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1、MANAGING A REWARD STRATEGY 1History of Reward The aims of a reward strategy are to try and be systematic about which HR mechanisms attract, retain and motivate staff. Historically the view was that salaries were what attracted a person to an organisation, benefits kept them there, while bonus and in
2、centive schemes motivated them. Reward was regarded as consisting of three distinctive parts: Remuneration - covering such aspects as job evaluation, salary structures and incentive schemes. Benefits - which tend to be offered to all employees irrespective of their grade, such as paid leave, employe
3、e assistance programmes or Christmas parties. Perquisites - which are benefits that tend to provided to discrete categories of employees, such as a company car/car allowance, private healthcare or concierge service. 2Reward TodayMore recently, this divide between which parts of reward are best suite
4、d for attraction and recruitment, retention and motivation has broken down. Modern research shows that individuals are attracted, retained and engaged by a whole range of financial and non-financial rewards and that these can change over time depending on their personal circumstances. The financial
5、elements of a package are not considered particularly important by individuals in some situations. For instance, people at the beginning of their career may be more interested in getting access to training and career development. People at the end of their career are more concerned with job satisfac
6、tion rathe than pay necessarily; those with childcare responsibilities are more concerned about work life balance policies and flexibility. It is crucial when creating a reward policy that organisations try to ensure that they align their practices to the needs of the organisation and employees, and
7、 integrate the various elements of the reward package so that they support, rather than contradict, one another. They also need to mee the requirements of the legal and regulatory environment. 3Reward strategy Any reward strategy should clearly spell out the aim of the various reward elements, integ
8、rate them in a coherent way and tell employees what they can expect to receive and why. This strategy needs to be written, communicated and understood throughout the organisation. It is the yardstick by which reward elements are measured and evaluated and manages the expectations of all employees. W
9、ithout a clear reward strategy, the various elements will at best seem like individual initiatives and at worse employees will be left to form their own opinions about what the organisation is trying to achieve. However, on its own, a reward strategy is not going to be effective unless the organisat
10、ion has the ability to execute it. Research for CIPD (Chartered Institute of Personnel and Development) reward management surveys shows that the most common causes of problems in implementing a reward strategy effectively are the skills and abilities of line managers to actually implement the strate
11、gy as intended. Attitudes are also an issue, with a sizeable proportion or organisations citing problems as lack of support from top managers, front-line managers, staff and unions. The other stumbling blocks to success are process related, either poor communications and/or lack of support systems.
12、It is important to address these when creating or amending a reward strategy. 4 Elements of Modern Reward systems (all sectors)Common elements across ALL sector reward systems Base payHow pay structures are managedHow pay progression and awards are managed Variable payShort term bonuses and Incentiv
13、esPerks and benefitsNon-financial benefits4.1Base pay How base pay levels are determinedThe CIPD survey on Reward Management shows that when it comes to determining salary levels whether ranges or mid-points, the key factors are: market rates job evaluation ability to pay. There are variations by se
14、ctor, for example job evaluation is an important market pricing tool in the public sector, market rates drive salary levels for private sector service employers, while ability to pay is a factor for manufacturing and production firmsOf those who use market rates, research shows that the most common
15、method of getting information to determine salary rates is from pay surveys (international, national, local or job function), reviewing job adverts, national pay research by general HR consultancies or specialist companies such as Incomes Data Services (IDS) or Industrial Relations Services (IRS) an
16、d job-evaluated pay databases. When it comes to adopting a market position in respect of base pay, the most popular approach is to try to match the median. There are variations by sector, for instance manufacturing and production firms are least likely to opt for the upper quartile. For total cash (
17、base pay plus bonus), there is a shift in market positioning with more employers aligning themselves to the upper quartile and being more discriminating, with management and technical/professional occupations more likely to have their total cash pay linked to the upper quartile. However, this is usu
18、ally stated as being for upper quartile performance, which is much harder to determine than the market level of total cash pay. 4.2How pay structures are managedAccording to CIPD reward management, pay structures are all about valuing jobs and understanding how jobs relate to one another and the ext
19、ernal market. Employees and their individual competence, experience, and standards of performance should fit into, and be valued by the structure. CIPD research shows that the more common approaches to managing pay structures include: narrow graded pay structures a narrow graded structure is a seque
20、nce of job levels. All jobs in a particular level or grade are broadly of equal value to the organisation. Each grade may have a single salary or a range of salaries associated with it. Where there is only a single salary linked with a grade, all employees whose jobs fall in the same grade are paid
21、at the same rate. Where each grade has a range of salaries, the level of pay for individual employees in a grade range could depend on their performance or their length of service. broadbands a broad-banded pay structure combines a broader range of jobs within a small number of grades or bands. As a
22、 consequence, the range of pay in a band is significantly higher than in a narrow graded pay structure. This can allow pay to be managed more flexibly and salary levels and relativities can readily linked to the market. For instance, under a narrow-graded scheme, employees could only increase their
23、salary typically via promotion to a higher grade. individual pay rates, ranges or spot salaries an individual job structure places each separate job in its own grade, with its own salary or salary range. In other words, there is only one job to a grade. Such a structure is useful where the job conte
24、nt for individual positions varies widely, or where flexibility in response to rapid organisational change or market-pressure is vital. job-family pay structure this consists of separate pay structures for occupational grouping or job families. Job families may be task-based, covering specific workg
25、roups, or generic, covering similar types of work across functions. pay spines consist of a series of incremental points stretching from the highest- to the lowest-paid jobs. The CIPD latest reward management survey shows the most popular approaches to managing pay structures are: individual pay rat
26、es/ranges/spot salaries (44% of respondents) broadbands (40%) job families/career grades (31%) narrow graded pay structures (22%) pay spines (16%) However, there are variations by sector and occupational group, For instance, pay spines, which provide for a greater degree of control and certainty, ar
27、e common at all levels in the public sector, while individual pay rates, ranges or spot salaries, which allow for greater flexibility, are more common in the private sector. By occupation, individual pay rates, ranges or spot salaries are common for senior managers, while clerical and manual grades
28、are more likely to be covered by narrow graded pay structures. 4.3How pay progression and awards are managed CIPD research shows that the most common approach is to link movement to an assessment of individual performance, followed by competency and market rates. There are variations by sector, with
29、 individual performance more of a factor in both parts of the private sector, while length of service is more widespread in the voluntary and public sectors. Many employers have adopted a hybrid approach that bases progression on more than one factor, for example, a contribution approach which exami
30、nes what has been achieved (individual, team or organisational performance) and how it has been achieved (by looking at competencies and/or skills). Most organisations expect that satisfactory performers will progress to a target point in their pay range. Among private sector service employers, the
31、target point is the mid point in the range, while in the public sector the target point is close to the top of the range. In the voluntary and manufacturing and production sectors, employers are roughly split as to whether the target point is at the mid point or towards the top end of the pay band.
32、Fixing overall pay awards and the general pay structure movement (commonly known as the annual pay award or cost of living uplift) usually involves looking at: inflation organisational performance movement in market rates the going rate of pay awards elsewhere. Again, there are variations by sector.
33、 For instance, in the public sector the key determinant is how much the government gives them and how much the unions will demand while this later factor is not generally an issue for private sector companies. 4.4Variable pay Short-term bonuses and incentives In general, there is a widespread use of
34、 short-term bonus and incentive awards, either to encourage future performance (incentives) or to recognise past performance (bonus). However, there are variations by sector, with bonus and incentive schemes being much more common in the private sector. Of those with a scheme, the most common type i
35、s that linked to an individuals performance, followed by collective approaches, the most popular being those driven by business results (such as profit or revenue targets) and combination schemes (combining both individual performance measures with collective measures, such as unit- or team-based).
36、Most organisations have more than one scheme, with the average number per organisation being three. The advantages of variable pay is that, in theory, it only pays when there is something to pay out and it is generally not pensionable which means no additional on-costs. However, again, pay is not th
37、e only way to reward or incentivise employees. Many organisations use gift vouchers or arrange trips or experiences, while others find a simple thank you from an individuals line manager or the chief executive can have positive effects. The CIPD recent reward management survey found that 36% of orga
38、nisations use a non-cash bonus or incentive scheme. This varies by sector with private sector service employers being more likely to sue such a scheme (44%) and voluntary sector organisations less likely (17%). Private sector organisations are more likely to use a form of recognition that has a cash
39、 value (retail vouchers) while the public sector are more likely to use a non-cash form of recognition (such as being allowed to leave work early).Employee perks and benefitsThe CIPD reward management surveys show a wide range of perks and benefits on offer to employees, from the traditional such as
40、 paid leave, occupational sick pay, occupational pensions and healthcare benefits to newer ones such as on-site massages, concierge benefits and bicycles. Some benefits, such as work-based pensions, are tax-efficient methods of remuneration. There are various reasons why employers offer employees be
41、nefits. For some, it is to match market practice, for others it is to provide employees with some measure of security, such as occupational sick pay, while others use them to retain employees, such as occupational pension schemes. The same research shows many organisations examining voluntary and fl
42、exible benefits schemes. Voluntary benefits (where employers provide third-party goods and services at a discount) excite most interest. Flexible benefits schemes (also known as cafeteria benefits or flex plans) are formalised systems that allow employees to vary their pay and benefits package in or
43、der to satisfy their personal requirements. Flexible benefits are generally only evident in employers with over 1,000 employees, and almost one-quarter of organisations with over 5,000 employees operate them. Non-financial rewardsWhile pay and benefits are important, and getting them wrong can have
44、dire consequences for the organisation, they are not the only rewards that employers should consider. Research shows that non-financial rewards can be just as important. These include: opportunities for personal and career development flexible working (such as working from home or flexitime) being i
45、nvolved in decisions that affect how and when employees do their work a pleasant working environment good performance management and appraisals recognition, such as through an employee of a month award or team-based events. 5Summary of the CIPD viewpoint on RewardEmployers need to consider what they
46、 are rewarding and try and align what employees want with the needs of the business. There are various elements to reward from the financial to the non-financial and its important that employers chose the appropriate mix of base to variable pay, fixed to flexible benefits, and pay to non-pay rewards
47、. Employers should be also aware of the signals that pay sends out about the organisation, so it is important that this is recognised and an appropriate communications strategy adopted to explain to staff what behaviours, values and performances the organisation is rewarding, how and why. 6 Elements
48、 of Reward systems in the Voluntary sectorReward in the voluntary sector is a hit and miss affair. And in addition, there is no one organisation that collects data systematically on how the vol sector approaches this issue. With managers increasingly crossing over from the private sector there are m
49、ore reward management systems that mimic what might be traditionally thought of as private sector policies such as PRP. There are some factors that are fairly commonly acknowledged about vol sector reward: Pay is about 20% under private sector pay rates at senior manager and manager level, but is about the same at assista
