1. Unit-5
REWARD SYSTEM
DEFINITION
 Reward Management is about the development,
implementation, maintenance, communication and
evaluation of reward processes.
 These processes deal with the assessment of
relative job values, the design and management of
pay structures, performance management, the
provision of employee benefits and pensions.

2. OBJECTIVES
 What the organization values and want to pay for
 The value they create for their organizations
 The right behaviors and actions of the employees in
order to reinforce appropriate behaviors and
outcomes
 Foster and maintain a high performance work culture
 Motivate employees in order to obtain their
commitment and engagement

3. OBJECTIVES
 Attract and retain talents the organisation needs
 Emphasize the right mix of financial and non-
financial rewards
 Develop a positive employment relation and
psychological contract
 Align reward practices with the business strategy of
the organisation and communicate business values
and direction to employees
 Operate in ways that are fair, equitable, consistent
and transparent.

4. COMPONENTS
 Financial reward – Salary, Wages, Incentives, etc.,
 Non-financial reward – Medical Insurance, Life
insurance, subsidized canteen, subsidized transport,
free uniforms, interest free loans, etc.,
 Psychological satisfaction – Social interactions with
others in the workplace, job training, career
advancement opportunities, recognition,

5. DIMENSIONS
 Intrinsic Reward – Psychological reward that is
experienced directly by an individual. Ex: Feelings of
accomplishment, Increased self-esteem, satisfaction
of developing new skills, sense of fulfillment, etc.,
 Extrinsic Reward – A reward that is provided by
outside agent, such as a supervisor or work group.
Ex: Bonus, promotions, increase in salary, perks,
appreciation or praise, etc.,

6. CONSTRAINTS
 Statutory compulsions
 Industry wise wage boards
 Operative long term settlements
 Lack of mutual trust
 Lack of visional and innovative approaches
 Lack of commitment
 Lack of system
 Fear on personal authority

7. LINKAGE BETWEEN THE REWARD
AND PERFORMANCE
Value of reward
Received
Effort-reward
probability
Efforts
Abilities and
Traits
Task
Perceptions
Performance
accomplishmen
t
Intrinsic
Reward
Extrinsic
Reward
Satisfaction

8. IMPLICATIONS FOR MANAGERS
 Determine the rewards valued by each subordinate.
 Determine the performance desired
 Make the performance level attainable
 Link rewards to performance to maintain motivation
 Analyze what factor might counteract the
effectiveness of the reward

9. IMPLICATIONS FOR ORGANIZATIONS
 The organisation’s reward system must be designed
to motivate the desired behaviour and results.
 The jobs should be designed to the employees to
fulfill some of the higher needs such as
independence or creativity
 The immediate supervisor has an important role in
the motivation process. He has to trained in the
motivation process and given enough authority to
administer rewards.

10. MONETARY AND NON-MONETARY
REWARDS
MONETARY REWARDS
NON-MONETARY
REWARDS
 Salary increments
 Promotions with
increments
 Paid up insurance
 Loans
 Transport(Car/Two
Wheeler)
 Telephone
 Profit sharing
 Free Lunch
 Picnics
 Dinner with boss
 Birthday treats
 Trophies
 Certificate
 Letter of Appreciation
 Vacation trips
 Special Leave