Myth Of The Rewards And Benefits Business Essay


Past two decades, many people regard the human recourse management "knowledge recourse" as one of the key factors for sustainable competitive advantage. In particular knowledge sharing is perceived to be the most essential process foe knowledge management.

People are not willing to share their knowledge in the organisation. They think that their knowledge is very valuable and important. Ernst and Young centre for business school innovation the biggest difficulty in knowledge management was "Changing people's behaviour" (Ruggles 1998).

The main purpose of above research is to motivate people in organisations to share their knowledge with other in. But employee expects rewards and benefits to contribute their knowledge in the firm.

Reward and Benefits in HRM

Rewards and benefits are the most important tool to the HRM department that may be used to attract and motivate his employee in the organisation. Many theories have discussed that how to motivate employee through meet their expectations to achieve a firm's objectives. The aim of HRM to find the best way to reward them. Rewards and benefits strategy also important for employer to achieve controble productivity and return on investment.

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How does reward influence individual employees?

Rewards strategies are used in HRM to directly control employee behaviour. Employees in a firm mostly compare their own salaries with each other on the same job, some of them want to grow within the firm, but they expect something extra to share their knowledge.

There are three theories to explain more deeply rewards and benefits:-

Reinforcement Theory

E.L.Thorndike's Law of Effect states that a response followed by a reward is more likely to recur in the future. The implication in HRM is that high employee performance followed by a monetary reward will make future high performance more likely. The theory emphasizes the importance of person's actually experience of a reward.

Expectancy Theory

Expectancy theory also focuses on the link between reward and job performance. Job performance can be described as a function of ability and motivation. Motivation in HRM is hypothesizes to be a function of expectancy .Expectancy theory implies that linking an increased amount of rewards to will increase motivation and performance.

Agency Theory

This theory focuses on the divergent interests and goal of the organization's shareholder and the ways the employee compensation can be used to align these interests and goal. A very important characteristic of the modern corporation is the separation of ownership from management. Mostly shareholders or owners are removed from operation day by day. The main agent (Manager) expects something to act on the behalf of owner

Reward and benefit is a key element in strategy approach to HRM. Theory of reward F.W.Taylar in father of scientific management viewed employee as retained and economic in their approach but basically lazy and having to be motivated by management through the reward system.

Objectives of Reward and Benefits in HRM

The main objective of reward and benefit in HRM is to run the organisational operations with "Flawless execution" in the market competitions. Objective of rewards and benefits can be varying in different segments:-

Employee's Objective:- to motivate towards the best performance, achieve their person goals and make a recognise position in the organisation.

Employer's Objective:- to get the maximum best contribution of his employee to achieve organisational goal.

Government objective:- to make better economy condition with the strong purchasing power in the country.

Organisational objective:- to keep the best employee for the future.

Elements of reward

There are a number of terms can be describe the rewards that are given by employer in return of performance for work performed by workers or employee. Now a day many of rewards that people take from their do not take a monetary term. "Compensation" is a term widely used in America's literature. Remuneration is a most common word use in human recourse management which means the same as payment but also has more letters and is misspelled.

There are five elements make it total rewards:

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Development in career opportunities

Types of Rewards and benefits

Few decades ago, word used to be called "Pay" and then became "Remuneration" and now-a -days we are using "Rewards". Rewards and benefits refer all the cash, non-cash and psychological payments. There are two basic types of rewards:

Extrinsic rewards: which cover the basis need of salary or income to run day-to-day life. these kind of rewards also called "financially rewards" In Maslow's Hierarchy of needs they are the at the bottom end.

Intrinsic rewards: which cover the employee's satisfaction from job, competing in challengeable environment and social actions which arise from the work place, These kind of rewards also called "psychological rewards".

Extrinsic rewards are:-

Recognise program:

These kinds of rewards are most popular in small and big firms these days. Reward can be "Employee of the week" or month or year in the firm. It help to develop the sense of security at workplace by a good performance, motivate to employee in the future. It can be in cash form or gift vouchers.

Online Award Programs:

There are few sites which are offering exceptional employee service with special awards internet incentive or reorganisation sites include;, premierchoiceaward .com,, many firms including Citi bank, Wal-Mart and Levi Strauss and company are the now partners with online rewards firms.

Profit Sharing:

Most employees receive a share of the company's annual profit. Profit sharing rewards boost productivity with the controllable cost. Reward in a cash form is the most popular reward in a Human Resources Management.

Employees Stock Ownership Plans:

Organisation contributes shares from his own stock to give as a reward to employees. This kind of reward develops ownership sense in employee's behaviour.

Gain Sharing Programmes:

Gain sharing plans developed in 1937 by Joseph Scanlon. Gain sharing plans offer a means of sharing productivity gains with employees. Although sometimes confused with profit sharing plans, gains sharing differ in two key respects. First, instead of using an organization level performance measure, the program measure group or plant performance, which are likely to be seen as more controllable by employees. Second, pay-outs are distributed more frequently and not deferred. In a sense, gain sharing programmes represent an effort to pull out the best features of organisation -oriented plans like profit sharing and individual -oriented plans like profit sharing and individual-oriented plans like merit pay and individual incentives.

Intrinsic Rewards

These kinds of rewards also called non-cash payments. Employer shifts money from cash to benefits. New benefits coverage a tangible success that could impact on employee's psychological behaviour than a salary increase or cash reward. There are some few example of these kinds of rewards

Medical benefits

A public opinion survey shows that medical benefits are a most important to a average person life. This has a good cost advantage, together with tax considerations and a concern of employee security.

Life insurance, Retirement and Pension policy, Holiday pay, Sick pay, Child care policy are the various types of benefits. Benefits are great opportunities to save the money for future. These kinds of benefits consider as a protection against the risk of old age, loss of health and life and social environments.

Process of rewards in organisation

Reward and benefits is the only important tool to alive a organisation in the competitive market. With monetary feedback employee can be motivate to the best performances in the future. This is process of an organisation, continue after every best performance.

Advantage of Rewards and benefits in HRM

The biggest advantage of rewards and benefits in HRM is to direct and motivate employee's behaviours to achieve organisational objective.

Maximum use of all level of performance in firm's productivity.

To achieve profitable growth with the controllable cost.

Foster the development of future with high performance culture.

Focus on productivity and returns.

Give the fair return of employee's investment.

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Reduce of less employee turnover.

Enhance loyalty level in employees.

Disadvantage of Rewards and benefits in HRM

The biggest disadvantage of reward and benefits is that it makes the additional cost in the firm operation.

In order to get recognised some employees give more preference to their personnel goal rather than working on group goals. These kind of activities will create demoralization among the other team members which will ultimately effect the performance of the organization.

Applications of Rewards and Benefits in HRM

We can discuss applications of rewards and benefits in HRM with a case study of Domino's Pizza.

Case study: Domino's Pizza and reward system

Domino's pizza is the one of biggest "Pizza Delivery" in the world, founded in 1960. About a decade ago, it was known fast food industry which was highly dependable on low-paid worker. People just wanted to do only part time job because of low pay rate, quit jobs for avoid the increase wage rate and less satisfaction with work place. Because of above behaviour there was high turnover in employees.

After reviewed the whole situation with experience and basic education, HRM department of Domino's introduce the Rewards and benefits plans with standard rates of pay rate for different performance in the firm. They also motivate to employee with better working environment, to stay longer in the firm.

How they handle the problem?

Introduce Reward and benefits plans in Domino's

Monetary Rewards

Psychological Rewards

Weekly cash reward to control food and labour cost.

Weekly cash reward to achieve good customer service.

15% of profit sharing from increase in sales growth.

Employee stock option plan

Recognition within the firm.

Better work place.

Benefits for employee.

Flexible hours.

Gift vouchers.

HRM department of domino's received positive result after introduce this scheme, to achieve the best performance of employee. They achieved:

Increase profitably of operations to control with food and labour cost.

Increase large no. of customers and repetition of customers.

To keep the best employees in firm for long-term.

To motivate employees for the best of their performance.


Our focus in this assignment has been on the design reward programs that recognize employee contribution to the organisation's success. Rewards and benefits have important influence on an employee's standard of living. This carries two important aspects. First, reward program can be a powerful motivator. An effective reward program can substantially promote an organisation's success. Second, the important of reward means care a great deal about the fairness of process. The fact that now these days organisations are differ from their business and human recourse department has to design the reasonable methods of reward to motivate the employee. Human recourse management understand that archiving financial objective and satisfying shareholders, depends to a considerable level of reward program in the firm. The reward and benefits affect the long-term profitability of any firm in competitive market.

Total Reward


Provide an overview of the programs for reward and benefits in HRM. Each program shares a focus on performance. Table differ according to three features: Design Features (1) method of payment (2) Frequency of payout (3) ways of measuring performance. Consequence (1) motivation of performance (2) employee's attraction (3) culture of organisation (4) cost. There are two contingencies that how pay program may influence and fit the situation.

Merit pay

Incentive pay

Profit sharing


Gain sharing

Skill- based

Design features

Payment method

Change in base pay



Equity changes


Change in base


Frequency of payout




When stock sold

Monthly or quarterly

Competency acquired



Supervisor's appraisal

Individual output

Company profit

Company stock returns

Controllable cost of production

Competency acquisition of individual


Performance motivation

Relationship between pay and performance

Clear performance

Stronger in smaller firms

Stronger in small and big firms

Stronger in smaller units

Encourages learning


Overtime pays better performers

Pays higher performance

Helps with employee if plan pay out

Help lock employee in the firm

Help with employee if plan pay out

Attracts learning new technology


Individual competition

Individual competition

Knowledge of cooperation and business

Sense of ownership

Supports cooperation problem solving

Learning and flexible organisations


Requires well-development performance appraisal system

Setting and maintaining acceptable standards

Relates costs to ability to pay

Relates costs to ability to pay

Setting and maintaining acceptable standards

Training certificate and material


Management style

Participation desirable


Fits participation

Fit participation

Fit participation

Fit participation

Type of work



All type

All type

All type

Significant skill depth