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REWARDS

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Rewards- Definition

1. Incentive plans: Scheme to support and reinforce desirable behavior, such as wage rate that increases with the productivity of the worker.

• A reward is a prize, payment or recompense for merit, service or achievement.

• something given in return for good or, sometimes, evil, or for service or merit. (Webster’s New World Dictionary, Second

College Edition, 1984.) • Something given or received in recompense for

worthy behavior or in retribution for evil acts. • Money offered or given for some special service,

such as the return of a lost article or the capture of a criminal.

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REWARDS(CONTD)

• Anything which an employee may value & desire and employer is able & willing to offer in exchange for employee contributions.

• Rewards that satisfy emotional & intellectual demands.

• People obtain compensation rewards that provide them money to purchase goods & services.

• In kind reward means , goods & services that would have required the expenditure of money.

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INDIVIDUAL REWARDS

Main Objectives of Reward Programs

To keep employees coming to work. (Retention)To motivate employees to achieve high levels of performance. (Motivation)

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THE REWARD SYSTEM

• . Employee reward systems refer to programs set up by a company to reward performance and motivate employees on individual and/or group levels. They are normally considered separate from salary but may be monetary in nature or otherwise have a cost to the company

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THE REWARD SYSTEM

• Reward system- to attract, retain the employees, who have knowledge, skills & willingness to work.

• Focus on rewards from organization,– Direct rewards & indirect rewards.– Short term rewards & long term rewards.– Every thing that an employee may value

and desire.

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THE REWARD SYSTEM (Contd)

• Reward system to support accomplishment of specific mission of the organization through individual objectives / goals , specific performance standards & innovative contributions to enhance productivity.

• Reward system modifies behaviour.• Difficulty is to identify, what attracts an

individual in a specific reward system. It may vary from time to time and person to person.

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COMPENSATION SYSTEM (OF REWARDS)• The compensation system results from allocation , conversion and

transfer of portion of income of an organization to it’s employees for their monitory and in-kind claims on goods and services.

• MONITORY CLAIMS . – Salary, wages, or any form that is quickly and easily transferable to

money at the discretion of employee.– Payments earned and acquired and payments earned but not

acquired until some future time.

• NON- MONITORY (IN KIND ) CLAIMS. – All facilities and benefits & services , if not provided by employer

would have incurred cost to employee. – Medical facilities.– Housing.– Company car / pick & drop facility.– Recreation.– Other attractions ( traveling, social interaction , availing facilities

not in personal affordability etc.)

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NON- COMPEMSATION SYESTEM (OF REWARDS)

• The other major part of reward systems is non-compensation rewards, which are mostly work related situations and not

included in the compensation package.• These are supportive to physical and psychological well being of

employees. • Enhance dignity and satisfaction from the work performed.• Enhance psychological health, intellectual growth and

emotional maturity .• Promote constructive social relationships with other

employees.• Design jobs that require adequate attention and efforts.• Allocate sufficient resources to perform work assignments.• Grant sufficient control over the job to meet personal

demands.• Offer supportive leadership and management.

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COMPENSATION DIMENSIONS (8 DIMENSIONAL MODEL)

1. Pay for work & performance.

2. Pay for time not worked.

3. Loss of job income continuation.

4. Disability income continuation.5. Deferred income. (post retirement PF. Gratuity, pension, social security etc,)

6. Spouse ( family) income continuation.

7. Health, accident and liability protection.

8. Income equivalent payments

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INNOVATIVE REWARD

SYSTEMS

•Increases organizational flexibility.•May need fewer distinct job classifications.•Fewer employees may be needed.•May reduce turnover and absenteeism.

SKILL-BASED PAYPay levels based on how many skills employees

have or how many jobs they can do

Potential Potential AdvantagesAdvantages

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INNOVATIVE REWARD SYSTEMS

Gain-Sharing• Allows employees contributing to improved performance to share in the proceeds

• Formula used to distribute gains based on cost reductions

• Best known - Scanlon Plan

Employee Stock Ownership Plans (ESOPs)• Employees gain a direct stake in the company

• Employees receive stock or cash to purchase stock in the company

• Research on effectiveness is mixed

BROADBANDING.• Reduction in the number of salary or pay grades• Creates a smaller number of broad salary ranges• Places more emphasis on basing salary increases on skills and

performance

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