Reward Management: Strategies and Policies

Reward Management

• Reward means financial and non-financial compensation for an employee's services, impacting worker performance and engagement
• Reward Management formulates strategies and policies to fairly and transparently reward employees based on their value

Importance of Reward Management

• Attracts and retains top talent by positioning rewards as part of the employment deal
• Improves productivity when employees know their hard work is appreciated
• Ensures clarity about employees' roles in achieving organizational objectives
• Mutually benefits both employees and the organization
• Reduces absenteeism
• Influences a company's reputation, affecting client trust
• Improves employee loyalty by making them feel valued
• Boosts employee morale through various rewards
• Increases teamwork by incentivizing collaborative objective achievement

Elements of Reward Management

• A competitive salary is essential for attracting and retaining high performers
• A more complete offering is required though

Compensation

• Financial and Non-Financial Rewards can lead to optimum employee contribution
• Compensation is a key part of any reward strategy, with short and long-term incentives
• Short-term incentives provide quick performance improvements
• Long-term incentives, like cash bonuses and stock options (Contingent Pay), sustain productivity over a year

Well-being

• Companies should enable a healthy balance between work and personal responsibilities
• Wellness programs can include fitness facilities, health screening, stress reduction workshops, childcare, flexible work arrangements, and financial counseling, and retirement planning
• Benefits packages give a competitive advantage
• Benefit packages could include different types of leave including sick leave and study leave, vacation time and variety of retirement benefits

Development & Recognition

• Lack of development opportunities prompts employees to leave their jobs
• Development opportunities improve workforce skills and loyalty
• Recognition of employees hard work is valued and critical for the success
• A culture of peer and team recognition is also important

Pay Rates

• Direct Financial Payments include base pay (wages, salaries) and variable pay (bonuses, incentives, stock options)
• Indirect Financial Payments include health/medical insurance, life/disability insurance, paid time off, retirement/pension plans, and educational assistance
• Direct financial payments can be time-based or performance-based

Legal Considerations in Sri Lanka compensation

• Employment laws protect workers from employer wrongdoing
• Laws set minimum standards for compensation decisions, including:
• Shop and Office Act
• Wages Board Ordinance
• Budgetary Relief Allowance of Workers Act No. 36 of 2005
• Budgetary Relief Allowance of Workers Act No. 4 of 2016
• National Minimum Wages of Workers Act No. 3 of 2016
• EPF act
• ETF Act
• Gratuity Act
• Workmen's Compensation Act
• Voluntary Termination Act

Job Evaluation Methods

• Job evaluation assesses jobs' relative worth based on factors like qualifications and skills
• Job evaluation determines the the size and value of various jobs in an organization

Non-Quantitative Techniques

• Ranking Method organizes jobs by classes/groups based on duties, responsibilities, and significance to the organization

Advantages of Ranking Method

• Simple
• Less time
• Economical
• Suitable for small units

Disadvantages of Ranking Method

• No pre-determined standard exists
• Fails to differentiate jobs due to factors not considered separately
• Random ranking may be disliked

Job Classification (Job Grading) Method

• This provides standards for allocating job classes or grades
• Classes contain similar jobs
• Grades contain jobs similar in difficulty but otherwise different
• The committee evaluates job descriptions and assigns grades with clear definitions
• Each grade should accommodate several jobs

Steps in Job Grading

• Preparation of job descriptions
• Preparation of grade descriptions or job classes
• Selection key jobs. Few jobs from different departments will be selected for this purpose
• Assigning a grade to key jobs
• Jobs classified by the pre-determined grades

Advantages of Job Classification (Job Grading) Method

• Simple
• Less time consuming
• Less expensive
• More suitable to small scale concerns

Disadvantages of Job Classification (Job Grading) Method

• Difficult to thoroughly write job descriptions
• Since only judgment is used for all jobs, it may prove to be incorrect
• Requires multiple systems for different types of jobs

Quantitative Techniques: Points Rating Method

• Analytical: jobs broken into components for comparison
• Numerical value allocated to each component
• Factors influencing jobs should be well-thought-out earlier
• A job description (JD) needs to be prepared if it does not already exist
• Factors are expressed in points
• Jobs assessed factor by factor, summing point values
• Jobs categorized into grades based on points; wages fixed accordingly

Steps of process include

• Separate processes for executives and clerical jobs
• Selection of factors varies based on the job
• Factors include Skills, education, experience, initiative, creativity
• Responsibility towards machines and material, safety of others and work of others
• Mental and physical efforts
• Working conditions and hazards
• Allocation of points with value in terms of money
• Points allocated to factors like skills, education, experience, initiative, and creativity
• Each jobs are then evaluated

Advantages of Points Rating Method

• Objective
• Ensures accuracy
• Once scales are in developed, they can be used for a long time
• Jobs are easily evaluated in terms of money
• No bias
• No prejudice

Disadvantages of Points Rating Method

• Very expensive
• Can only be used for large organizations
• Selection of factors is a difficult task
• Clerical work can be considerable and time-consuming

Factor Comparison Method

• This differs from points rating based on measurement for evaluating jobs
• Few jobs evaluated at first instance Job descriptions evaluated to select the key jobs Jobs are then ranked, considering one factor at a time

1. Select job factors
2. Select key jobs
3. Define correct rates of key jobs
4. Rank job factors under each key job
5. Assign the correct rate of each key job among the job factors
6. Assess all other jobs in terms of these factors
7. Design, fine-tune and operate the wage structure

Limitations on Factor Comparison Method use

• Maximum of 7 factors used
• Each job ranked relative to job factors

Advantages of Factor Comparison Method

• Provides reliable results
• Wages for any different jobs can be calculated
• Since few factors are selected, no overlapping of factors

Disadvantages of Factor Comparison Method

• The method is complex
• Difficult to describe to employees
• Expensive, so small-scale companies cannot afford it
• Expert service required

Creating a Market Competitive Pay Plan

• Fine-tuning pay rates to fit the market is essential
• Employees must be paid equitably internally while being competitive externally
• A job’s compensation should reflect the job’s worth within the company and also parallel jobs in the market place

Process of planning and appraisal

• First benchmark the jobs
• The employer needs to appraise the benchmark jobs
• Second select the compensable factors
• Third assign weights to compensable factors
• mental requirements would be higher for executive jobs than physical requirements
• Percentage weights are then assigned based on the factor, such as 60% for the factor of responsibility, 30% for consequences of errors, and 10% for working conditions
• Fourth Convert percentages to points for each factors
• To convert percentages to points, multiply by 1,000

Job Evaluation Committee Responsibilities

• The evaluation committee defines each factor after it is split into degrees
• Define consequences of errors degree definition, ranging from no loss to very likely Rs. X million loss
• Determine the points
• Review specifications
• Evaluate job descriptions
• Through job analysis a manager determines the job's duties
• The committee determines the extend of of each compensable factor

Wage Curve Planning

• The wage curve will be drawn to consider how is each jobs points is realted to it's current pay
• Drawing the wage curve will relate between the value of the job and average wage
• Shows the pay the various pay rates paid for jobs
• Creates scatter graph to compare current values
• Drawing a external wage curve is the next step, based on what other employers are paying

Drawing market comparisons

• Market pay surveys can then be preformed
• Used to compare external wage curves and find the values that might be too high or too low compared to other business and competitors

Pay range and structure

• Employers group similar jobs according to points, into grades for pay purposes
• Reduces the volume of job rates
• A pay grade is a collection of similar jobs that have approximately equal importance -Equal point spreed

Determining Compensation

• The pay grade is developed using minimum, maximum, and midpoint pay rates
• Lets companies attract experienced staff to higher pay at the top
• It's necessary to evaluate the the remaining jobs using the same process, or simply assigning them
• The wage rate the firm is paying now for a job may fall within the wage curve or outside the range
• Transfer or promote employees to jobs which can legitimately pay the current rates

Financial and non financial rewards

• A motivational plan used to to achieve goals
• The reward structure must retain top talent and boost productivity
• Variable pay will have costs to the company
• Total rewards is an incentive plan to boost the desired behavior of workers in return for their service to the organization -The main objective is to retain and attract top talent -Motivates employees and increases the productivity

Monetary and Societal needs

• Financial rewards will satisfy all future needs
• Can be provided to employees
• Base Pay can determine additional payments competence or skill
• Variable pay is related to performance, contribution, and skill
• Can be incentives
• Incentive wage plans are used to quantitatively give extra depending individual performance
• Contingent can be applied for additional forms like service contributions or skills that are applied for extra compensation like bonusses or stock options

Bonuses

• Bonuses can be paid in Stocks, cash, for over the value of thier wages to compensate for great performanc e

Recognition

• Appreciation of ones work with gifts and awards, or top worker status awards
• Job Enrichment: additional job responsibilities as motivation for interest
• Career Advancement: opportunities to grow within an organization.
• Challenging Dynamic Works: accept challenging the job to be more engaging and more mentoring to all workers
• Status: status as an employee to be to increase status with hard work

Advantages and disadvantages

• Money can't fix cultural problems or social issues There are many benefits as well to these methods.
• rewards are in expensive or rewarding, monetary can be expensive and ineffective.
• May not be always full partipation

Reward management involves creating strategies and policies to fairly compensate employees, impacting their performance and engagement. It attracts and retains top talent by offering incentives, improving productivity, and clarifying roles. Effective reward systems mutually benefit employees and the organization.