Reward System Performance Related Pay And Gain Sharing Commerce Essay

October 4, 2017 Commerce

Reward system has been widely used in modern direction by corporations and organisations all around the universe. It is because reward system influences significantly on human resource procedure and practiced by actuating employees who contribute in organisations with benefits, stated by Marchington and Wilkinson ( 2008 ) . In earlier times, harmonizing to Oliver ( 1980 ) , wages was merely reflected in an addition of employee ‘s wage. However, as decennaries passed, employees ‘ instruction degree and populating criterion has been improved, and human resource direction is acquiring complicated. Therefore, assorted methods, such as moral encouragement, publicity, preparation and pecuniary inducements, etc. , in a wages system is inevitable to maximum the efficiency of an organisation ( Britton et al, 1999 ) . The sweetening of wages systems to human resource direction had been proved by Cameron and Pierce ( 1994 ) in their analysis of 96 experimental surveies, which honoring methods produce an addition in intrinsic motive, and hence led to better public presentations at work.

In this study, it concentrates on fiscal wages systems in human resource direction. A literature reappraisal will be given at first, followed by two instance surveies about the Performance Related Pay of National Health Service and Gain Sharing of Colorado Memory Systems. In the terminal, we will analysis and compare the two instances mentioned earlier.

Section 1 Literature Review

1.1 Definition

Led by the principals of equity, equitability and consistence, Armstrong and Murlis ( 2007 ) concluded the basic thought of wages system, is to honor the employees harmonizing to their part to the organisation.

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Arnold ( 1990 ) defined that motivate employees and maintain productive work force is the basic aims of a wages system, and in order to finish wages system, there should be reward policies, procedures and patterns designed and applied in human resource direction. After that, public presentation assessment should be implemented to oversee, exam and measure the rewarding consequences. Excellent wages system maximizes the benefits of both the organisations and the persons.

1.2 Classs of wages system

By and large, there are two chief types of wagess, extrinsic/monetary wagess and intrinsic/non-monetary wagess. Monetary inducements such as salary addition, fillip and any other fiscal payment, harmonizing to Richard ( 1979 ) , are the most direct and simple manner to actuate employees. On the other side, better working environment, publicity, insurance, vacations and kids attention, etc. , are non-monetary wagess for staffs. It has besides been categorized into five different kinds by Luthans ( 1998 ) , fiscal, societal, consumable, ocular and audile, and manipulatable wagess.

As it is suggested by Ellis et Al ( 2004 ) , pecuniary inducements affect employees straight but in short term and on the other manus, non-monetary wagess influenced slow but deeper on employees.

1.3 Monetary inducements and Performance Related Pay

Among all the pecuniary inducements, Performance Related Pay is presently the most widely used wages method. Excess payment will be given to employees harmonizing to their public presentation assessments, which implemented by the HRs and designed to measure their parts to the organisation ( Redman and Wilkinson, 2009 ) . The advantages of PRP are obvious, since it is efficiency-oriented and has a rigorous measuring standard towards all sorts of places in organisations, employees will be motivated to better their working qualities and efficiencies. On the other manus, due to the immense sum of factors required to sing in the PA, disadvantages and mistakes are ineluctable. Merely as Brown and Armstrong ( 1999 ) indicated, the figure of unfavorable judgments grew imposingly and it had about equaled to those who approved. Fairness is the nucleus issue argued between persons and organisations.

Furthermore, under the PRP system, an instant return of payment will be pursued by employees and hence led to the under-focus of organisation civilization building and other non-monetary plants, such as after-sale service and client relationships, etc. This is unsafe for an organisation in long term.

1.4 Non-monetary inducements

Armstrong ( 2009 ) pointed out that non-monetary inducements bring deeper and longer influences to organisations and persons. He categorized non-monetary inducements into four kinds, single extrinsic wagess, single intrinsic wagess, corporate extrinsic wagess and corporate intrinsic wagess.

For illustration, harmonizing to the corporate extrinsic wagess, work-life balance policies, employee wellbeing services, concierge services, etc. , will be provided to employees as portion of their wagess.

1.5 Comparison

Harmonizing to the research of Kinney and Raiborn ( 2009 ) , short-run workers and low-skill employees such as cleaners, gross revenues and drivers, etc. , are motivated more by fiscal wagess because they need money to better their life conditions ; on contrast, non-monetary and long-run inducements affect better on long-run workers and high-skill employees for their intents to develop further on their places.

Matthew arnolds and Venter ( 2007 ) indicated that pecuniary inducements are still regarded as the lone method in employee ‘s motive by many directors in the modern society. However, restrictions of exclusive pecuniary inducements are obvious since the development of employee ‘s instruction and living status, employees tend to concentrate more on their calling developments, occupation satisfactions and ego fulfilments, etc. Therefore, suited non-monetary inducements given to employees will actuate them more and lend to a win-win state of affairs for the organisation and persons every bit good.

Section 2

2.1 Case1: Evaluating performance-related wage for directors in the National Health Service.

As the universe ‘s largest publically funded wellness service, National Health Service ( NHS ) remains free for people who is occupant in the UK. It founded in 1948, until now it is presently more than 62m people. NHS provides the most efficient, classless and comprehensive intervention for penitent.

PRP was introduced into the NHS strategy in 1986, in pattern, it still be adopted until now more or less unchanged. The strategy includes three parts. First of wholly, the single director will put work mark for employees at the caput of a twelvemonth. Second, at the terminal of the twelvemonth, directors will measure whether employee ‘s public presentation meet the aim, so directors give each employees a feedback. This feedback is ranked in one of five sets from 1 ( “ systematically exceeds short-run aims and makes first-class advancement towards long-run ends ” ) to 5 ( ‘meets few short-run aims and makes small or no advancement towards long-run ends ‘ ) . Third, the increasing wage is related to this rank. The maximal proportion increasing in wage is 6 per centum in degree 1, 4 per centum and 2 per centum in degree 2 and 3, severally. If a staff acquire flat 4, no wage will increase but still has one-year wage award for class ; whereas, those who get flat 5 will acquire no addition and one-year award.







Proportion additions in wage

6 %

4 %

2 %

0 %

0 %

Annual wage award






Table 1: different degree of PRP

It is obvious that some directors reach degree 1 agencies that they can gain an excess fillip except their basic wage, and their excess fillips are rated by yearly public presentation. On the other manus, those who ranked at degree 4 can still have the one-year paying award, though unable to acquire award that based on public presentations. Furthermore, it is similar to those flat 4 employees, workers ranked at degree 5 can neither accomplish growing in payment, nor does the one-year paying award. Furthermore, people who got band 5 may confront the state of affairs of being fired.

This research shows that 29 % of directors thought PRP could actuate employees to make the aim of work, whereas, merely 5 % directors asserted that it could demotivate. As for the bulk of directors and employees, equity and satisfaction are besides important for motive publicity in PRP strategy.

Case 2: Colorado Memory Systems

Colorado Memory Systems ( CMS ) , which coup d’etat by HP, had non own a profit-sharing system. After it acquired by HP, directors in CMS attempted to establish HP ‘s corporate profit-sharing plan, in order to do them experiencing that CMS had become a big organisation as HP. However, direction felt barely to make the wage at HP degrees. Hence, CMS instituted a gain-sharing plan by themselves so that they cloud heighten its employees ‘ basic wage and supply compensation that reached or exceeded HP ‘s criterion.

Management of CMS thought that with the installed of local gain-sharing plan, workers in CMS would increase several behaviours which can heighten productiveness: single enterprise and duty ; adaptiveness ; willingness to larn ; hustle ; willingness to face struggle ; willingness to larn ; and concentrate and attentiveness. Management hoped that these features could make fiscal accomplishment for house and cut down the spread between CMS and HP.

Consequences: Management reported that the plan had some positive facets: increased visibleness between sections, a heightened consciousness of concern basicss and so on. However, there are more negative effects appeared. For case, workers wished that they could acquire the same compensation plan degree with the employees in HP. Employees of CMS besides perceived the plan to be advancing short-run behaviour.

Furthermore, employees who used the gain-sharing plan should be rewarded on gross of CMS. After incorporating with HP, it is hard to separate whether the CMS ‘s public presentation growing due to the employees themselves instead than HP ‘s section or employees. Finally, in order to pay out plenty to cut down the spread with HP, CMS directors found that they need to pay out at least five out of six times ( wage outs were every two months ) and mean at least 10 % of base wage. However, the plan merely paid out four out of six times and averaged 6.13 % of base wage. Therefore, employees began to question the plan and its credibleness was damaged. Overall, the benefit of CMS did non outweigh the cost.


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