Reward System

Prof. GURU PRASAD

FACULTY MEMBER
INC GUNTUR
pgp4149@gmail.com
 What reward system is?

• A reward system is an important mechanism which

motivates and encourages managers to achieve
organisational goals.
• Rewards create a sense of belonging in the individual
which makes him feel more committed towards his
work.
• Rewards increase productivity and create a favorable
image for the organisation,
• Rewards either financial or non- financial are meant to
boost the morale of the employees.
 Components of Salary

• Salary : Salaries are usually paid every

month.
• Benefits: These help to deal with certain
contingencies and meet certain social
obligations, like safety measures, health
benefits, pension, perquisites etc.,
• Incentives: These are short-term incentives
plans and Long-term incentive plans.
 Short-term incentive plans

• Total bonus pool: Wherein share holders vote on

the formula to be used for deciding the total
amount of bonus to be paid.
• Carryovers: This is an annual carryover of a part
of the amount determined by the bonus formula to
the bonus pool.
• Deferred payments: Bonus is calculated annually,
but the employees receive the payments over a
period of years, usually five.
 Long-term Incentive plans

• Stock options: Gives the employees the right to buy a

certain no. of shares of the company at a fixed price for a
certain no. of years.
• Stock appreciation rights: Gives employees the right to
receive cash payments based on the increase in value of
stock from time to time.
• Phantom stocks: Manager receives a no. shares of stock
either in the form of cash or shares.
• Performance shares: Under this employees are awarded a
specific no. of shares when they meet specific long-term
goals.
 Performance variables

• Controllable
• Non controllable
• Financial
• Non financial
• The Balanced score cards
• Feedback