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Compensation and Reward Systems

The document discusses compensation and reward systems, including their components, factors that determine them, and the role of line managers. It defines compensation as financial and non-financial packages received by employees. Components include wages, salaries, incentives, and benefits. Factors that determine compensation internally and externally are also examined.

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Moses Swaga
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21 views

Compensation and Reward Systems

The document discusses compensation and reward systems, including their components, factors that determine them, and the role of line managers. It defines compensation as financial and non-financial packages received by employees. Components include wages, salaries, incentives, and benefits. Factors that determine compensation internally and externally are also examined.

Uploaded by

Moses Swaga
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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COMPENSATION AND

REWARD SYSTEMS
Forms of the reward system(Wages, salaries, incentives
and benefits)
The role of line managers in reward and compensation
Factors that determine reward and compensation
Characteristics of a good reward system
Definition
• An employee reward system consist of an
organizations integrated practices in
remunerating its employees in accordance
with their contribution, skills, knowledge and
market worth.
• It consists of financial rewards i.e. wages,
salaries and also non-financial rewards such as
recognition, praise, opportunity for personal
growth.
Definition
 Refers to a system of pay that involves financial and non-
financial packages, employees receive for their services
offered to the organization.

• Compensation system

• Financial • Non- Financial

• Wages • Salaries • Employee benefits • E.g Family Tour

• E.g Free
Incentives • E.g life Insurance
• E.g Paid holidays • Dinner/lunch
•
• E.g Free house • Free travel allowance • E.g Company car

• E.g Retirement benefits • E.g Mandatory benefits


Components/forms - Compensation & Reward Systems

The “ideal total compensation package” should include:


(“Wages” or “Salaries” + Incentives + Benefits)
 Wages:
 Paid to workers on daily or
 Weekly basis, E.g piece rate & time rate system.
 Paid to causal workers or blue collared employees

 Salaries:
 Paid on monthly/weekly basis at a
Fixed rate.
 Paid to white collared employees,

 Incentives:
 Its any Extra payment for excellent service or good
performance, E.g bonus, profit sharing,
 payments offered to employees as a way of stimulating
increased output. Aimed at increasing productivity.
Components cont...
Employee benefits. are payments or services
rendered to employees to supplement their
wages or salaries. Organizations provide
benefits aimed at creating organizational
commitment and loyalty.
E.g
 Child care, Medical allowance, tuition deduction &
education scholarships, retirement fund, Housing,
employee discounts, entertainment, travel allowance,
company car, meals.
The role of reward & compensation system
“why organization pay”

 To attract and retain quality human resources,


 To motivate employee,
 To boost employees’ performance,
 To satisfy employees’ personal needs,
 To increase employee job satisfaction,
 To enhance organizational commitment,
 To reduce absenteeism & tardiness culture,
 To reduce influence of trade unions,
 To improve company image & the industry,
 To comply with the existing labour laws.
 Etc
Factors that determines reward & compensation package
in an organization
• Driving factors

• Internal • External

e outcome of Job Analysis • DD & SS of HR (marke


D & PS),job requirements • Cost of living
bility to pay, managerial • Trade unions,collecti
• attitudes
• Kind of the jobs • Bagaining agreemen
• e.g Key jobs • Competitors job prici
Nature of the personnel • Legal framework
• e.g Specialized • E.g minimum wage bill
Productivity of personnel
Characteristics of a good reward system

o Adjustable/flexible (circumstances such inflation),


o Sufficient / enough funds,
o Ensure Internal & External equity/competitive
o Individual worth,
o Able to Attract talent,
o Able to Retain talent,
o Able to trigger desired behaviors,
o Affordable/low cost
o Easy to understand
o Acceptable by both employees and employers
The role of Line managers in reward & compensation

o Assists in paying the wage workers,


o Assist in processing staff allowances,
o Assists in processing departmental staff salaries,
o Appraises, identifies & recommends staff for
salary enhancement,
o Helps in developing job compensatable factors,
o Helps in the process of developing pay structure
for the employees,
o Providing non financial rewards. E.g recognition
o E.t.c as discussed in class.

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