Hay group total reward framework

Running head: TOTAL REWARD SYSTEM 1

INFORMATION SYSTEMS

TOTAL REWARD SYSTEM 10

Total Rewards System

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Total Rewards System

Currently, most organizations are operating reward programs that are not current, no updates of new developments hence should be out of question especially in this era of competitiveness. These plans were developed for a labor force compared to that of old age that has moved to retirement, leaving a new world in its wake. In the last two decades, the workforce has become more diverse and less likely to stay at similar company for extended duration of time. It has also become more sophisticated about compensation hence rendering traditionally pay plans ineffective at best and in most cases counterproductive. It is noted that most organizations reward strategies has not met its objectives because organizations are hesitant to change their policies because they are uncertain on the way of doing it, they are afraid of change, too inflexible, or unable to respond fast enough to changes in the business (Manas & Graham, 2003).

Thompson (2004) defines total reward as all the employer’s available tools make employees get interested in doing their work, excite and appease them. Armstrong (2012) asserts that definitions of total rewards typically encompasses not only traditional, quantifiable elements such as salary, variable pay and benefits but includes also more intangible non cash elements such as gaining knowledge and growth, ability to acquire and act or take responsibility, progress in career and the conducive environment provided by the organization.

One way that many organizations define their total reward strategy is through the development, communication and maintenance of a rewards policy. It communicates how the organization plans to reward people including pay, benefits and work environment characteristics, how the system will be designed and maintained and the philosophy of what rewards are supposed to accomplish. Components of a reward system consist of financial rewards and employees benefits which together constitutes total remuneration. It also incorporates non financial rewards such as praise, recognition, achievement, responsibility and personal growth and most performance management processes. Total Reward system comprises the financial rewards, employee benefits and non financial compensation.

Basically, the premise of total rewards system is that there is no more to rewarding people than throwing money at them. This is the reason why every organization requires total rewards system. Issues initiated by recruitment and retention as well as means of influencing behavior is addressed well by total rewards strategy as this may influence workers to work towards achieving the organizational goal and objectives depending on how they have been rewarded. It also encourages or excites employees to work towards achieving their needs. It also motivates them towards redoubling their efforts hence addressing the broad of issues and spending reward money in areas where it is required and effectively address shifting values of workers. Finally, creating a challenging and conducive workplace in which employees can use their talents, abilities, skills and experience to meet targets that translate to receiving appreciation by the employer hence enhancing motivation and greater performance.

Total Rewards Strategy

Employee rewards system comprises of policies, processes and practices for compensating its workers according to their skills, performance, and contribution to the organization. It is established within the framework of reward philosophy, strategies and policies, structures put in place, processes and practices of the organization.

The strategy includes the process of measuring the value of jobs, personal contribution in the job, the coverage and benefits provided to employees. The processes consist of market rate, job evaluation, analysis and performance management. The reward strategy will be achieved by: developing practices that excite people through monetary and non monetary rewards. Financial rewards include base and variable pay and employee benefits, and allowances. Non financial rewards are provided through sound leadership and management, work and benefits given to employees to develop their careers. Also have structures in place associating payment and opportunities to the Company by providing monetary rewards to workers according to individuals, group or organizational performance. In addition, establish procedures for maintaining the system for ensuring that it provides monetary value and operates in a flexible and efficient manner (Armstrong, 2012).

The other reward strategies are:

· Reviewing the work environment and analyze current reward policies and practices. Researching different models or approaches and benchmark rewards practices elsewhere, especially those to do with selecting and defining elements of total rewards and methods of introduction.

· Involving stakeholders such as senior management, line managers, workers and their deputies in coming up with the approach of total reward and ideal phases.

· Selecting a reward model to adopt

· Prioritize the introduction of elements as necessary and integrate the total rewards strategy with the human resource strategy and plan and implementing the program.

· Making sure those in management are provided with necessary requirements to play their role in total rewards program and finally communicate throughout the program on what is taking place and how well can be accomplished.

Tanke (2001) suggests that to formulate total rewards strategy that encompasses the fundamentals of compensation and the regulatory environments should follow fair labor standards act practiced by the federal law. Fair labor standards act includes information and regulations on the following compensatory areas: Minimum wage law, employee meals and meals credit, equal pay, overtime, child labor, tip-tip credits and tip- pooling procedures, uniform and uniform maintenance, record keeping among others. He maintains that it is necessary to be flexible as opposed to being rigid as well as accommodating changes in attitude and demographics. He suggests the following as best reward strategies: Providing a promotional incentive that would motivate employees to seek the opportunities your company provides, compensation for quality work to encourage employees and assure them that the organization works towards achieving provision of quality goods and services, an equitable system that all employees view as fair, establishing standard procedures on compensation that ensures it attains and maintains the integrity of reward system as well as having in place an effective method for controlling compensation costs.

Advantages of total reward strategy.

Gone is the era when reward was about cash and benefits and its place is where organizations have put together increasingly sophisticated reward packages in order to hold on to their most valued staff. The emphasis in leading organizations is on a total reward approach that reflects the fundamental acceptance of people to business success. Total rewards explain current models, investigates the changing employment landscape and demonstrating that employees are critical to business success and outlines why organizations need an integrated approach to reward strategies (Thompson, 2004).

There are numerous advantages of total reward strategy as indicated below among others:

1. Greater impact. The combined effect of different types of rewards will enhance the employment relationship and make a deeper and long- lasting impact on motivation and performance.

2. Flexibility to meet individual needs. Relational rewards are assumed to be strongly binding individuals to the organization since they provide solutions and answers to special individual needs. Armstrong comments that companies today are managing much more heterogeneous population, and for each diverse workplace, no one component can have a significant value as employees have to make choices and need for greater flexibility.

3. Attraction and retention. Relational rewards help to deliver a positive psychological contract. The organization can become an employer of choice and a great place to work hence attracting and retaining talented people it needs.

· Improves employee’s perception of the value of their reward package.

· Increased organizational performance through greater workforce commitment and motivation in the organization.

· Improved recruitment arising from a quantified total employment package.

· Supporting the objective of becoming an employer of choice.

· Promoting flexibility in pay delivery.

· Helping in managing costs and maximize the return on investment in Human Resources.

· Mixing intrinsic and extrinsic rewards to encourage employees discretionary effort.

· Relocating effort to match the individual employee needs.

Communication components

Communication defines the relationship between employees and employer and in most cases; employee can terminate the relationship as a result of poor communication. It also motivates employee to increase productivity. Ineffective communication breaks a deal. A company can have most of the well-conceived, elegantly designed programs, but if the word does not get out to the current and prospective employees then it is of no value as the recipient defines the significance of total rewards program. Communication approach should be: Comprehensive to cover the totality of rewards and addresses all employees needs and queries; it should be personalized to meet expectations of the day; searchable so that they can get what they are searching when there is need, it should also be human as technology can sort out multiple issues but communication on employees rewards should not depend on technology.

Strategy for devising a competitive pay structure

Now days, there is stiff competition in various organizations across the globe especially in the age of 21st century. Therefore in order to remain competitive, companies need to develop reward packages that satisfy people. These reward packages also referred to as total rewards include all the monetary and nonmonetary rewards provided by an organization to attract, motivate and retain employees. Sudhir (2009) asserts that for a pay system to be successful, it will depend on linking the organizations’ objectives and strategies to compensation so that individuals are encouraged to work in a way that generates income to the firm and its stakeholders. The concept of total rewards requires a much broader understanding of pay or compensation traditionally occurred in business organizations. The total rewards concept emphasizes both direct and indirect compensation which strengthens a company’s ability to motivate employees particularly in challenging financial situations as faced by some companies.

Chingos (2004) notes that, the pay structure must respond to the company’s compensation philosophy, policies and strategies. Therefore, the following is the strategy for devising a competitive pay structure:

· Comparing actual pay levels versus market which will help in identifying completive gaps

· Evaluating the alignment of the executive pay structure with the organization’s compensation strategy.

· Evaluating the pay performance relationship degree to which it reflects the organization’s strategy.

· Identifying the change necessary in either the pay program or compensation strategy.

· Providing a market basis to help in guiding the development of changes made.

Jensen & McMullen (2007) point out that for an organization to be in a better strategic position in achieving total reward, it should put into consideration the following among others: Know the organizations pay philosophy, its reward program and how the various reward elements operate. The next is to identify employee attributes that the company encourages, supports and rewards these could constitute the organization’s culture. It is significant to understand your company’s leadership to people approach whether it is top-down or inclusive, whether it is focused on managing functions, individuals, teams or units. They also mention that it is vital to be aware of how to lead people, contact with employees, its growth and working conditions. Identify opportunities that can help employees develop be it one time work assignments, new positions, or new responsibilities. Also be sensitive to staff members’ needs and flexible in how to engage with them. Finally, staff recognition for some of the everyday things that go without being realized, and when there is need provide response and training on how people can perform better.

The company will adopt Towers Perrin Model of total reward where three elements of total reward are used. These elements are compensation which includes salary, performance based bonus, and stock options. Benefits such as non-contributory pension, life cover, private health care, perks and cars and work experience which is defined as all elements providing one with an environment that enables one to optimize and achieve full potential while maintaining balance of your personal and professional life.

The structure will be in designed as follows: Compensation or pay which constitutes base pay, annual bonuses, long term incentives, shares and profit sharing. Other benefits include pensions, holidays, perks and flexibility. The next is learning development which involves on the job training ensuring that goals or objectives are met effectively and efficiently, career progress and succession planning. Work environment incorporates organizational culture, leadership, communications, involvement, work life balance and non-financial recognition. Pay and other benefits are transactional tangible benefits or rewards that are essential to recruitment and retaining staff. Working environment and learning and development are relational intangible rewards referred to as rewards and cultural brand which is more difficult for competitors to copy.

References

Armstrong, M. (2012).Armstrong’s Handbook of Reward Management : Improving

Performance through Reward, Fourth edition. London: Kogan Page.

Armstrong, M. & Brown, D. (2006).Strategic Reward: Making it Happen. Great Britain: Kogan

Page.

Chingos, P. T. (2004). Responsible Executive Compensation for a New Era of Accountability.

New Jersey: John Wiley & sons, Inc.

Jensen, D., McMullen, T., & Stark, M. (2007).The managers guide to Rewards: What you need

to know to get the best for and from -your employers. USA: Hay Group, Inc.

Manas, T. M. & Graham, M. D. (2003).Creating a Total Rewards Strategy: A Tool kit for

Designing Business- Based Plans. USA: AMACOM.

Sudhir, A. (2009). Human Resource Management: A textbook for the hospitality industry. New

Delhi: McGraw-Hill.

Tanke, M. L. (2001). Human Reource Management for the Hospitality Industry. USA: Cengage

Learning.