Compensation & Reward Systems

Key Focus Areas

• Focus areas include differences between traditional and contingent pay, total rewards strategy, performance management models, and dismissal types with their legal aspects.

Rewards and Incentives

• Reward covers financial provisions like cash pay, benefits, pensions, and paid leave, while total reward includes non-pay benefits.

Types of Pay

• Base pay is the guaranteed wage or salary (fixed pay).
• Total earnings includes base pay plus bonuses and overtime.
• Compensation refers to financial rewards base pay and earnings.
• Remuneration is a broader term that encompasses benefits.

Reward Systems

• Tangible rewards involve cash compensation, incentives, and benefits.
• Intangible rewards are recognition, employment security, and career growth
• Dependency on performance management includes low (cost of living adjustments), moderate (work/life focus, allowances), and high (contingent pay, incentives).

Pay Plans

• Traditional pay plans use fixed salary structures with ranges, and regular increases for promotions, merit, or cost-of-living adjustments.
• Contingent pay plans (CPP) are performance-based, including bonuses, commissions, profit-sharing, and gain-sharing.
• Vroom's Expectancy Theory defines motivation as Expectancy x Instrumentality x Valence.
• CPP improves motivation and aligns goals with organizational needs but can fail if not linked to clear performance measurement.

Total Rewards Approach

• Non-financial rewards include career development, flexible work, and involvement in decision-making.
• Financial & Non-financial Mix includes flexible benefits, autonomy, and office perks.

Advantages of Total Rewards Approach

• Enhances recruitment, retention, and performance
• Improves employer reputation
• Helps employees understand their full compensation package.

Disadvantages of Total Rewards Approach

• It is hard to measure non-financial rewards.
• Employees may misunderstand choices.
• There is a risk of employer using it as a cost-cutting strategy.

Performance Management

• Traditional PM focuses on evaluation and weaknesses with annual reviews, is HR-driven with static goals and individual metrics
• Contemporary PM focuses on strengths and growth with continuous feedback, is employee-driven with dynamic goals and shared commitments.
• Performance management involves ongoing feedback between managers and employees and is more collaborative to prevent poor performance.
• Appreciative Inquiry ‘4-D Model’: Discovery, Dream, Design, Destiny
• APCP celebrates past success, clarifies goals, and aligns personal and organizational objectives.

Dismissals & Terminations

• Wrongful Dismissal: Employer breaches contract, no notice given.
• Constructive Dismissal: Employee resigns due to employer's contract violation.
• Unfair Dismissal: No justifiable reason for termination.
• Reasons for Dismissal: Misconduct, poor performance, redundancy.

Legal Considerations of Dismissals

• Dismissals must be for valid reasons capability, conduct, redundancy, statutory reasons.
• Constructive dismissal cases rely on proving fundamental contract breach.

HR Integration

• Recruitment & Selection helps define top performer traits.
• Training & Development identifies skill gaps and tracks training impact.
• Compensation & Rewards links pay to performance and ensures fairness.
• Employee Engagement encourages accountability and motivation.