This document discusses remuneration and reward systems in organizations. It defines remuneration as the financial incentives and payments employees receive for their work, including salary, benefits, and performance pay. It describes theories of motivation like the effort-reward imbalance model and how intrinsic and extrinsic rewards can influence employee behavior. It also covers psychological contracts between employers and employees and how remuneration should be designed to reinforce desirable behaviors through a combination of monetary and non-monetary rewards. The document provides examples of how reward systems can be aligned with business goals or encourage unintended behaviors if not carefully implemented.

1. Remuneration Motivation:
Rewarding Best Behaviour
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2. What is Remuneration?
“Financial incentives
constitute employees’
payment when
offering labour”
Salary
Benefits
Remuneration
Gkorezis & Petridou, 2012: 3598
Performance
pay
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3. Remuneration as Reward
Effort
Reward
“Effort Reward Imbalance
Model”
• Job stress comes when
effort and reward are
not balanced
• A problem in one area
can result in complaints
about another
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4. Other Forms of Reward
Extrinsic
• Rewards that are
outside of the actual
role and team:
– Financial
– Advancement
opportunities
– Prestige
Intrinsic
• Rewards that are
connected to the
organisation, its mission
and team:
– Relationships
– Achievement
– “A job well done”
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5. Classical Conditioning
Stimulus
• Original
• Paired
Involuntary
Response
• In Pavlov’s famous
experiment, a bell was
rung at the same time as
food was presented to a
dog. The dog would
salivate for the food, but
eventually would salivate
at the sound of the bell
• The paired stimulus, the
bell, resulted in the
involuntary response
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6. Operant Conditioning
• A voluntary action is
reinforced with reward
or punishment
• Remuneration
reinforces behaviours
• An unintended
consequence is where
the wrong behaviours
are reinforced
Voluntary
action
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Reinforcement

7. Reinforcing the Right Behaviours
On Target
Off Target
• Goal: to improve word-ofmouth referrals
• Reinforcement: ‘finders
fees’ for successful
referrals
• Result: staff motivated to
generate referrals
• Goal: to develop longterm relationships with
clients
• Reinforcement: salesbased commission with
no trailing commissions
• Result: sales staff focus on
immediate revenue even
if it loses clients longer
term
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8. Psychological Contract
•Remuneration
•Safety
•Formal obligations
•Position
•Colleagues
•Management
•Clients
Transactions
Wider Market
•Context
•Community
•Competing offers
Relationships
Work
•Prestige
•Career prospects
•Job security
• The ‘psychological
contract’ refers to the
mutual obligations
between an employee
and employer
• Psychological contracts
encompass formal and
informal aspects of work
• It is mediated in
comparative terms by
what is available in the
whole market
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9. Designing Reward Systems
• Reward systems should
take a holistic approach
to achieving optimum
performance
• Rewards can be
monetary and nonmonetary
Intrinsic &
extrinsic
rewards
Psychological
contract
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Reinforcement
& conditioning
Performance

10. Remuneration: Thought-Starters
The remuneration system…
• Has an overall objective and each component has a business case
for it
• Is based on evidence and benchmarking from reliable sources
• Includes monitoring and regular review systems including employee
feedback
• Encourages desirable behaviour and discourages undesirable
behaviour
• Rewards the individual for their work and avoids rewarding or
punishing them for others’ actions
• Is transparent and easy to understand or calculate
– Adapted from Scott, 2008
© Copyright Psych Press 2013

11. References
• Gkorezis, P., & Petridou, E. (2012). The Effect of Extrinsic
Rewards on Public and Private Sector Employees’
Psychological Empowerment: a collaborative approach. The
International Journal of Human Resource Management,
23(17). 3596-3612. doi: 10.1080/09585192.2011.639025
• Nelson, L., Tonks, G., & Weymouth, J. (2006). The
Psychological Contract and Job Satisfaction: Experiences of
a Group of Casual Workers. Research and Practice in
Human Resource Management, 14(2), 18-33. Online:
http://rphrm.curtin.edu.au/2006/issue2/satisfaction.html
• Scott, I.A. (2008). Pay for performance programs in
Australia: a need for guiding principles. Australian Health
Review, 32(4), 740-749.
© Copyright Psych Press 2013