Why is reward a strategic issue?
Objectives of a Reward Strategy
A reward strategy addresses the “why”, “how”, and “how much” questions surrounding pay and incentives.
The objectives of a reward strategy is to address the following:
A clear articulated Reward Strategy will help the organization align employee behaviors and actions to the business strategy, attract and retain key talent.
Key guiding principles of a reward strategy:
Competitive but affordable
Pay for Performance
Simple and Transparent
Fair & Trustworthy
Consistent & Sustainable
Clear levels of governance
Common Reward Life-Cycle Stages:
Stage 1 - Start-Up
Stage 2 - Maturity
Stage 3 - Old Age
Stage 4 - Renewal
Reward strategy can be achieved through:
Policy setting and costing ‘Best Practice’ approach:
Positioning against the market depends on:
Emotional Reward is more than ‘Just Pay’
We need to remember that reward has an ‘emotional dimension’
• physical environment • sustainability of work • work facilities • security
Quality of Work
• perception of the value of work • achievement • challenge • recognition • work interest
• social environment • life-style balance • caring environment
• working relationships • risk sharing • freedom & autonomy • pace of work
Building for the Future
• career advancement • learning & development • performance improvement & feedback
The 6 Guiding Principles
1. Think strategically about reward
2. Invest heavily in a ‘Pay for Performance’ culture
3. Check the market and be transparent on findings
4. Policies, Procedures and Guidelines should eliminate unfair practices
5. Never under-estimate the power of recognition
6. Accept that your best performing staff will always want more pay
How to design a compensation structure in 5 steps?
1. Reward Strategy
A clear linkage with the overall business strategy to describe how an organization will use reward policies and practices to deliver its business strategy which may include manpower plans, recruiting & retaining the right talent levels, motivating high performers, incentive based schemes, etc.
Examples of Reward Strategy linkage:
2. Internal Equity
The purpose of internal equity analysis is to determine and assess the relationship between similar jobs as evaluated and corresponding pay levels. This is only possible if there is a proper linkage between job analysis and job evaluation. Job size must be equitably in relation to other similar jobs within the organization.
3. External Competitiveness
Proper external market alignment through an effective benchmark and positioning against reliable external market pay & benefits data.
Why Use Pay Surveys?
What are you benchmarking against?
Probably the most critical aspect of any pay survey is how jobs are measured.
Job Matching / Mapping
Job Title Matching
4. Developing Compensation Structure
Structuring and assigning a compensation range/band against each relative job grade/job size. This is established by the desired “market position” and is tabulated using a percentage (%). Structuring an effective “right package” link between remuneration and job performance is very critical.
Country specific legislation will establish minimum wages, overtime pay, record keeping requirements, and equal pay affecting full-time and part-time workers in the private sector.
What is the basis for the pay range?
What is the size of the pay range?
Correct pay for Jobs
5. Communication & Implementation
Keep your communication simple for your people to receive the right message. Apply a compa-ratio to migrate into the new compensation structure.