“MSc
Project
Management
Management
Practice
MOD003187
Cambridge
Campus
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Road
Cambridge
CB1
1PT
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Campus
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Hall
Lane
Chelmsford
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Website
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http://www.anglia.ac.uk
MOD003187
Management
Practice
Topic
3:
Reward
Management
2
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content
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Ruskin
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Topic
3
Reward
Management
CONTENTS
Introduction
3
Learning
Objectives
4
The
Philosophy
of
Reward
Management
.
5
ACTIVITY
1
..
10
Rewards
.
11
Payment
Schemes
.
13
ACTIVITY
2
..
22
ACTIVITY
3
..
23
Final
Thoughts
24
Formative
Assessment
25
References
26
MOD003187
Management
Practice
Topic
3:
Reward
Management
3
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content
is
Copyright
Anglia
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University
unless
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INTRODUCTION
Reward
is
central
to
the
employment
relationship
that
exists
between
employer
and
employees.
As
such
it
has
a
significant
influence
on
the
management
of
human
resources
but
is
an
aspect
of
human
resource
management
over
which
the
manager
often
has
little
control
or
discretion
because
reward
strategy
policies
and
pay
levels
are
set
at
organisational
level.
Reward
is
similarly
central
to
the
organisation
as
it
is
a
major
determinant
of
costs
performance
and
competitiveness;
consequently
organisations
give
rewards
a
lot
of
attention.
In
response
to
growing
competitive
pressures
the
importance
of
human
resources
has
increased
significantly;
as
a
result
employers
have
to
think
more
holistically
about
how
they
manage
their
human
resources
with
reward
management
being
an
important
part.
An
integrated
approach
to
rewards
including
non-financial
and
other
rewards
offers
ways
to
attract
motivate
and
retain
valuable
employees
without
becoming
uncompetitive;
hence
the
emergence
of
reward
management.
There
is
however
an
inherent
tension
between
employer
and
employees
–
employers
want
to
pay
as
little
as
possible
whilst
employees
want
to
maximise
their
earnings.
A
tension
that
the
line
manager
inevitably
has
to
deal
with
on
a
day-to-day
basis
in
their
management
of
their
employees
so
it
is
important
to
understand
the
principles
and
practice
of
reward
management.
MOD003187
Management
Practice
Topic
3:
Reward
Management
4
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content
is
Copyright
Anglia
Ruskin
University
unless
otherwise
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images
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LEARNING
OBJECTIVES
Upon
completion
of
this
topic
students
should
be
able
to:
1. Understand
the
concepts
and
principles
and
practices
involved
in
reward
management
2. Understand
the
aims
and
objectives
of
reward
management
3. Recognise
the
evolving
nature
of
reward
management
and
its
significance
to
effective
HRM
4. Understand
the
development
and
operation
of
reward
management
systems
including
payment
and
benefit
systems
5. Understand
the
managers
role
with
regard
to
reward
management
6. Understand
the
contribution
of
reward
management
to
motivation
and
performance
7. Critically
analyse
and
evaluate
different
reward
systems
8. Critically
evaluate
work
situations
and
synthesise
approaches
to
reward
management.
MOD003187
Management
Practice
Topic
3:
Reward
Management
5
All
content
is
Copyright
Anglia
Ruskin
University
unless
otherwise
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Some
images
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in
this
document
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please
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the
full
Copyright
Notice
in
the
image
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for
details.
THE
PHILOSOPHY
OF
REWARD
MANAGEMENT
Reward
management
is
concerned
with
the
formulation
and
implementation
of
strategies
and
policies
to
reward
employees
fairly
equitably
and
consistently
in
accordance
with
their
value
to
the
organisation.
Reward
management
integrates
all
aspects
of
rewards
into
a
coherent
system
that
includes
reward
strategy
remuneration
pay
structures
pay
policy
and
practices
salary
payroll
and
administration.
It
aims
to
integrate
all
of
these
coherently
so
that
employers
know
what
their
costs
will
be
in
this
respect
and
employees
will
know
what
they
can
expect
to
receive
and
why.
Armstrong
defines
reward
management
as:
The
key
issue
from
a
management
perspective
is
to
ensure
that
rewards
do
not
exceed
the
ability
of
the
organisation
to
pay;
otherwise
the
organisation
will
operate
at
a
loss
and
will
become
uncompetitive.
The
reality
is
that
rewards
are
largely
constrained
by
the
financial
health
of
the
organisation
and
its
ability
to
pay
which
often
becomes
the
overriding
factor
in
the
setting
of
pay
and
rewards.
The
issue
of
whether
it
should
be
the
objective
of
the
organisation
to
pay
as
little
as
possible
so
as
to
maximise
profits
is
a
much
bigger
issue
involving
ethics
and
beliefs.
Figure
1
illustrates
reward
management
and
its
constituent
parts
conceptually;
it
shows
the
overriding
principle
of
reward
management
namely
that
it
encompasses
everything
to
do
with
rewarding
employees
and
addresses
it
from
a
holistic
perspective
in
relation
to
the
organisation
as
a
whole.
It
is
no
longer
enough
for
employers
to
think
in
terms
of
the
old
common-law
principle
of
a
fair
days
pay
for
a
fair
days
work.
Employee
commitment
and
motivation
are
so
important
in
todays
competitive
knowledge-based
world
that
rewards
have
to
be
actively
managed
to
secure
the
maximum
utilisation
of
human
assets
and
to
attract
motivate
and
retain
employees.
Reward
Management
deals
with
the
strategies
policies
and
processes
required
to
ensure
that
the
contribution
of
people
to
the
organisation
is
recognized
by
both
financial
and
non-financial
means.
The
overall
objective
is
to
reward
people
fairly
equitably
and
consistently
in
accordance
with
their
value
to
the
organisation
in
order
to
further
the
achievement
of
the
organisations
strategic
goals.
Reward
Management
is
not
just
about
pay
and
employee
benefits
It
is
equally
concerned
with
non-financial
rewards
such
as
recognition
learning
and
development
opportunities
and
increased
job
responsibility.
MOD003187
Management
Practice
Topic
3:
Reward
Management
6
All
content
is
Copyright
Anglia
Ruskin
University
unless
otherwise
stated.
Some
images
/
diagrams
in
this
document
are
copied
under
CLA
Licence
please
refer
to
the
full
Copyright
Notice
in
the
image
/
diagram
reference
for
details.
Figure
1
Reward
management
(source
Lowry
2002)
Reward
management
is
an
integrated
approach
to
rewards;
it
is
an
integral
part
of
organisation
strategy
and
reflects
the
philosophy
of
the
organisation
especially
its
philosophy
towards
people
and
human
resource
management.
It
establishes
the
fundamental
core
of
the
relationship
between
employer
and
employee
which
in
turn
determines
to
a
great
extent
the
performance
and
success
of
the
organisation.
Recent
developments
in
management
and
business
have
seen
a
growing
trend
towards
linking
rewards
to
the
performance
of
the
organisation
brought
on
by
increasing
competition.
Inevitably
reward
and
its
management
is
closely
linked
to
motivation
if
for
no
other
reason
than
it
forms
the
basis
of
the
employment
relationship
between
employer
and
employee:
the
fair
exchange
of
labour
summed
up
as
a
fair
days
work
for
a
fair
days
pay.
Whilst
this
may
appear
as
an
over-simplification
and
possibly
outdated
the
reality
is
that
the
essence
still
holds
true;
employees
work
for
the
rewards
that
the
work
provides.
Rewards
are
a
point
of
potential
conflict
between
employer
and
employee
due
to
the
Reward
management
is
now
an
integral
part
of
the
strategic
management
of
the
organisation
MOD003187
Management
Practice
Topic
3:
Reward
Management
7
All
content
is
Copyright
Anglia
Ruskin
University
unless
otherwise
stated.
Some
images
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in
this
document
are
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under
CLA
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please
refer
to
the
full
Copyright
Notice
in
the
image
/
diagram
reference
for
details.
inherent
tension
that
exists
between
employer
and
employee
as
employers
seek
to
minimise
costs
whilst
employees
seek
to
maximise
rewards.
The
two
are
not
irreconcilable
but
it
is
an
objective
that
can
be
difficult
to
achieve.
In
fact
they
must
be
reconciled
in
order
for
the
organisation
to
function;
it
is
also
essential
to
do
so
as
human
resources
are
the
organisations
main
competitive
advantage.
Consequently
for
most
managers
in
an
organisation
this
will
underlie
much
of
their
management
of
human
resources
and
their
relationship
with
employees
it
will
come
to
the
fore
at
points
of
contention
and
change.
It
is
important
to
recognise
that
reward
management
is
complex
and
involved
it
incorporates
a
number
of
aspects
it
is
dynamic
in
its
operation
and
in
many
ways
variable
because
it
involves
people.
From
a
managers
perspective
it
should
be
regarded
as
a
management
system
in
its
own
right.
Aims
of
Reward
management
The
aim
of
reward
management
has
been
defined
by
Torrington
to
be
to;
Design
competitive
reward
packages
which
serve
to
attract
retain
and
motivate
staff
while
at
the
same
time
keeping
a
lid
on
the
costs
so
as
to
ensure
the
organisations
commercial
and
financial
viability.
This
aim
provides
a
pragmatic
view
of
the
purpose
of
reward
management
and
which
for
most
managers
sums
up
the
aim
quite
accurately
as
it
is
these
aspects
of
rewards
that
they
will
be
engaged
with
most.
You
will
also
see
the
aims
of
reward
management
expressed
in
different
terms
with
different
emphasis
such
as;
Reward
management
seeks
to
encourage
skills
development
and
to
reinforce
both
organisational
culture
and
business
strategy.
These
aims
reflect
the
changes
to
the
employment
of
human
resources
by
modern
organisations
who
employ
fewer
staff
but
each
one
is
more
specialist
and
more
important
to
the
organisation
and
collectively
the
organisation
is
more
dependent
on
them.
Retention
has
become
an
important
objective
for
organisations
especially
as
they
invest
considerable
amounts
of
money
and
resources
developing
them.
You
will
note
that
management
consultants
undertake
the
development
of
reward
strategies
for
a
lot
of
organisations
either
as
part
of
overall
strategic
planning
advice
or
as
stand-alone
reward
strategies.
The
common
factor
amongst
these
reward
strategies
is
the
fact
that
they
are
all
different
which
is
not
surprising
as
all
organisations
are
different.
An
example
of
such
a
strategy
by
Booz-Allen
is
shown
in
Figure
2.
MOD003187
Management
Practice
Topic
3:
Reward
Management
8
All
content
is
Copyright
Anglia
Ruskin
University
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images
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this
document
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please
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the
full
Copyright
Notice
in
the
image
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diagram
reference
for
details.
Figure
2
Reward
Strategy
(Source
Booz
Allen)
Philosophy
of
rewards
Preceding
the
development
of
a
reward
strategy
will
be
a
philosophy
towards
rewards
that
reflects
the
fundamental
beliefs
and
attitudes
of
the
organisation
and
its
owners
to
people;
in
this
instance
people
who
work
for
them.
It
also
reflects
their
political
and
economic
beliefs
collectively
these
form
a
philosophy
that
will
become
a
significant
part
of
the
organisations
culture
and
determine
how
they
choose
to
manage
the
organisation.
You
will
note
from
the
reading
that
there
is
a
certain
amount
of
scepticism
regarding
the
concept
of
a
reward
strategy
and
whether
it
actually
exists
in
practice.
Because
every
organisation
is
different
every
reward
strategy
will
be
different
so
it
is
unlikely
that
a
uniform
reward
strategy
that
contains
all
the
same
elements
will
exist
which
may
account
for
some
of
the
criticism.
Marchington
and
Wilkinson
(2012)
identify
a
number
of
criticisms:
Failure
of
management
to
manage
rewards
as
a
whole
Management
tend
to
adjust
one
part
of
the
system
without
considering
the
others
MOD003187
Management
Practice
Topic
3:
Reward
Management
9
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content
is
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Anglia
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images
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please
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Notice
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the
image
/
diagram
reference
for
details.
Objectives
for
rewards
are
often
contradictory
Wider
implications
are
not
considered
Over
attention
on
pay
at
the
expense
of
other
rewards.
The
reading
in
Activity
1
considers
reward
strategy
and
provides
the
opportunity
for
you
to
consider
its
validity
and
application
in
organisations
that
you
are
employed
or
ones
with
which
you
are
familiar.
Indeed
you
should
consider
the
part
that
reward
strategy
plays
in
organisation
strategy
as
a
whole.
As
frontline
managers
you
will
experience
reward
management
policies
and
probably
strategies
that
you
will
be
expected
to
implement
with
your
workforce.
An
understanding
of
reward
strategy
its
constituent
parts
aims
and
operation
is
essential
if
you
are
to
get
maximum
performance
from
your
workforce.
MOD003187
Management
Practice
Topic
3:
Reward
Management
10
All
content
is
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Anglia
Ruskin
University
unless
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Some
images
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diagrams
in
this
document
are
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CLA
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please
refer
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full
Copyright
Notice
in
the
image
/
diagram
reference
for
details.
ACTIVITY
1
Reading
Read
Armstrong
M.
2011
A
Handbook
of
Human
Resource
Management
Practice.
London:
Kogan
Page
11th
ed.
chapter
26
Reward
Management
Strategy
and
Systems.
MOD003187
Management
Practice
Topic
3:
Reward
Management
11
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content
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for
details.
REWARDS
Rewards
can
be
categorised
in
a
number
of
ways
but
the
majority
of
classifications
use
two
categories
of
reward
financial
rewards
and
non-financial
rewards
Financial
rewards
are
divided
into
direct
financial
rewards
and
indirect
rewards.
Direct
rewards
mainly
comprise
money
such
as
basic
pay
bonuses
and
other
monetary
payments
Indirect
rewards
are
those
that
can
be
converted
to
a
monetary
value
such
as
pensions
company
car
preferential
loans
additional
leave
goods
or
services
etc.
All
of
which
will
have
tax
implications
for
the
employee.
Non-financial
rewards
are
those
rewards
that
do
not
have
a
monetary
value
to
the
employee
these
include;
Seniority
position
status
Recognition
Flexible
working
hours
Access
to
enhanced
benefits
Training
and
development
opportunities
career
development
Working
conditions
Choice
of
location
overseas
secondment
etc.
Responsibility
Authority
empowerment
self-determination
Interesting
and
challenging
work
Involvement
in
organisational
affairs
Social
facilities
and
activities
Family
access
to
benefits
facilities
etc.
There
are
a
wide
range
of
these
which
in
itself
poses
a
problem
to
management
as
to
which
one(s)
to
offer
to
employees.
Each
employee
will
have
different
preferences
as
to
which
of
the
non-financial
benefits
they
want
and
these
will
differ
between
employees
which
leaves
the
organisation
having
to
choose
which
ones
to
offer
their
workforce.
It
is
in
practical
and
financial
terms
not
possible
to
offer
all
of
these
so
a
choice
has
to
be
made.
Organisations
tend
to
offer
a
range
of
non-financial
benefits
and
allow
employees
to
select
which
one
or
ones
they
wish
to
have.
This
approach
is
termed
the
Cafeteria
approach
it
allows
individuals
to
choose
and
to
mix
and
match
to
suit
their
needs
within
an
overall
total
value.
The
challenge
for
the
organisation
is
to
develop
a
reward
management
system
that
has
the
optimum
combination
of
financial
and
non-financial
rewards.
MOD003187
Management
Practice
Topic
3:
Reward
Management
12
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content
is
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Anglia
Ruskin
University
unless
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Notice
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for
details.
As
a
manager
responsible
for
the
management
and
motivation
of
their
workforce
it
becomes
important
to
understand
their
workers
and
to
know
what
their
preferences
are
and
to
manage
accordingly.
Fairness
Implicit
throughout
the
consideration
of
rewards
is
the
concept
of
fairness
or
equity;
it
is
an
aspect
that
carries
great
significance
for
employees
and
managers
must
be
aware
of
this
when
pay
and
rewards
are
being
discussed.
Employees
have
a
strong
sense
of
fairness;
it
is
a
crucial
aspect
of
the
employer-employee
relationship.
Fairness
is
a
comparative
measure
made
by
the
employee
on
a
number
of
criteria;
Is
the
reward
fair
for
the
work
being
undertaken?
Is
the
reward
comparable
to
other
employees
doing
similar
work
or
working
as
hard?
Is
the
reward
fair
in
comparison
to
that
being
paid
by
other
organisations
for
comparable
work?
Is
the
reward
fair
with
regard
to
my
skills
expertise
experience
responsibility
etc.?
Achieving
and
maintaining
all
these
measures
of
fairness
for
all
jobs
for
all
workers
over
extended
periods
of
time
is
difficult
for
organisations
especially
large
organisations.
A
reward
system
will
fail
if
it
is
perceived
by
employees
as
being
unfair
which
then
creates
problems
in
respect
to
motivation
retention
and
overall
workplace
relations.
Managers
should
be
aware
that
fairness
is
a
perception
and
is
often
not
real.
MOD003187
Management
Practice
Topic
3:
Reward
Management
13
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content
is
Copyright
Anglia
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Notice
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the
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for
details.
PAYMENT
SCHEMES
There
are
a
number
of
individual
pay
schemes
in
existence
each
tailored
specifically
to
the
needs
of
the
particular
organisation
but
all
based
on
one
or
more
underlying
philosophies.
Torrington
et
al
(2011)
defined
these
philosophies
as;
Service
philosophy;
based
on
experience
and
time
served
it
takes
the
premise
that
with
experience
comes
increased
performance
so
pay
is
increased
incrementally
with
time.
This
philosophy
also
encourages
employees
to
stay
in
the
job
thus
addressing
the
issue
of
retention
Fairness
philosophy;
based
on
the
premise
of
paying
what
each
job
is
worth.
To
implement
such
a
system
requires
some
form
of
job
evaluation
to
measure
the
worth
of
a
job
but
in
large
organisations
with
large
numbers
of
jobs
this
becomes
increasingly
complex
costly
and
involved
it
also
becomes
a
source
of
dispute.
Some
schemes
based
on
this
philosophy
also
include
a
bonus
incentive
element
which
further
complicates
the
calculation
of
pay
Performance
philosophy;
this
is
not
a
new
philosophy
originating
with
the
scientific
school
of
management
with
payment
by
results.
Other
schemes
followed
based
around
incentive
bonus
schemes
in
conjunction
with
a
basic
wage
however
there
are
social
and
other
implications
of
performance
schemes.
The
underlying
concept
of
performance
related
pay
has
re-emerged
in
other
forms
of
payment
such
as
payment
by
results
and
performance
related
pay
amongst
others
which
appeals
to
organisations
as
these
schemes
relate
the
rewards
to
the
performance
of
the
organisation
and
its
ability
to
pay.
Payment
schemes
should
not
be
considered
in
isolation
the
concept
of
rewards
management
is
to
consider
all
aspects
of
rewards
and
to
include
this
as
part
of
the
overall
management
of
human
resource
management;
it
directly
affects
motivation
recruitment
retention
etc.
Payment
schemes
do
not
last
forever;
they
are
overtaken
by
changes
in
technology
working
practices
organisation
objectives
and
other
factors
which
renders
the
schemes
unfit
for
purpose
a
process
that
is
seen
as
inevitable.
Consequently
schemes
that
have
some
built-in
flexibility
have
the
potential
to
be
adjusted
and
to
last
longer
however
managers
need
to
be
aware
of
the
need
to
monitor
the
performance
of
the
pay
scheme
and
to
be
prepared
to
consider
changes
to
it
at
appropriate
points.
Length
of
service
is
useful
fairness
is
necessary
but
what
really
matters
is
the
performance
of
the
employee.
Torrington
et
al.
MOD003187
Management
Practice
Topic
3:
Reward
Management
14
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content
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image
/
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reference
for
details.
Payment
by
time
Payment
by
time
is
a
long
established
and
the
most
commonly
used
payment
system
employees
are
paid
hourly
weekly
or
monthly
depending
on
their
job.
It
is
a
time-served
system
that
is
easily
understood
by
all
but
which
is
based
on
the
simple
assumption
that
time
spent
equals
output.
Critics
would
argue
that
it
pays
only
for
attendance
and
that
output
is
not
necessarily
a
direct
result.
The
advantages
and
disadvantages
of
payment
by
time
include;
Simple
in
concept
Simple
and
economic
to
administer
Transparent
employees
and
employer
know
what
has
or
will
be
earned
Complicated
in
practice
by
various
allowances
introduced
over
time
to
incentivise
or
reward
certain
workers
or
jobs
Consolidation
of
allowances
over
time
distorts
the
simplicity
and
fairness
of
the
system
Proliferation
of
grades
to
incorporate
new
jobs
increases
complexity
and
cost
Grade
drift
occurs
where
everyone
migrates
to
the
top
grade
and
gets
stopped
at
the
grade
boundary
The
system
to
deal
with
grievances
gets
increasingly
invoked
until
it
is
overloaded
and
ceases
to
function.
Pay
structures
Payment
by
time
leads
to
the
development
of
pay
structures
as
a
way
to
structure
and
manage
the
system.
These
provide
the
basis
for
evaluating
the
worth
of
a
job
and
its
relationship
to
other
jobs
in
the
organisation.
An
example
of
a
typical
graded
pay
structure
is
shown
in
Figure
3.
MOD003187
Management
Practice
Topic
3:
Reward
Management
15
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content
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Anglia
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University
unless
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images
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this
document
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please
refer
to
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Copyright
Notice
in
the
image
/
diagram
reference
for
details.
Figure
3.
Typical
pay
structure
(source
University
of
Richmond)
To
develop
such
a
structure
involves
a
comprehensive
process
of
job
evaluation
of
all
the
jobs
in
an
organisation
once
completed
all
the
jobs
must
be
graded
in
relation
to
each
other
and
put
into
a
hierarchy
of
jobs.
This
is
a
time
consuming
expensive
and
complicated
undertaking
which
will
also
require
a
significant
amount
of
subjective
judgement
wherein
lies
the
seeds
for
dispute.
There
are
various
forms
of
pay
structure
commonly
used
by
organisations
these
include;
Graded
Pay
structure;
this
is
composed
of
a
series
of
job
grades
whereby
jobs
of
equivalent
value
are
slotted
into
a
relevant
grade.
This
can
involve
hundreds
and
in
some
cases
thousands
of
pay
grades
which
makes
the
administration
of
the
system
very
difficult
and
expensive.
Figure
3
is
an
example
where
the
number
of
grades
has
been
limited
to
avoid
this
problem
but
it
spawns
another
of
how
to
evaluate
all
jobs
within
a
limited
set
of
grades.
Broad-banded
pay
structure;
provides
a
measure
of
flexibility
to
the
graded
pay
structure
by
having
fewer
pay
grades
but
allowing
a
number
of
grades
within
each
band.
Figure
4
illustrates
the
principle;
note
the
overlap
between
the
bands.
MOD003187
Management
Practice
Topic
3:
Reward
Management
16
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content
is
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Anglia
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University
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images
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this
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please
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Notice
in
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image
/
diagram
reference
for
details.
Figure
4.
Broad-banded
pay
structure
(source
Lowry)
Pay
Curves;
comprise
pay
represented
as
curves
for
jobs
or
bands
of
jobs
each
individual
is
positioned
on
the
curve
depending
on
performance
competence
ability
responsibility
or
any
other
job
or
performance
measure
that
is
considered
relevant.
Pay
curves
allow
the
manager
some
discretion
with
regard
to
rewarding
performance
within
pay
bands
or
grades
but
care
needs
to
be
taken
not
to
overuse
otherwise
every
employee
ends
up
at
the
top
of
the
curve
or
at
the
top
of
the
top
curve;
it
is
not
a
substitute
for
inadequate
pay.
MOD003187
Management
Practice
Topic
3:
Reward
Management
17
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content
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Ruskin
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images
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diagrams
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this
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please
refer
to
the
full
Copyright
Notice
in
the
image
/
diagram
reference
for
details.
Figure
5.
Pay
curves
(source
Lowry)
Setting
pay
levels
The
setting
of
pay
levels
in
whatever
pay
structure
or
payment
system
is
used
is
complicated
and
involves
considerable
judgement
by
those
involved.
It
requires
consideration
of
a
large
number
of
external
factors
and
internal
factors
ultimately
the
aim
is
to
please
all
the
people
all
the
time
a
feat
that
is
recognised
as
near
impossible.
Consequently
the
exercise
is
doomed
to
be
a
compromise
or
inadequate
or
in
worst
case
scenarios
to
fail
yet
one
that
is
unavoidable.
External
factors
include;
Competitor
salaries
Number
of
competitor
employers
Supply
and
demand
of
employees
of
varying
types
and
skills
Economic
conditions
Market
rate
for
similar
jobs
Competitive
level
to
attract
and
retain
employees
Internal
factors
include;
Relative
value
of
different
jobs
Job
evaluation
Retention
rates
Affordability
MOD003187
Management
Practice
Topic
3:
Reward
Management
18
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content
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Anglia
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University
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stated.
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images
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please
refer
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Notice
in
the
image
/
diagram
reference
for
details.
There
are
also
a
number
of
different
methods
used
to
classify
and
evaluate
jobs
each
with
their
own
advantages
disadvantages
and
applications.
Whilst
most
managers
will
not
be
responsible
for
this
which
is
a
specialist
HR
function
they
will
be
involved
in
the
process
of
evaluating
jobs
and
employees
so
it
is
essential
that
you
understand
the
processes
and
the
implications
of
decisions.
Armstrong
discusses
the
setting
of
pay
levels
in
further
detail
in
the
reading
that
follows.
Payment
by
results
(PBR)
Payment
by
results
attempts
to
link
output
to
effort.
Originated
by
the
Scientific
School
of
management
some
schemes
are
commonly
referred
to
as
piecework
stemming
from
the
original
practice
of
paying
for
each
piece
of
work
produced.
There
are
numerous
social
and
other
problems
related
to
wholly
piecework
systems
of
pay
but
they
are
still
used
in
some
industries
such
as
sales
and
in
the
agricultural
industry.
These
are
most
commonly
applied
to
individual
employees
but
there
are
also
notable
group
piecework
schemes.
Payment
dependent
wholly
on
piecework
has
a
number
of
disadvantages
not
least
with
regard
to
recruiting
and
retaining
workers
but
also
with
regard
to
quality.
Piecework
tends
to
be
suitable
where
the
work
is
essentially
unskilled
but
where
skilled
work
is
involved
it
is
less
so.
Most
schemes
of
piecework
are
a
hybrid
system
whereby
workers
are
paid
a
base
wage
based
on
time
supplemented
by
piecework.
This
provides
workers
with
guaranteed
minimum
earnings
which
overcomes
some
of
the
worst
excesses
of
piecework
whilst
at
the
same
time
incentivising
them
to
greater
effort.
As
with
all
pay
systems
piecework
involves
the
calculation
and
setting
of
the
piecework
rate
together
with
accounting
for
the
work
produced
by
each
individual
worker.
Piecework
whist
attractive
to
employers
in
principle
is
far
less
so
in
practice
especially
with
the
changing
nature
of
work
towards
more
knowledge-
based
jobs
–
consequently
their
use
has
declined
except
for
unskilled
jobs.
Employment
protection
legislation
has
also
restricted
this
type
of
payment
system
because
of
its
inherent
negative
social
implications.
Performance-related
pay
Performance
related
pay
has
been
seen
as
a
means
to
link
rewards
to
performance
and
to
incentivise
employees
to
improve
performance.
The
focus
is
clearly
on
output
(performance)
and
is
therefore
directly
related
to
organisational
performance.
In
conceptual
terms
this
method
of
payment
has
many
attractions
for
employers
but
in
practice
it
has
not
lived
up
to
its
potential.
The
system
links
an
individual
employees
rewards
to
an
assessment
of
performance
objectives
usually
agreed
in
advance
(or
at
least
set
in
advance)
the
employees
pay
is
calculated
on
the
basis
of
the
extent
to
which
they
have
met
these
objectives.
Objectives
are
usually
set
as
measurable
targets
such
as
sales
achieved
results
achieved
etc.
the
more
objective
and
quantifiable
the
performance
objective
is
the
better
the
system
works.
The
advantages
of
performance-related
pay
are;
Links
reward
to
organisation
performance
Links
reward
to
effort
MOD003187
Management
Practice
Topic
3:
Reward
Management
19
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image
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diagram
reference
for
details.
Motivates
employees
Reinforces
the
strategic
aims
of
the
organisation
The
use
of
performance
related
pay
for
the
entire
reward
for
an
employee
is
rare
in
practice
it
is
usually
used
as
an
incentive
component
of
a
reward
system
whereby
a
base
salary
is
paid
with
a
proportion
added
based
on
the
performance
of
the
individual.
It
is
also
used
as
a
means
of
determining
pay
increases
and
in
some
cases
promotions
where
the
employee
is
required
to
have
met
or
exceeded
their
performance
targets
in
order
to
receive
these.
In
practice
the
application
of
performance-related
pay
has
a
fundamental
flaw;
it
is
focussed
deliberately
on
the
individual
and
their
performance
it
completely
ignores
the
fact
that
almost
all
employees
do
not
undertake
their
work
in
isolation
but
in
teams
–
teams
where
each
of
the
individuals
is
dependent
on
the
other
members
of
the
team
to
do
their
work
and
to
achieve
their
performance.
Consequently
isolating
the
individuals
performance
from
that
of
the
team
as
a
whole
is
difficult
if
not
impossible
it
also
means
that
the
efforts
of
the
individual
may
be
offset
by
lower
performance
of
others
in
the
team
so
the
individual
does
not
receive
the
reward
to
which
they
should
be
entitled.
In
addition
to
the
effect
of
the
immediate
team
on
the
individuals
performance
most
jobs
and
the
ability
to
do
them
efficiently
depend
on
the
performance
of
other
teams
and
in
many
cases
other
factors
outside
the
organisation
such
as
suppliers.
The
result
of
all
these
factors
is
that
the
individual
cannot
control
their
performance
only
their
effort
which
under
performance
related
pay
is
not
recognised.
Performance-related
pay
contradicts
the
efforts
of
organisations
to
build
teams.
Organisations
recognise
that
the
highest
performance
and
innovation
come
from
effective
teams
and
they
spend
a
lot
of
time
and
effort
building
them.
Effective
teams
are
based
on
collaboration
and
cohesion;
performance
related
pay
encourages
individualism.
The
issue
of
innovation
is
now
crucial
for
the
wellbeing
of
most
organisations
it
produces
continuous
improvement
which
in
turn
maintains
competitiveness
especially
as
research
and
practice
have
shown
that
the
majority
of
innovation
emerges
from
teams
not
individuals.
For
these
reasons
attempts
by
many
organisations
in
both
the
private
and
public
sectors
to
use
performance-related
pay
as
an
incentive
have
not
been
successful.
Some
writers
such
as
Kohn
(1993)
argue
that
it
is
a
failure
and
an
excuse
for
poor
management
and
leadership
of
the
workforce
which
would
generally
produce
far
better
results
than
performance-related
pay.
Performance-related
pay
is
an
emotive
and
divisive
issue
both
between
managers
and
between
managers
and
employees.
There
is
as
yet
no
definitive
answer
as
to
whether
it
is
good
or
bad
because
as
with
most
things
management
it
depends
upon
the
situation
in
which
it
is
being
applied.
As
managers
however
you
will
probably
encounter
performance-related
pay
in
organisations
for
whom
you
will
work
so
it
is
important
that
you
have
an
understanding
of
its
principles
together
with
the
arguments
for
and
against
it.
In
operation
it
is
difficult
for
performance-related
pay
to
be
perceived
by
employees
as
fair.
MOD003187
Management
Practice
Topic
3:
Reward
Management
20
All
content
is
Copyright
Anglia
Ruskin
University
unless
otherwise
stated.
Some
images
/
diagrams
in
this
document
are
copied
under
CLA
Licence
please
refer
to
the
full
Copyright
Notice
in
the
image
/
diagram
reference
for
details.
Incentive
schemes
Incentive
schemes
commonly
referred
to
as
bonus
schemes
have
been
a
feature
of
pay
systems
for
a
long
time.
These
provide
the
opportunity
to
add
an
incentive
element
to
the
basic
pay
system
usually
time-
based
based
on
a
measure
of
output.
These
schemes
have
a
number
of
advantages
if
well
designed
and
operated
and
provide
