The context of Reward management

The context of pecuniary backing guidanceIn 1960s and mid-seventies the main cause behind introducing incentive schemes was to build path of giving proles wages and salaries at a time of government controls (Bowley et al 1982). Due to lack of proper strategy and policies, some of employers view reduced greet and even below 50% of improver outcomes in 1980s and 1990s the concept of paid people was changed where transactioner were paid for their performance rather than attendance similarly taxation policy was slightly changed as lower rate in income tax(Marchington and Wilkinson, 2005). retribution arrangement has been drastically changed in Britain over the last twenty years and lots of concepts ar emerged in relation to compensation and remuneration which be at present in control of management similarly, in USA, a new concept of net incomement has emerged under the rubric of the New Pay. This new pattern has great tempt on Britains management practice and government as well (White, G and Druker, J, 2000). The new pattern of thinking about New Pay in Britain is strengthener management (term used by Armstrong and Murlis 1988) has same management concern. Then, these concepts fall upon 2 ground 1) issueing employees for work done and 2) remuneration formation to be qualified upon business policy. Further more, the interest in yield system concept had been boosted by IPD professional syllabus which includes lots of unit and form of address on employee reward and a specific text book (Armstrong, M, 1999). The new syllabus by IPD provides high schooler emphasis on rewarding employees and employees satisfaction towards job. However, this holistic approach of toleratement has non, to date, reflected in academic literature, where controversy arises between micro- sparings literature of fag economists and human resource literature. The former concern was about effect of dedicate on whole deliverance and impact on inflation, productivity and employment. Afterward, in contrast, draws both upon the industrial with regulation with employment relationship and organizational behavior (White, G and Druker, J, 2000).Now, the existing textbook focused largely realistic than imaginary, which ignore collective bargaining and employee voice, continue to play in lots UKs organization (Armstrong, M, 1999).The parallel employee relation also include title to describe pay bargaining systems (Gennard, J and Judge, G, 1997). Most importantly, the impact of control relation with in the work ara and its impact on reward management plans and policies argon polished over IPD texts. Core personnel and Development text (Marchington, M and Wilkinson, A, 1966) being an honorable exemption to this approach.Reward management has fascinated increased attention in recent years. Pay structure and system of payment are collectively determined and influenced by context of indian lodge in which they employ (Steven, J, 1996).For most of the work i s, in the main, a source of disutility, and they on that pointfore require payment to compensate them for the time they devote to it. (Elliott R.F, 1991)Reward management is non save about cash. It is also concerned with those non-fiscal rewards which provide intrinsic or extrinsic motivation (Armstrong, M and Murlis, H 1988)Reward is about how staffs are rewarded and nurtured in return of their performance towards organization which may includes both financial and non financial rewards and follow the plan, policies , strategies, and reward layout prepared by an organization to maintain smooth reward system (Armstrong, M, 2009).It signifies one of the vital factors supporting the employment relationship (Kessler, 2005). It can be define as fundamental expression of job relationship. It is concerned with the formulation, and execution of instrument of plans and policies to reward employees fairly, equitably and consistently on the basis of their performance. The development , maintenance, designs and implementation of reward system is done to fulfill needs of both organization and employees (Armstrong, M, 2009). Both organizational and employees values are significant for align reward practices (Brown, D, 2001). It can influence a bod of human resource policies, processes and practices which have great impact on organizational performance(Lawler, 2000a).It becomes an essential tool to coordinate, communicate and reinforce the organizational goal because it incentivizes staffs to achieve objectives and apply required capabilities and skills supporting them (Brett, S, 2006). As a result employee feels that they are considered as valuable as roach of an organization (Jaques, E, 1961). All the organization has their own reward system without that employee would not join, come to work and perform less than they are supposed to perform with the mission statement of organization (Wilson, T, B, 2002).Reward system is a system which contains various interrelat ed process and activities done effectively in value to fulfill organizational goal and maintain employees value (Armstrong, M, 2009). It consists of monetary reward (Fixed and variable) and non monetary (employee usefulnesss) which together mixed and form positive remuneration. The main sections of reward system are process, practice, structure, scheme and procedure.Process includes job evaluation, commercialise rate analysis and performance management,Practice includes financial benefits and non financial benefits provided to employees,Structure describe direct of rewarding people on the basis of structure and their performance,Schemes explain financial rewards and incentives provided to employees,Procedure for maintaining system and ensuring that worker work according to standard and value of money.Reward system provides systematic way to deliver positive consequence (Wilson, T, B, 2002). Cost is the vital factor in reward and for service oriented organization, weary cost ha ve important proportion on overall cost however, lower labor cost doesnt endlessly minimize cost , some time high labor cost hold ups towards increased turnover because of excellent performance due to motivation(Pfeffer, 1998). The proper implementation of strategic reward management helps to change employees behavior and berth towards organization due to effective reward strategy there are number of factors which mix along these type of straight-forward cause effect relationship therefore, there is high possibility that reward strategy might helps in organizational change (Marchington and Wilkinson, 2005).Reward IssuesBoardroom pay has been brought back under the attention afterwardwards it emerged that CEO of FTSE100 companies receive around 3.2 m in 2006 where analysis also empha size that there is narrow gap between American and British pay(The Times, 29 October 2007).Employees of the largest UK companies are ultimately starting to contribute the decent amount of defined co ntribution and pension Employers are tends to put much less defined into the defined payment pensions that has largely replace recompense scheme for new employees- only 6-7% of salary, Paul Macro, senior consultant with the firm saidapproximately 15% of the salary that generally accepted as being the level of contribution needed to provide a decent income in retirement (Financial Times, 14th November 2007).Employee compensation, remunerations and reward (terms that may be used interchangeably in the literature, although compensation tends to pre predominant US commentary) may be defined as all forms of financial returns and tangible serve and benefits employees receive (Milkovich and Newman, 20043).Reward TheoryLabor Market TheoryThe term labor grocery store implies that, the struggle on labor in capitalist society where product and services are traded in market employee tries to spend their labor in maximum best prices and similarly employer bargain to purchase labor in minimum best price (Perkins, J.S and White, G, 2008).Classical labor Market TheoryThe concepts of constant choice by the groups to grounds-reward relationship emphasize serious music labor market possibility the contain of labor meets supply of labor exactly where pay will be determine in labor market is known as market clearing(Black, J, 2002).The only effective policy is to pay what new(prenominal) do (Garhart, B and Rynes, S.L, 200315).FigAccording to above figure, the supply of labor is equal to demand of labor where employee will accept the job at the price that offer by employer it is a value of marginal productivity of labor. This supposition explain that there is tough competition among employer in term of paying their employees but finally every employer has to pay same as everyone pays. This theory indicates that paying strategy always leans toward symmetry where demand and supply of labor meets.This model of the employment system address the famous classical economist Adam Sm ith and its neo classical restatement by other neoclassical economists like Jevons, Menger and Walrus every one is free to choose their best price either employees or employers, employee compete with other employee for wages and similarly employer compete with other rivals for labor(Watson, M, 2005).Logically looking for Maximum utility, worker will accept work after comparing overall benefit of different works thus work that are less satisfying, include more threat and hard to achieve mastery will require higher(prenominal) amount of wages compare to other work whose feature are opposite (Perkins, J.S and White, G, 2008).However, the concept of labor market was changed form middle of twentieth century, number of research indicate that the real situation of labor market doesnt run according to previous assumption given by classical economists the paying system might effect in market force whereas some economists argues that it needs to remove market distortion(Garhart, B and Rynes, S.L, 2003). Whether or not, labor supply by employees to employers is not the single economic issues it is the effort employed by employees when employed (Rees, 1973)Stand as alternative economic theory of classical labor market theory, institutional Labor Economic Theory describes the different wage level and dependent on organizational issue employees and employers anticipation will be rest on maximizing in their financial concern (Perkins, J.S and White, G, 2008). In term of strategic initiative, higher level executive plan the wither in such a way that it minimizes the economic cost by putting labor satisfaction in effective and efficient ways in other word, both employees and employers take for a decision about work relationship comparing all the economic issues and interest quick-scentedity between both party and their interest and wants go along significant Transaction Cost Theory Assumption (Williamson, O, 1975). Similarly, Resource Based Theory of Firm explains that eco nomic effectiveness and efficiency will be increase through subsidiary scheme to take benefits of organizational resources employee reward are parallel to HRMs other features and is arranged to maintain organizational culture (Kessler, I, 2001 Purcell, J, 1999). Whereas, new institutional approach strategy theory describes the number of political and social issues tackling employees in an organization organizational system (both ingrained and external) helps to design better employees reward system (Perkins, J.S and White, G, 2008).Human Capital TheoryHuman Capital Theory makes an assumption that individuals gather human capital by investing both time and money in training and development, education, and other various opportunities based political platform in order to increase their efficiency and productivity and as a result employees value to employers (Abercrombie, N et al, 2000). Human Capital Theory (developed by Schultz and Becker in the 1960s) differentiates between expendi ture made on human capital and employees consumption market are for the service of capital, not the reserve capital itself. In order to achieve HRM objectives of motivating employees and get work done through them, manager must proportionality between cost and skills (Hendry, C, 2003).Exchange Theory explains the relationship between employment, employees and employers enter into the contract that employees are willing to accept work and perform their best similarly, employers are agreed to pay extrinsic rewards and working environment then employers change hired labor power into labor economic values where employer are presumable to invest more in permanent workforce than in temporary workforce (Atkinson, 1984 Kalleberg, 2003).Efficiency Wage TheoryAccording to theory, the managerial policy to gain more efficient employment agreement in medium term worker will employ their capita to secure optional work boost pay rate but it cause loss to the employer so, paying higher reward le vels is a logical employers reaction in order to hold skilled employees (Perkins, J.S and White, G, 2008). This theory also describes a possible corrective aspect, concentrating on what economists do to labeled soldiering on the part of worker more optimistically, this theory theoretically introducing a sorting effect(Perkins, J.S and White, G, 2008). Those organization who needs more and skilled human capital to operate their business use above-market wage levels in order to attract judge employees where close supervision will be reduced this relates to Responsible autonomy policy (Friedman, A.L, 1984). Paying above-market reward for skilled workforce might be suitable option than to employ additional supervision this concept will be attractive in case of knowledge workers (Rubery, J, 1997).precept Agent TheoryPrinciple Agent Theory is also known as Agency Theory with the concept the deferred payment method it emerged as dominant theory on economics and management in term of pay d etermination process and results according to this theory, reward system must be design in the way that it satisfies the employees in term of pay and internal ladder of advancement employees need full payment of their work and effort in short term, in other commit if job length is long then employees stay beyond the below market rate in early phase of employment (Garhart, B and Rynes, S.L, 2003). This theory emphasize result based deferred reward such as profit sharing, gin sharing, incentive plans, stock ownership etc designed for high level staffs the size of deferred reward depends upon job convolutedity Employees potential agree earning and career opportunity will determine the risk sharing behavior of employees (Perkins, J.S and White, G, 2008). Role of employees and employers should be designed effectively that it simply explain the characteristics of individual represent that position thus role theory simply explain how behavior and attitude are socially influence (Perkins , J.S and White, G, 2008).Internal Labor MarketInternal labor market where organization search for a constant association with their workforce structured internal labor market may be created and maintained few or all the employees from external labor force effecting on organizations ability to preserve its worker (Keer, 1954, cited in Hendry, C, 2003).The theoretical construct of the labour marketmay be more precisely defined as an administrative unit within which the market functions of pricing, allocating and often training labor are performed. It is governed by the set of institutional rules which delineate the boundaries of the internal market and determines its internal structure. These or administrative hiring and work rules defines the ports of introduction into the internal market, the relationship between jobs for purpose of internal mobility, and privilege which accrue to worker within the internal Market(Doeringer, 1967207, cited in White, G, 2000)In united state, after the First founding War the development of internal market emerged where demand of both products for equity from trade union and modern personnel management was emphasized in long-term planning (Cappelli, P, 1995). In contrast, most British entrepreneur didnt build internal labor relation but depends upon market mechanism for obtaining labor (Gospel, 1992). Under ILM, wages and salaries was attached with work rather than employees (Williamson, O, 1975). Workers are rewarded through long-term benefits and advantages rather than monetary reward where pricing and allocation of labor are determined by organizational rules and policies (Garhart, B and Rynes, S.L, 2003).Wage Gap TheoryAnother neo-institutionalist approach was Wage Gap Theory which indicate the same dominant power exercise by employers on their product market to distribute higher part than the normal profit with the employees and employees commitment towards organization for enduring of production (Heery, E, 2000). Wage r ate across six OECD nation remained about equal and controlling labor quality and effectiveness. (i.e. USA, Canada, Sweden, Australia, Norway and Germany) the wage paid to employees in return of their effort seems less considerable comparing with rate of trade union and collective bargaining (Zweimuller, J and Barth, E, 1992).Criticism of neo institutionalist argumentsThe practical role of employees reward twisting and level of typical social science whether at national level or organizational level management has required employment relationship on more flexible pattern in order to transfer risk from employer to employee and to facilitate organizational product market or to enhance return on shareholder enthronement. (Rubery, J, 1997).During 1980-1990, the institutional approach of designing fair wage and arrangement with reward enjoy by employees were reduced, supported by government policies that pay should be based upon organizational ability to pay which reduce the power of trade union and popularity of the collective bargaining (Beaumont and Hunter, 2000)The existing reward determination theory was piece ineffective in its overruling importance on stability and mutuality building where as majority of interest is on employment relationship thats why labor market policies should be reconsider more attention should be given for disputes that profit values are redistributed between organizational stakeholders to privilege economic capital over human capital the expectation between groups, balance of policies have courageously transfer in the side of management (Rubery, J, 1997).Reward ObjectivesThe supremacy of any reward system fully depends upon clear and concise objectives the first step in consulting a strategic corridor through the reward jungle is to set achievable objectives, basically, to make employees snug and get work done from them is a primary objective of reward system (Brown, D, 2001). Organizations are starting to understand that pay sh ould not de considered in term of particular job and financial results the compensation should be inextricably being attached to employees, their performance and organizational vision and goals as well as most valuable and important tools for communicate, coordinate and reinforce the attitude and behaviors for results (Flannery et al, 1996). Reward management aims to support the achievement of organizations strategic and operational objectives, helps to communicate, father and support expected attitude and behavior, promote continuous development, compete in employment market, enhance teamwork, and promote flexibility, gain fairness and equity (Armstrong, M and Murlis, H, 1998). Similarly, support culture management and change through matching pay and organizational culture as a whole, where as it cannot drive change or lead change process, cannot define change, cannot establish values and cannot establish effective leadership (Flannery et al, 1996). Furthermore, the European study under total rewards underpinned the following as a objectives and themes of rewards introducing more flexible and changeability reward rather than control oriented and highly structured, market driven rewards, more flexible employee based, focused on variable pay, promoting lodger concept of reward in relation to contribution in their organization, implementing variety of reward tools, involving managers and staffs in those rewards cases and so on(Perrin,T, 1999). append RewardReward that include not only traditional, financial component (salary, wage, pay, benefit etc) but also non-financial component (job responsibility and accountability, career opportunities, training and development etc) provided by an organization in order to motivate its employees (Thumpson, 2002). Reward that covers not only tangible pay like pay and benefits, but also intangible factors, such as opportunity to work flexibly, career development, trainings and environment where employees feels respect and v alued (Brett, S, 2006). It includes direct as well as indirect and intrinsic as well as extrinsic (Manus and Graham, 2003), which embrace everything that employee values in employment relationship (Oneal,Sandra 1998). The combination of both monetary and non-monetary reward which helps to address every staff whether they want financial or non financial the tools that are used to attract, retain, motivate and satisfy employee in order to increase efficiency and effectiveness that drive desired attitude in workplace (World Bank, 2000). Total reward is vertically integrated organizational strategy and horizontally integrated with HR strategies to gain internal consistency (Armstrong, M, 2009). The success of totals reward strategy is almost all depends upon monetary and non-monetary rewards provided to employees by employers (Davis, M.L, 2007).an approach to providing a package of reward to employees in the way that optimize employee satisfaction with reward from their work, and which does this in such a fashion that the employees contribution to employer is optimized at an acceptable cost-Vicky Wright, CIPD vice president(CIPD National Conference 2001)It is fairly simple to understand but very complex in operation owing to the wide -ranging implications for..reward management (Richards and Hogg, 20074)All the employers available tools that may be used to attract, retain, motivate and satisfy employees, this encompasses every single investment that an organization makes in its people, and everything its employees value in the employment relationship. (World Bank, 2000)The termadopted to describe a reward strategy that brings additional component such as learning and development, together with aspects of the working environment into the benefit package. It goes beyond standard remuneration by embracing the company culture, and is aimed at giving all employees a voice in the organization, with the employers in return receiving and engaged employee performance. (Ric hards and Hogg, 20071)Whistling the initial definition on offer, the relationship might be distinguish between total reward and various thoughts and ideas like employee well-being and psychological contract (Guest and Conway, 2004) similarly, emotionally intelligent leadership (Brown et al, 2006 Goleman, 2002 Palmer et al, 2001) mutual gain(Bacon and Blyton, 2006) as well as employee involvement program (Cox et al, 2006) and high involvement work practice(Huselid, 1995) and so on. Therefore, adopting the wide concept of reward, everything that employees get in return of their efforts is total reward (Davis, M.L, 2007). Therefore, the total reward component of World at Work can be summaries as follows compensation, benefits, work-life, performance and recognition and development and career opportunities (Perkins, J.S and White, G, 2008).In USA, both old and new style organization are taking on board total reward strategy. In other hand, same author comment that too often, when compan ies talk about total reward they simply mean providing generous benefits and positive workplace. Guaranteeing jobs, supporting an attractive work-life balance, adding benefits and pay- scale, encouraging development and opportunities and making work area appealing all makes unfortunate business sense without understanding the needs of high performance. They also told they feel most existing solutions ignore performance and encourage entitlement (Zingheim, P and Schuster, J, 2000).Transactional (tangible)Rational (intangible)communalIndividualWork EnvironmentCore value of the organizationLeadershipEmployee voiceRecognitionAchievementJob design and role development( responsibility, autonomy, meaningful work, the field to use and develop skills)Quality of work lifeWork-life balanceTalent managementBenefitsPensionHolidayHealth careOther perksflexibility reading and DevelopmentWork place learning and developmentTrainingPerformance managementCareer developmentPayBase payContingent payCa sh bonusesLong-term incentivesSharesProfit sharingFigure 2 Towers Perrin model of Total RewardSource (Armstrong, M, 2009)In the above given figure, upper two boxes (i.e. Pay and Benefit) indicate transactional reward which are financial in nature. In other hand, lower two boxes (i.e. Learning development and work environment) indicate rational reward which are non financial in natureThe effective reward is the one which consist of both transactional and rational rewards (Thompson, 2002). The success of organization depends upon its staffs. If staffs are satisfied and loyal towards organization than overall goals can be achieved. However, some business organization fails to motivate their employees in aspect of reward. So, considering the fact, organization should apply both financial and non financial reward (i.e. Total reward).Financial/ Extrinsic RewardRewards like pay, benefit, salary, incentive are financial or extrinsic reward various kinds of benefits and perks provided to em ployees in non-cash as a benefits and helps to motivate employees to perform better, similarly it also shows employers interest in employees well being(Perkins, J.S and White, G, 2008).Non-Financial/ Intrinsic RewardIntrinsic reward can be divided into two parts Environmental reward and Development oriented reward (Kessler, I, 2001). Environmental rewards are like employees value shown by senior supervisor, managers in work place, sensitivity of supervision and leadership excellence similarly, development oriented reward are individually targeted to enhance career development and opportunity as well as helps to built sense of accomplishment in employees(Milkovich and Newman, 2004). Intrinsic reward is also regarded as psychological reward which indicate psychological contract in work relationship (.).