Reward Management

Reward Management is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organisation. It deals with the design, implementation and maintenance of reward processes and practices that are geared to the improvement of organisational, team and individual performance.

Aims of Reward Management

Create reward processes that are based on beliefs about what the organisation values and wants to achieve; Reward people for the value they create; Align reward practices with both business goals and employee values; Reward the right things to convey the right message about what is important in terms of expected behaviours and outcomes

 Facilitate the attraction and retention of the skilled and competent people the organisation needs, thus winning the war for the talent Help in process of motivating people and gaining their commitment and engagement Support the development of a performance culture Develop a positive employment relationship and psychological contract

Reward Management Processes and Activities

The business/HR strategy The Reward Strategy Grade and Pay structure Policy
Base Pay Contingent Pay Variable Pay

Market Analysis Job Evaluation

Contd
Grade structure Pay structure Employee benefit Non-financial rewards Performance Management Total remuneration Total reward Building capability

The Psychological Contract

Two types of contracts which define the employment relationship:
Transactional Contract : Well described terms of exchange . These have a basis in law and are usually expressed in financial terms with specified performance requirements. They are also called, Economic Contracts Relational Contract: which are less well defined or may not be defined at all. They have more abstract terms and refer to an open-ended membership of the organisation

Psychological Contract
The concept of Psychological contract is an important one to anybody involved with reward management because it is concerned with defining and meeting expectations concerning pay, performance and the development and application of competence and skill.

Characteristics of the Psychological Contract

A psychological contract is a systems of beliefs which encompasses , on the one hand, the actions employees believe are expected of them and what response they expect in return from their employer, and , on the other, the behaviour employers expect from their employees.

Psychological Contract
Psychological contracts are the beliefs individuals hold regarding the terms and conditions of the exchange agreement between themselves and their organisations. The set of expectations held by the individual employee that specify what the individual and the organisation expect to give to and receive from each other in the course of their working relationship. What employees are prepared to give by way of effort and contributions in exchange for something they value from their employer, such as job security, pay and benefits or continuing training.

There are four types of psychological contract: Transactional Relational Transitional Balanced

Types of Psychological Contract

Transactional
The transactional contract is present when employment arrangement is of a short-term or limited duration Primarily focused on exchange of work in lieu of money - with a specific & definite description of duties & responsibilities and - limited involvement in organisation This is particularly true for employees hired on shortterm contracts as well as workers located off-site

Relational
The relational contract results from long-term employment arrangements based upon mutual trust and loyalty Growth in career and remuneration comes mainly from seniority Other benefits and rewards are only loosely related to work performance The contract is derived from long term membership and participation in the organisation This type of contract is very common in family run organisations in India Where trusted and loyal employees manage most of the senior managerial/supervisory work in the organisation

Transitional
It is a cognitive state which reflects the changes in organisational context & socio-economic changes and Transitions that are in contradiction with a previously established arrangement or psychological contract. This type of cognitive state is apparent during company mergers and acquisition, downsizing as well as related state of uncertainties in work life.

Balanced
Balanced psychological contract refers to: A dynamic and open-ended employment engagement Pre-conditioned on business success of the employer organisation Employee has opportunities to develop skill sets and opportunities for career advancement based on skills and performance Both employee and organisation contribute to each others development Rewards to workers are based upon performance and contributions to the organisations business success or Competitive advantages, particularly in the face of changing business environment. In most of the public owned and professionally managed organisations, balanced type of psychological contract exists

Function of Psychological Contract

To reduce the insecurity of employees To fill the gaps in the employment relationship that cannot be addressed in a formal written contract To shape behaviour of the employees To help employees to weigh their obligations towards the organisation against the obligations of the organisation towards them and To adjust their behaviour on the basis of critical outcomes To give employees a feeling of influence on what happens to them in the organisation

Why is this Useful to Know?

Changing nature of the workplace:
More part-time and temporary contracts Flexible job descriptions Doing more with less (downsizing) Constantly changing service standards Constantly changing technology Changing attitudes about work.

The Psychological Contract Framework

The Good Employer
The High Quality Workplace The Deal

Satisfied And Productive Workers

The Deal
Employer Delivers on Promises Fairness Trust Commitment Well-Being Performance Employees Deliver on Promises

Framework for applying the psychological contract to the employment relationship

Contextual and Background Factors
Individual: Age Gender Education Level in organisation Type of work Hours worked Employment contract Ethnicity Tenure Income Organizational: Sector Size Ownership Business strategy Union recognition

Policy and Practice

Psychological Contract

State of the Psychological Contract

Outcomes
Attitudinal Consequences: Organizational commitment Work satisfaction Work-life balance Job security Motivation Stress Behavioural Consequences: Attendance Intention to stay/quit Job performance OCB

HR policy and practices Leadership/ Climate Employment relations Quality of workplace Reciprocal promises and obligations Delivery of the deal Fairness Trust

The Good Employer

Progressive Human Resource Practices Climate of Positive Organisational Support

The Good Employer

High Quality Workplace

Flexible Employment Practices Employee Partnership