This document discusses reward and compensation in human resource management. It defines reward as strategies and policies that fairly reward employees according to their value. Reward systems include pay structure, performance management, and total remuneration. The main objective of rewards is to attract, maintain, and retain high performing employees. Compensation includes salary, benefits, incentives, and allowances and aims to attract, retain, and motivate staff as well as drive changes and support the company's reputation. Effective compensation systems tie pay to employee performance and contributions.

1. HUMAN RESOURCE
MANAGEMENT
REWARD AND COMPENSATION

2. WHAT IS REWARD?
• Literature Review
• Reward is the ‘oil’ of the entire
Human Resource process shields
• Reward is = Is concerned with the
formulation and implementation of
strategies and policies that are to
reward people fairly, equitably and
consistently in accordance with their
value in the organization.
• From Oxford Definition
1. A sum of money offered for the
detection or capture of a criminal,
the recovery of lost or stolen
property.
2. Something given or received in
return or recompense for services,
merit hardship
3. To make return or requite.

3. • Other components of reward system including:
a) Organization Strategy
b) HR Strategy
c) Pay and Grade Structure
d) Performance Management
e) Total Remuneration
• The main objective organization give rewards to the employee is;
• To attract, maintain and retain, good, efficient, motivated and high performing
employees.

4. TYPES OF REWARDS
• Money
• Gift cards
• Property
• Medical coverage
• Promotion to new position
• Increment
• Grades
• Performance based incentives
• Employee Recognition
• Protection Programs
• Profit sharing
• Overtime and Holiday
packages

5. PERFORMANCE REWARD AND COMPENSATION
• The most effective reward and
compensation systems align with
objective, outcome-based
evaluations of employee
performance.
• Each employee's performance
measurement should reflect the
organization's business strategy
and financial goals.
• Compensation should also reflect
the employee's performance level
and his or her contributions to the
organization's success.

6. • Approaches to do including:
1. Reflect an employee's performance
and contributions
2. Improve employee and customer
engagement
3. Increase productivity
4. Focus employees on clear, objective,
and measurable outcomes
5. Link to the organization's strategic
direction and business goals
6. Reward employees who achieve
results
• With this approaches its expected
the relationship between
employees and employers to be
stronger and maximization of
employees performance.

7. WHAT IS COMPENSATION?
• DEFINITION
• Any form of payment made to an individual for services rendered as an
employee for an employer; services performed as an employee
representative; and any separation or subsistence allowance paid.
• The money receive by an employee from an employer as a salary or wages.
• Synonyms: Repayment, reimbursement, remuneration.

8. WHY COMPENSATION?
• Attracting Staff
• Retaining Staff
• Motivating Staff
• Driving Changes
• Corporate Reputation
• Affordability
• Employee Objectives
• Purchasing Power
• Fairness
• Recognition
• Composition

9. WHY COMPENSATION?
1. Attracting staff – benchmark with labour market to secure the good
candidates.
2. Retaining staff – competitive pay package will ensure that effective
performers stay with you.
3. Motivating staff – ‘necessary evil’ to motivate staff to work.
4. Driving change – higher base-pay, bonuses, and promotion can tie to
new behavior, attitude & skill gained by staff.

10. 5. Corporate reputation – Good compensation packages may be
perceived as good company in the eyes of public and industry hence
establish positive image.
6. Affordability – Compensation package must suit with company’s
affordability.
7. Employee objective – If company’s objective is to maximize profit, then
the employee objective is to maximize earning or income.
8. Purchasing Power – Total remuneration should meet the general
standard of living of that particular area.

11. 9. Fairness – Every employee had a strong feeling about the level of
payment that was fair for the job so that he will not feel underpaid.
10.Recognition – Employee feel that their contribution or expertise is
recognised through pay package.
11.Composition – Different group of employees have different priorities.
• E.g. younger staff – opt for maximising cash earning; mid-career staff –
opt for child care benefits, transport facility coz have family; older staff–
opt for retiring benefits, golden hand- shake, etc.

12. HOW TO SET BASE PAY?
1. External market comparison – i.e. ‘follow the market’ or ‘above the
market’ rate.
2. Job evaluation – i.e. each job is assigned with certain value which tie
up with certain pay level e.g. Hay Job Evaluation Methods.
3. Collective bargaining – i.e. employee union and employer mutual
agreement on the type and amount of compensation to be given to
staff.

13. TOTAL COMPENSATION PACKAGE
Total Compensation Package =
Salaries + Benefits + Incentives +
Allowances

14. REMUNERATION ELEMENTS
1. Salaries
• i.e. combination of monthly or frequent payments, annual increment, and
annual or other infrequent bonuses.
• 2 components – fixed pays (e.g. basic salary); and variable pays (e.g. overtime).
2. Benefits
• i.e. extras to the working conditions that have cash value e.g. lunch coupon,
subsidized meal, staff discounts.
• Can be classified into quantifiable (e.g. annual leave, sick leave, company car,
further study sponsorship) and non-quantifiable (e.g. recognition for full
attendance, long service awards, employee of the month, retirement benefits).

15. 4. Incentives
• i.e. element of additional remuneration that linked to working performance of
an individual or group as a result of prior engagement e.g. piecework,
production bonuses, attendance allowance, commission to salesperson or
team, profit sharing.
5. Allowances
• i.e. a form of supplementary income to compensate employees for
performance of additional duties, possession of additional skills/equipment or
endurance of certain work condition.
• Once this condition cease to exist, the allowance can be ceased to be paid as
well. E.g. shift allowance, housing allowance, transport allowance, uniform
allowance, hardship allowance.