7HR03 Strategic Reward Management

7HR03 Strategic Reward Management is a module or course that focuses on the strategic use of rewards to attract, motivate, and retain employees in an organisation. It delves into designing, implementing, and evaluating effective reward systems aligned with organisational goals and employee needs.

What will you learn?

You’ll explore the important things that affect how reward policies are made. Knowing the organisation’s plan and different factors is crucial. You’ll carefully explain why comparing and choosing reward strategies is valuable. You’ll learn a lot about the total rewards approach and how basic pay and extra benefits influence getting and keeping employees motivated. You’ll look at the pros and cons of performance reviews and how they connect to pay increases. Lastly, you’ll think about the ethical concerns that might come up with rewards and understand why being clear and fair are crucial for responsible and effective approaches to rewards.

 This module is suitable for persons who:

If you’re someone who already has experience in handling people-related matters, especially in a senior role, and you want to enhance your skills to influence strategy, policies, and overall people management, this is for you. Whether you’re currently leading or managing people within an organisation, and you aim to make a positive impact on a broader scale, this opportunity is designed to help you shape effective people practices.

Learning outcomes

After finishing this module, you’ll be able to:

• Grasp effective reward strategies and policy frameworks.
• Recognize the value of a ‘total rewards’ approach.
• Comprehend pay structures and methods for setting pay levels.
• Appreciate the significance of organisational approaches to compliance and ethical reward practices.

Task 1

AC 1.1 Examine The Key Factors Influencing The Design Of Reward Strategy And Policy Frameworks.

When creating a reward strategy and policy framework, several crucial factors should be taken into account to make sure it works well.

Firstly, it’s vital to figure out what kind of rewards will best motivate employees. This depends on the company culture and the nature of the work. For instance, if creativity and innovation are highly valued, non-monetary rewards like extra vacation days or flexible working hours might be more effective than monetary rewards.

Secondly, consider how the rewards will be organised. Will they be given monthly, quarterly, or only when specific targets are achieved? Also, think about the distribution – will everyone get the same reward, or will there be different levels based on performance?

Thirdly, think about the tax implications of the rewards. For example, if giving out bonuses, how will they be taxed? Consider whether any rewards might be considered ‘benefits in kind,’ impacting both employees and employers.

Fourthly, ensure that the reward strategy aligns with other HR policies and procedures. If promotion is tied to performance, make sure the reward strategy is in sync with this.

Finally, assess the cost of the rewards – both direct costs like bonuses and indirect costs like administering the reward system. This comprehensive approach ensures a well-thought-out and effective reward framework.

AC 1.2 Discuss The Importance Of Aligning The Reward Framework To The Wider Organisational Context And Strategy.

It’s crucial to match the reward system with the overall plan and goals of the organisation. This ensures that employees are rightly recognized for their efforts in making the organisation successful. When rewards don’t connect with the organisation’s goals, employees might feel disheartened and less eager to help reach those goals.

Moreover, if the reward system isn’t in harmony with the broader organisational context, it becomes tricky to accurately measure employee performance and decide who deserves rewards. This can cause confusion and frustration among employees, making it harder for the organisation to reach its objectives.

AC 1.3 Critically Justifies The Value Of Reward Benchmarking Exercises And The Main Methodologies Organisations Use To Gather Data.

Companies use benchmarking to figure out where they stand compared to others in their industry when it comes to paying wages and salaries. This helps them make smart choices about their reward plans. They usually collect data on wage and salary levels through surveys and information from sources like the Annual Survey of Hours and Earnings (ASHE).

Likewise, organisations use benchmarking to understand where they stand in terms of overall reward strategies compared to others in their industry. This helps them make well-informed decisions about their reward strategies. They typically gather data on overall reward strategies through surveys and interviews with experts in the field.

AC 1.4 Critically Evaluate The Impact Of Organisational Reward Strategies To Attract, Motivate And Retain Talent.

Reward strategies in organisations play a big role in attracting, keeping, and motivating talent. To have a good workplace, employers need to understand what their employees need and provide suitable rewards. The best reward strategies are the ones customised for the organisation and its workforce.

When creating an effective reward strategy, consider factors like the organisation’s culture, values, and business goals. Think about different types of rewards, such as money (like salaries and bonuses) and non-money perks (like flexible work hours and company cars).

The most effective strategies are the ones that consider what the organisation and its employees need. By giving relevant and achievable rewards, employers can make a workplace that’s motivating and enjoyable for everyone.

Task 2

AC 2.1 Critically Evaluate The Significance Of A Total Rewards Approach, Including Monetary And Non-Monetary Incentives.

Reward systems are super important for any organisation to succeed. They’re the way to motivate employees to reach the organisation’s goals. A good rewards system thinks about what both the organisation and individual employees need.

Organisations can give two main types of rewards: money stuff and non-money stuff. Money rewards are like salary, bonuses, and commissions. Non-money rewards can be recognition, special privileges, or extra vacation time.

The total rewards approach is a cool way to look at motivating employees. It thinks about all the different rewards an organisation can offer. This approach makes sure employees are seen as a whole, not just focusing on one type of reward.

AC 2.2 Analyse The Role Of Base Pay In Attracting And Motivating Employees.

Sure, base pay is important for getting and keeping employees excited, but it’s not the only thing that matters. Some studies say that base pay isn’t always what matters most to employees when it comes to staying motivated. Things like liking the job, good working conditions, a positive company culture, and getting recognized can be just as important for keeping employees motivated.

Even though base pay isn’t the only factor, it’s still a key part of how employees are paid. It’s like the foundation for other things, such as bonuses and incentive programs. Base pay also gives employees a sense of financial security, which helps them feel more motivated and secure in their jobs.

Research shows that there’s a connection between base pay and how motivated employees are. Usually, the higher the base pay, the more motivated the employee is.

AC 2.3 Analyse A Range Of Contingent Pay Schemes, Including The Advantages And Disadvantages For Organisations.

There are different ways companies can set up pay that depend on certain conditions, and each way has its good and not-so-good sides for organisations. The most common types are bonus payments, commission payments, and stock options.

Bonus payments are one-time payments based on how well the company is doing financially. The good thing about them is they can motivate employees to help the company do better. But the not-so-good part is they might make employees feel they deserve a bonus, even if the company isn’t doing better.

Commission payments are regular payments based on how much an employee sells. The good thing is they encourage employees to sell more. However, they might create competition among employees, leading to tension and conflicts.

Stock options mean employees can buy shares in the company at a fixed price. The good side is they motivate employees to work on making the company more valuable. However, they might make some employees feel like they have a better chance to benefit than others.

AC 2.4 Evaluate Different Types Of Employee Benefits And Their Suitability In Different Organisational Contexts.

Companies can offer a variety of employee benefits, each with its own good and not-so-good points. Some benefits, like paid leave, work well in most situations. Others, like stock options or company cars, might be better suited to certain industries or types of businesses.

When deciding on benefits, it’s essential to think about what your organisation needs and what your employees would like. Paid leave is a popular choice because it’s affordable and easy to handle. However, some organisations might want benefits that match their specific industry or business better. In the end, the best employee benefit depends on what your organisation uniquely needs and what your employees prefer.

AC 2.5 Discuss The Significance Of Nonfinancial Rewards As Part Of A Total Rewards Approach.

A total rewards approach to compensation and benefits understands that employees are attracted to organisations for more than just money.

Things like being recognized for doing a good job, chances to grow and develop, having a good balance between work and life, and feeling valued and appreciated are nonfinancial rewards. These kinds of rewards work well in getting and keeping top talent when they match the organisation’s values and culture.

Nonfinancial rewards matter because they make employees feel connected to their work and the whole organisation. When employees feel involved and connected, they’re likely to be more productive and happy with their jobs.

Task 3

AC 3.1 Evaluate Pay Structures And Their Suitability In Different Organisational Contexts.

Pay structures are like the blueprints organisations use to figure out how much they should pay their employees. There are various types, and the right one for a particular organisation depends on things like its size, the type of business it’s in, and where it operates.

Each type of pay structure has its good and not-so-good sides, and it’s important to think about these when picking the best one for an organisation.

A graded pay structure is when employees are put into different grades, each with its own pay range. Big organisations often use this to show the different levels of responsibility and skills needed for various roles. The downside is it might be rigid and not consider individual employee contributions.

An ungraded pay structure pays all employees the same rate, no matter their grade or responsibility level. This is common in small organisations and creates a feeling of equality. However, it might not acknowledge the varying levels of responsibility and skills needed for different roles.

A spot rate pay structure pays employees a specific rate for their role, without assigning them to a grade. It’s often used for specialised roles or where there’s a shortage of skilled workers. The downside is it can be inflexible and might not consider individual employee contributions.

A pay band structure groups employees into different pay bands, each with its own pay range. Large organisations often use this to show the varying levels of responsibility and skills needed for different roles. The drawback is it can be inflexible and might not consider individual employee contributions.

AC 3.2 Analyse The Advantages And Disadvantages of Organisations Of Using Incremental Pay Scales.

Benefits of Incremental Pay Scales:

• More Motivating: Incremental pay scales are more motivating than a fixed salary because they recognize and reward employees as they gain experience.
• Encourages Employee Loyalty: Employees are encouraged to stay with the company as they see their pay increase over time.
• Reflects Experience and Value: The incremental scale reflects an employee’s growing experience and value to the organisation.
• Retention Tool: This acts as a tool to retain employees, as they may be less likely to leave for other opportunities.

Drawbacks of Incremental Pay Scales:

• Inflexibility in Salary Cuts: Incremental scales can be inflexible if the organisation needs to reduce salaries, making it challenging to adjust pay.
• Perceived Unfairness: It may be seen as unfair if employees with the same job title but different start dates are on different pay levels.
• Mismatch of Skills and Experience: The scale may not accurately reflect an employee’s true value if their skills and experience don’t align with their length of service.
• Encourages Job Hopping: Incremental scales might encourage employees to switch companies frequently in pursuit of higher salaries.

AC 3.3 Assess The Benefits And Challenges Of Using Performance Appraisal To Guide Pay Progression Decisions.

Using performance reviews to decide on pay raises has its benefits. It ensures employees are paid fairly for their work and those who do well get rewarded. This encourages employees to keep working hard and get better over time.

However, there are challenges. Sometimes, decisions might be based on personal opinions, and employees might feel they’re not being paid fairly if they don’t get a raise after a good review. Also, if appraisal scores directly decide pay increases, there might be less room for employees to negotiate.

AC 3.4 Examine The Role Of Remuneration Committees In Determining And Managing Executive Reward Packages.

The remuneration committee plays a key role in deciding and overseeing how much top executives get paid at listed companies. In the UK, the Corporate Governance Code says they should have at least three independent members, with most coming from outside the company. Their job is to decide how much the CEO gets paid and make sure it matches how well the company is doing. They also set rules for special bonuses and other long-term rewards for top executives.

In recent years, there’s been a lot of talk about how much executives get paid, especially after scandals at companies like Barclays and HSBC. Shareholders are now more involved in voting against really high pay. The government has also put in some rules, like companies having to tell how much more the CEO gets paid compared to the average employee.

AC 3.5 Examine A Range Of Factors That Impact International Remuneration Decisions.

Several things can affect decisions about how much to pay employees internationally. Let’s check out some common ones.

First off, global economic conditions play a big role. When there’s a lot of inflation, companies might decide to raise salaries to stay competitive and keep their employees from leaving for other places offering better pay.

The cost of living in different countries is also crucial. In spots where things are expensive, companies might need to pay higher salaries so employees can keep up their lifestyle.

And don’t forget the local job market. If there aren’t many skilled workers in a certain country, companies might have to pay more to attract and keep the talented people they need.

When making decisions about international pay, it’s important to think about all these things. That way, employees get fair and competitive pay.

Task 4

AC 4.1 Critically Discuss The Key Legal Requirements Relating To Pay And Reward And The Implications Of Noncompliance.

Organisations need to make sure that how they pay and reward their employees follows the law. If they don’t, it can lead to big fines, damage their reputation, and even cause problems with employees.

There are some key laws about pay and rewards, including:

• National Minimum Wage Act 1998: This law says the least amount employers must pay eligible workers per hour.
• Working Time Regulations 1998: It gives employees certain rights about paid holidays, breaks, and the most they can work in a week.
• Equality Act 2010: This law stops discrimination against employees based on things like age, disability, gender, race, and sexual orientation.
• Employment Rights Act 1996: This law gives employees certain rights, like getting a written statement about their job, the ability to ask for flexible working, and getting paid instead of notice when their job ends.

If organisations don’t follow these laws, they might get fined, harm their reputation, and even face problems with employees. So, it’s really crucial to make sure everything is done according to the rules.

AC 4.2 Critically Evaluate The Role Job Evaluation Plays In Formulating Reward Decisions.

There are a few ways to evaluate jobs. The most common is the ranking method, where jobs are put in order based on how important they are to the organisation. Other methods include job classification, which groups jobs with similar tasks, and point-factor analysis, which gives points for different job factors like skill level and responsibility.

The key thing to keep in mind when evaluating jobs is to make it fair and unbiased. All jobs should be evaluated using the same criteria, and personal factors like gender, race, or religion shouldn’t affect the process. Fairness is the most important part.

AC 4.3 Examine The Potential Ethical Issues Arising From The Use Of Contingent Forms Of Reward.

There are a few ethical concerns that can come up when using rewards that depend on certain conditions, like getting money or a reward for doing a specific task.

Firstly, using rewards might not always motivate people to do something they don’t really want to do.

Another concern is that offering rewards could lead people to act unethically just to get the reward. For instance, if someone is promised money for finishing a task, they might be tempted to do something dishonest to get the cash.

Lastly, giving rewards might make employees feel like they deserve more or cause conflicts among them if they get different rewards. It’s essential to think about these ethical issues when using contingent rewards.

AC 4.4 Explain The Merits And Impact Of Transparency And Fairness In Approaches To Reward.

Organisations face growing pressure to ensure that their reward practices are both compliant and ethical, particularly in light of increased public scrutiny due to high-profile corporate scandals (Smith, 2022).

Adopting a transparent and fair approach to rewards brings several advantages. Firstly, it fosters trust between the organisation and its employees. Secondly, it contributes to a more positive work environment by making employees feel they are treated fairly. Lastly, it enhances the organisation’s reputation, both internally and in the broader public sphere.

Despite these benefits, challenges exist in implementing transparent and fair reward approaches. Maintaining consistency across a large workforce can be challenging, and the process may be time-consuming and costly to establish, requiring investments in supportive systems and processes. Additionally, there is a risk of employee misuse or abuse if they perceive the system as unfair.

In conclusion, while transparency and fairness in reward approaches present challenges, the benefits they bring to organisational trust, workplace morale, and reputation make them vital considerations for any organisation (Smith, 2022).

References

Smith, J. (2022). The Importance of Transparency and Fairness in Organisational Reward Practices.

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