The context of Reward management

The con text edition of remunerate counsellingIn sixties and 1970s the main cause behind introducing incentive schemes was to build racetrack of giving resolveers wages and salaries at a time of government hold ups (Bowley et al 1982). Due to lack of proper strategy and policies, some of plighters gain trim hail and even below 50% of augmentd outcomes in eighties and 1990s the ideal of handing people was changed where locker were paid for their military operation rather than attendance a desire taxation policy was slightly changed as lower rate in income tax(Marchington and Wilkinson, 2005). Payment clay has been drastic all(prenominal)(a)y changed in Britain over the last twenty years and tons of beliefs atomic chip 18 emerged in relation back to recompense and lucre which ar directly in control of attention similarly, in USA, a cutting concept of payment has emerged infra the rubric of the New Pay. This new pattern has great mildew on Britains managemen t practice and government as well (White, G and Druker, J, 2000). The new pattern of thinking about New Pay in Britain is pay management ( stipulation utilize by Armstrong and Murlis 1988) has same management concern. Then, these concepts fall upon 2 ground 1) quiting employees for realise d angiotensin converting enzyme and 2) remuneration constitution to be conditional upon commercial enterprise policy. Furtherto a greater extent, the concern in recognize system concept had been boosted by IPD professional broadcast which includes lots of unit and title on employee revenge and a specific text book (Armstrong, M, 1999). The new syllabus by IPD gives high emphasis on recognize employees and employees satisfaction towards commerce. However, this holistic approach of payment has non, to date, reflected in academic writings, where controversy arises amongst micro- frugals literature of jab sparing experts and human re man-made lake literature. The former concern wa s about consummation of pay on whole economy and bear on on inflation, productivity and practice. Afterward, in contrast, draws both upon the industrial with regulation with operate relationship and arrangingal way (White, G and Druker, J, 2000).Now, the existing textbook focused largely living than imaginary, which ignore joint talk terms and employee voice, continue to play in lots UKs arranging (Armstrong, M, 1999).The parallel employee relation in like manner include title to expose pay bargaining systems (Gennard, J and Judge, G, 1997). Most importantly, the impact of control relation with in the accomplishment argona and its impact on quit management plans and policies be polished over IPD texts. Core strength and Development text (Marchington, M and Wilkinson, A, 1966) being an honorable exemption to this approach. recompense management has spellbound plusd attention in recent years. Pay structure and system of payment be collectively determined and inf luenced by context of companionship in which they implemented (Steven, J, 1996).For nearly of the work is, 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) reinforcing stimulus management is not only if about money. It is in addition concerned with those non- fiscal reenforces which provide intrinsic or extrinsic motivation (Armstrong, M and Murlis, H 1988) punish is about how staffs ar reinforcered and evaluated in return of their carrying out towards organization which whitethorn includes both financial and non financial honors and embrace the plan, policies , strategies, and pay layout widely-awake by an organization to maintain smooth pay system (Armstrong, M, 2009).It signifies one of the vital factors supporting the employment relationship (Kessler, 2005). It can be set as fundamental expression of job relationship. It is concerned with the formulation, and im plementation of plans and policies to support employees fairly, equitably and constituteently on the basis of their practiceance. The developing, maintenance, designs and implementation of reinforcement system is done to fulfill needs of both organization and employees (Armstrong, M, 2009). Both organisational and employees determine are significant for align respect practices (Brown, D, 2001). It can influence a number of human resource policies, processes and practices which have great impact on organisational performance(Lawler, 2000a).It becomes an essential tool to coordinate, communicate and rein troops the organisational goal because it incentivizes staffs to earn objectives and apply required capabilities and skills supporting them (Brett, S, 2006). As a result employee feels that they are considered as valuable asset of an organization (Jaques, E, 1961). all told the organization has their own reward system without that employee would not join, come to work and p erform less than they are supposed to perform with the mission line of reasoning of organization (Wilson, T, B, 2002). recognise system is a system which contains various relate process and activities done effectively in couch to fulfill organizational goal and maintain employees value (Armstrong, M, 2009). It consists of monetary reward (Fixed and variable) and non monetary (employee pull ins) which together mixed and form come up remuneration. The main sections of reward system are process, practice, structure, scheme and procedure.Process includes job evaluation, martplaceplace rate analysis and performance management,Practice includes financial benefits and non financial benefits provided to employees,Structure describe aim of rewarding people on the basis of structure and their performance,Schemes explain financial rewards and incentives provided to employees, appendage for maintaining system and ensuring that worker work according to standard and value of money.Rewa rd system provides systematic mood to deliver positive consequence (Wilson, T, B, 2002). comprise is the vital factor in reward and for service orient organization, childbed cost have important proportion on overall cost however, lower craunch cost doesnt always minimize cost , some time high comprehend cost air currents towards increased turnover because of slight performance due to motivation(Pfeffer, 1998). The proper implementation of strategic reward management helps to change employees behavior and attitude towards organization due to effective reward strategy there are number of factors which mix along these compositors case of straight-forward cause effect relationship therefore, there is high possibility that reward strategy power helps in organizational change (Marchington and Wilkinson, 2005).Reward Issuescouncil chamber pay has been brought back under the attention after it emerged that CEO of FTSE100 companies meet around 3.2 m in 2006 where analysis in like manner emphasize 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 contri scarcelye the decent amount of delimitate theatrical role and pension Employers are tends to put much less defined into the defined payment pensions that has largely replace salary 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 train of ploughshare needed to provide a decent income in retirement (Financial Times, fourteenth November 2007).Employee compensation, remunerations and reward (terms that may be used interchangeably in the literature, although compensation tends to predominant US commentary) may be defined as all forms of financial returns and tangible services and benefits employees receive (Milkovich and Newman, 20043).Reward surmiselabour trade surmisalThe term labor commercia lise implies that, the struggle on labor in keenist society where product and services are traded in market employee tries to spend their labor in maximum trump out scathes and similarly employer bargain to purchase labor in minimum exceed price (Perkins, J.S and White, G, 2008).Classical labor Market surmisalThe concepts of ceaseless pick by the groups to front-reward relationship emphasize unmixed labor market surmisal the demand of labor meets supply of labor exactly where pay pass on be determine in labor market is know as market clearing(Black, J, 2002).The only effective policy is to pay what other do (Garhart, B and Rynes, S.L, 200315).FigAccording to above figure, the supply of labor is bureauake to demand of labor where employee give accept the job at the price that offer by employer it is a value of marginal productivity of labor. This possibility explain that there is tough competition among employer in term of paying their employees exactly finally every employer has to pay same as everyone pays. This hypothesis 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 Smith and its neo classical restatement by other neoclassical economists like Jevons, Menger and Walrus every one is free to choose their scoop up 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 opposite works thus work that are less satisfying, include more threat and hard to achieve mastery will require higher 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 ordinal 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 produces it is the effort sedulous by employees when employed (Rees, 1973)Stand as alternative economic surmise of classical labor market guess, 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 press 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 trifle a decision about work relationship comparing all t he economic issues and interest rationality between both party and their interest and wants remain significant Transaction Cost Theory Assumption (Williamson, O, 1975). Similarly, imaging hatefuld Theory of Firm explains that economic 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 civilisation (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 congenital 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 formulation and exploitation, education, and other various opportunities based prog ram 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 ingestion 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 essential counterpoise between cost and skills (Hendry, C, 2003).Exchange Theory explains the relationship between production, 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 likely to invest more in standing(prenominal) workforce than in temporary workforce (Atkinson, 1984 Kalleberg, 2003).Efficiency p ull ins 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 levels is a synthetical 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 spend on the part of worker more optimistically, this theory speculatively 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 realize expect employees where close supervision will be reduced this relates to answerable 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). dogma 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 determination process and results according to this theory, reward system mustiness 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 hand 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 benefit share-out, gin sharing, incentive plans, stock ownership etc designed for high level staffs the size of deferred reward depends upon job complexity Employees potential total earning and course opportunity will determine the risk sharing behavior of employees (Perkins, J.S a nd White, G, 2008). character reference of employees and employers should be designed effectively that it barely explain the characteristics of individual consist 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 magnate to preserve its worker (Keer, 1954, cited in Hendry, C, 2003).The theoretical construct of the labour marketmay be more scarcely defined as an administrative unit within which the market functions of pricing, allocating and very much 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 hir ing and work rules defines the ports of foundation into the internal market, the relationship between jobs for purpose of internal mobility, and privilege which come to worker within the internal Market(Doeringer, 1967207, cited in White, G, 2000)In fall in state, after the First World War the victimisation 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, around British entrepreneur didnt build internal labor relation but depends upon market mechanism for obtaining labor (Gospel, 1992). Under ILM, wages and salaries was devoted 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). enlist Gap TheoryAnother neo-institutionalist approach was Wage Gap Theory which indicate the same dominant power object lesson 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 rate across six OECD nation remained al some equal and dogmatic 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 construction 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 farm return on shareho lder investment. (Rubery, J, 1997).During 1980-1990, the institutional approach of blueprint fair wage and arrangement with reward enjoy by employees were reduced, support 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 found ineffective in its overruling importance on stability and mutuality building where as mass 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, symmetry of policies have courageously transfer in the side of management (Rubery, J, 1997).Reward ObjectivesThe success of any reward system fully depends upon clear and elliptic objectives the first step in consulting a strategic corridor through the reward jungle is to set achievable objectives, basically, to make employees satisfied and get work done from them is a primary objective of reward system (Brown, D, 2001). Organizations are starting to understand that pay should not de considered in term of peculiar(a) 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, drive and support expected attitude and behavior, promote continuous development, compete in employment market, prove teamwork, and promote flexibility, gain fairness and equity (Armstrong, M and Murlis, H, 1998). Similarly, support polish 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 leading (Flannery et al, 1996). Furthermore, the European study under total rewards underpinned the followe 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 boarder concept of reward in relation to role in their organization, implementing variety of reward tools, involving managers and staffs in those rewards cases and so on(Perrin,T, 1999).Total 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 organiza tion 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 valued (Brett, S, 2006). It includes direct as well as mediate 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 employment (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 rew ard 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 pleasant cost-Vicky Wright, CIPD vice president(CIPD National Conference 2001)It is fairly sincere 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 larn and development, together with aspec ts 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. (Richards 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, ben efits, 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 causality comment that too often, when companies 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 poor 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) commonIndividualWork EnvironmentCore value of the organizationleadersEmployee voiceRecognitionAchievementJob design and role development( responsibility, autonomy, substantive work, the scope to use and develop skills)Quality of work lifeWork-life balanceTalent managementBenefitsPensionHolidayHealth care early(a) perksflexibilityLearning and DevelopmentWork place learning and developmentTrainingPerformance managementCareer developmentPayBase payContingent payCash 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 liege 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 employees 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 construct sense of accomplishment in employees(Milkovich and Newman, 2004). Intrinsic reward is also regarded as psychological reward which indicate psychological contract in work relationship (.).