Human Resources Management, Reward, internal factors
Reward is one of the most important things in Human Resources Management. It can be defined as the compensation people receive for their contribution to an organization or firm. It deals with the implementation of strategies in order to reward people fairly and equitably. How can compensation be analyzed? This subject has been studied by many theoreticians and we'll try to examine it.
First of all, there are external and internal factors that influence reward design. Concerning the external factors, political and economic factors are essential. For example, in China, the remuneration of some CEO must be approved by the government, whereas in the UK, the remuneration committee takes the decision. There are also cultural values. Some jobs are highly paid, others not. The labour market is also important especially in terms of supply and demand. Finally, a trade union can have a huge influence for the reward attribution. In some countries, their role is essential (France). In China, it is not allowed.
As far as internal factors are concerned, factors such as the product market conditions and the employer's cost structure, the organization's reward strategy (paying the market rate or not), the location of the organization (salaries are not the same in Nottingham and London), the job size and the individual characteristics (experiences, qualifications, skills and performance) have to be taken into consideration.
[...] It is also related to this question: how much more? Should we choose a hierarchical (large pay gap structure) or a flat (small pay gap) pay structure. The tournament theory (Lazear and Rosen, 1981) argues that it may be efficient to pay those at the top of a pay structure a wage that exceeds their marginal contributions. On the other hand, some argue that a more egalitarian pay structure may be more efficient as it may inculcate feelings of fairness and common purpose, foster cooperative, team-oriented behavior, and support common goal orientations (Bloom,1999 and Shaw et al.,2002). [...]
[...] Issues about reward in Human Resources Management Introduction: Reward is one of the most important things in Human Resources Management. It can be defined as the compensation people receive for their contribution to an organization or firm. It deals with the implementation of strategies in order to reward people fairly and equitably. How can compensation be analyzed? This subject has been studied by many theoreticians and we'll try to examine it. First of all, there are external and internal factors that influence reward design. [...]
[...] It involves managers viewing the way that they reward employees in the round, taking equal account of both the tangible and intangible ingredients that together help to make work and jobs “rewarding” in the widest sense of the world. The idea is effectively illustrated in graphical form by Armstrong and Brown (2009). This broader focus on “total reward” has come about largely because of developments in the commercial environment (great competitive pressure leading for ways of reducing their costs, tighter labour market conditions making it difficult for employers to recruit, retain and motivate References: Boxall, Peter; Purcell, John and Wright, Patrick. Oxford Handbook of Human Resource Management. [...]
[...] How much should we pay each person in our organization? 2. How should the payment package be made up? These are among the most important decisions Human Ressources managers have to take because they have such significant outcomes How much should we pay each person in our organization? To answer this question, we should focus on the equity theory according to which an individual will consider that he is treated fairly if he perceives the ratio of his inputs to his outcomes to be equivalent to those around him. [...]
[...] For instance, the ‘market rate' can be identified informally or formally. Firms can lead, match or lag the market. There are different views on this issue (Guthrie, 2008). The neoclassical economic perspective argues that deviating from the ‘market' rate would negatively impact on firm profits. On the contrary, the ‘efficiency wage hypothesis (Akerlof and Yellen, 1986) argues that paying above-market wages may be more ‘efficient'. Higher relative salary could: 3. Give employer an advantage in the labour market 4. Reduce ‘skirking' on performance problems 5. Reduce labour turnover 6. [...]
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