD
CATEGORIES
TYPES OF
REWARDS
ADVANTAGES &
DISADVANTAGES
CONCLUSION

2. INTRODUCTION
• Wilson (1995) defines reward systems as follows:
“A reward system is any process within an organization
that encourages, reinforces, or compensates people for
taking a particular set of actions. It may be formal or
informal, cash or noncash, immediate or delayed”
•The reward and recognition
industry had its roots in the
depression years of the 1930’s.
•It was during that time that
pioneers such as E.F. MacDonald
and Edward Maritz began to sell
their jewellery, watches and other
merchandise to corporations as
sales incentives and service awards
for employees.

3. PURPOSE OF REWARD
ATTRACT, MOTIVATE AND RETAIN

4. CATEGORIES
• As referred by Michael Armstrong (2007), all aspects of rewards, namely base pay,
contingent pay, employee benefits and non- financial rewards, which include intrinsic
rewards from the work itself, are linked together and treated as an integrated and
coherent whole .
• Intrinsic reward: is personal, it includes feelings of satisfaction to have finished a
particular task.
• Extrinsic reward: outside the control of the employee. It includes incentives, share
options, pension schemes, insurance and crèches.
The lack of attention to these details could create de-motivation and dissatisfaction.

5. Payment by results
Types
of
Reward
TYPES OF
REWARDS
Time rates
Individual/group
performance-related
pay
Skill-competency
based pay
Cafeteria or
felxible bnefit
system

6. Time rates
This reward system is related to the number of hours
worked and it experience rather than performance. It
gives importance on the value of the task rather than on
the value of the skills, abilities the employee brings to
the job, or on the quantity or quality of performance.
Advantages:
It is open to inspection;
It creates stability and
retention of employees.
system is easy to administer
and allow labour cost to be
predicted;
It does not emphasise quantity
of output to the detriment of
quality.
Disadvantages:
Employees are not
motivated to become more
productive.
This happens because both
good and bad performers
are rewarded for the
reason why they are in the
same grade.

7. Payment by result
It links pay to the quantity of the individual’s output. The
pay is usually linked to the number of units of work
produced.
Advantages:
The employee is
motivated to put effort
so he can increase his
income;
It is fair because the
reward is related to the
level of production;
wages are linked to
production and less
supervision is required.
Disadvantages:
It is difficult to measure
output in certain jobs,
safety standards could be
compromised.

8. Individual/group performance-related pay
It considers not only results or output but also actual
behaviour in the job. It consist of a lamp sum, or a
bonus as a percentage of basic salary with quality of
permormance determing the magnitude of the
percentage increase
Advantages:
It combines goals with
emotions, there is a
congruency between
organisational and personal
goals,
the remuneration packaging
is fair, the culture of
organisation is supportive,
employees receive useful
Disadvantages:
There is not attempts made to
relate individual performance to
organisational objectives,
appraisal is not conducted fairly,
open communication between
manager and subordinates is
descouraged,
poor performancers are punished

9. Skill-competency-based pay
It places the emphasis on inputs that consist of knowleadge,
skills and competencies injected into the job by employees
Advantages:
Fair amount of consultation and employee participation;
there is a strong encouragement in changing behaviour;
there is an appropriate level of training and much time is
invested in the process
Disadvantages:
Skills obsolence which could be arise in condition of changing
technology; it is possible that this system do not pay
attention to the skills that are no longer significant or they
are not required at all

10. Cafeteria or flexible benefit system
The felxible benefit system is a departure from the traditional model of a
single system of remuneration for everybody” (Meyer, 2000)
It is calculated within an overall remuneration or compensation package and
it includes a lot of benefits.
Advantages:
Employees choose benefits to meet their needs, during periods of change it
is an harmonise rewards, employees are given a sense of control and
involvment, employers are seen as more responsive to employees’needs.
Disadvantages:
Choices can cause problems , the schemes can be complex to operate

11. Example
Employee Recognition Gone Wrong , Then Right
http://www.youtube.com/watch?v=KFplP0ZNzjQ&feature=PlayList&p
=E9E0E27B199F9547&index=0&playnext=1

12. CONCLUSION

13. Thanks for Listening
Queries?