Rewards Management

Individual or group reward

Rewards are often related to individual performance; however, this can lead to conflict and rivalry if not managed effectively. All individuals are dependent on others and on efficient workplace systems to achieve high-quality performance. Increasing use of group and team-based structures have increased the need for cooperation and made it difficult to distinguish performance of individuals within teams.

Gain-sharing plans and group incentive schemes are often used to support a team-based culture. A gain-sharing plan involves the benefits of improvements and success, such as productivity improvements, cost savings and sales and profit increases, being reflected in rewards for teams, such as shares, cash bonuses or annual bonuses.

Key issues to consider in designing a reward and benefits system in terms of the business include:

• Business strategy

• Economic conditions — supply and demand for labour and skills shortages

• Organisational objectives of rewards

• Rewards and benefits of competitors

• Relevant awards and agreements, minimum employment standards

• Union power

• Profitability/viability of the business

• Performance pay — remuneration based on distributing rewards according to individual employee performance. In doing so it increases individual accountability and promotes employee development. Performance pay is often related to executive remuneration but is also received by approximately one-third of Australian workers.

• Performance related — incentive plans for performance above standards or criteria, bonuses, piece rates, commissions, production-related incentives

• Job related — role and level of responsibility, scope of supervision, base pay, interpersonal skills, knowledge and skills, experience, value to the company (e.g. links with key clients)

• Other individual considerations — group incentives, the employee’s values (e.g. job flexibility vs career planning), specific job conditions (e.g. requiring employees to live overseas) and their individual bargaining power.

Note: Reward systems that are not clear or fair, or where employees believe there has been favouritism or bias, can lead to internal politicking and conflict, loss of trust and motivation, and higher levels of labour turnover, therefore increasing costs ($)