THE REWARD SYSTEM: COMPENSATION AND NON-COMPENSATION DIMENSIONS Jayendra Rimal

The reward system Different people have different sets of satisfaction that they obtain from work. Receiving some form of reward for services provided is one set of satisfaction. Employers use rewards to attract and retain those with the required knowledge, skills aptitudes and attitudes. Reward systems are implemented to focus worker attention on desirable behaviors considered necessary to accomplish organizational goals. If rewards are to be stimulating, they must meet the demands of the employees whose behaviors they are intended to influence.

The reward system, contd… How does reward affect motivation or modify behavior? Although theorists can explain behaviors, prediction has been difficult as the value that individuals attach to a specific reward may vary with time. Because of the variety of demands the task of designing and managing a reward system is difficult and complex. The ideal reward system is one that an employee may desire & value and that which the employer is willing to offer in exchange for contribution. This is usually done by separating the compensation and the non-compensation components of the reward

Compensation systems The allocation, conversion and transfer of a portion of the income of an organization to its employees for their monetary and in-kind claims on goods and services. Monetary claims are wages and salaries paid in the form of money or a form that is easily transferrable to money. Wages and salaries are either earned and acquired at the present time or not acquired till some future date – deferred payment. In-kind claims are claims on goods and services made available and paid either totally or in some percentage by the employer – without immediate monetary gain.

Compensation Dimensions Pay for work and performance Pay for time not worked Loss-of-job income continuation Disability income continuation Deferred income Spouse (family) income continuation Health, accident and liability protection Income equivalent payments

Non - Compensation systems More difficult to classify and are more complex. These are all the situation-related rewards not included in the compensation packages. Any activity that has an impact on the intellectual, emotional and physical well-being of the employee and not specifically covered by the compensation system is part of the non-compensation reward system. But there is a close inter-relationship between compensation and non-compensation rewards.

Non - Compensation Dimensions Enhance dignity and satisfaction from work performed Enhance physiological health, intellectual growth and emotional maturity Promote constructive social relationships with co-worker. Design jobs that require adequate attention and effort Allocate sufficient resources to perform work assignments Grant sufficient control over the job to meet personal demands Offer supportive leadership and management

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