REWARDS SYSTEMS
Objectives:
After going through this module, you are
expected to:
1. Define what is a reward system.
2. Identify the different rewards system.
3. Know the aims and purpose of reward
system.
What is a REWARD SYSTEM?
A reward system helps to motivate employees to achieve high
quality performance. Its help to attract and retain highly
skilled workers. Reward System promote fairness and equity
by rewarded employees according to their contribution and
effort to the organization.
Organizations offer competitive rewards system to attract
knowledgeable and skilled people and to keep them motivated
and satisfied once they are employed in their firm. Further,
rewards promotes personal growth and development and
present fast employee turnover.
Types of Rewards
Extrinsic Rewards- these are rewards which pertain to money, finance, or
currency. They usually refer to as monetary rewards.
a) pay/salary- financial remuneration given in exchange for work
performance that will help the organization attain its goals;
examples: weekly, monthly or hourly pay, piecework compensation
etc.
b) benefits- indirect forms of compensation given to
employees/workers for the purpose of improving the quality of their
work and personal lives; health care benefits, retirement benefits,
educational benefits, and others are example of these.
Types of Rewards
c) incentives- rewards are based upon a pay for performance philosophy; it
establishes a baseline performance level that employees or groups of
employees must reach in order to be given such reward or payment;
examples: bonuses, merit pay, sales incentives, etc.
d) executive pay- a compensation package for executives of organizations
which consist of five components: basic salary, bonuses, stock plans,
benefits and perquisites,
e) stock options- are plans that grant employees that right to buy a specific
number of shares of the organization’s stock at a guaranteed price during
a selected period of time.
Types of Rewards
Intrinsic Rewards – these are rewards which do not pertain to money, finance, or
currency; refer to nonmonetary rewards that are self-granted and which have a
positive psychological effect on the employee who receives them.
a) award – nonmonetary reward that may be given to individual employees
or groups/teams for meritorious service or outstanding performance;
trophies medals, or certificates of recognition may be given instead of
cash or extrinsic rewards.
b) Praise – a form of nonmonetary, intrinsic reward given by superiors to
their subordinates when they express oral or verbal appreciation for
excellent job performance.
Aims and Purpose of a Reward System
Armstrong & Murlis (2007) put forward number of aims of reward management/system which
are very helpful to understand what businesses want to drive through these reward systems
which are as follows:
• To create total reward processes that are based on beliefs about what the
organization values and wants to achieve;
• To reward the employees for the value they have created for the
organization;
• To bring into line the reward practices with the employee values and
business goals and objectives;
• To develop the positive psychological contract and employment
relationships with the employees;
Aims and Purpose of a Reward System
• To reward right behaviours in order to deliver the positive message
to the employees that what organization expects from them in terms
of outcomes and behaviours;
• To win the war of the talent by attracting and retaining the talented,
skilled and competent pool of employees that organization need to
make the difference;
• To gain the commitment and engagement of the employees by
motivating them through reward practices;
• To cultivate and sustain the performance culture within the
organization.
QUIZ #4
GET ½ PIECE OF PAPER
(isurat naman it ngaran!!)
Activity No. 1 COMPLETE ME. On the figure are types of rewards
given to an employee in the organization. Identify the words either
Extrinsic or Intrinsic rewards by placing them on the box provided.
