Reward and Compensation Management System Types in HRM

Reward and Compensation Management System Types in HRM

Reward and Compensation Management

Reward and Compensation Management, which comes under human resource management is concerned with the implementation and formulation of policies and strategies that aspire to reward employees equitably, fairly and regularly in accordance with their performance and value to the company.

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Reward & Compensations = Motivated Manpower

Rewards to motivate
Rewards to motivate

Reward management is a good motivational practice that companies use in order to reward their employees for their success and achievement. The company sets their goals and authorizes rules for their employees so that they can follow and achieve those set goals.

This makes sure that the employees are completely aware of the rules and goals and they receive their rewards for their performance. All employees follow the generic reward system as it is a just system.

Happy Employee , Happy Company

Importance of Compensation & Reward System in HRM

Importance of Compensation in HRM
Importance of Compensation in HRM

In the present generation, employees often don’t remain in their jobs as before. Every time a new employee is brought on board, the company spends its valuable resources and money on hiring and training which it could have utilized or spend elsewhere.

Having a wonderful reward system helps keep employees satisfied, happy and loyal to the company. They stay eager to take more steps and climb up the ladder and reach a mightier place within the company.

Employee Engagement : Meaning, Importance & Activities Ideas

Rewards like additional pay and public recognition motivate employees so that they can work harder. Using a software in place to track the employee performance empowers the employee and the employer to monitor the progress and identify when goals are achieved and rewards are earned.

Types of Reward Management

  1. Extrinsic Rewards: These types of rewards satisfies basic needs like security and survival, pay, treatments and conditions.
  2. Intrinsic Rewards: These rewards focuses on satisfying higher level needs like development and esteem.
  3. Individual Rewards: Includes base pay, incentives, rewards attendance, performance, competence, and benefits.
  4. Team Rewards: Includes team benefits and rewards groups cooperation.
  5. Organisation: Includes profit sharing, gain-sharing and revenue sharing.

Objective of Employee Reward Management

Objective of Employee Compensation in HRM
Objective of Employee Compensation in HRM
  1. Support the company’s strategy
  2. Recruit & retain
  3. Strengthen psychological contract
  4. Motivates the employees to a greater extent
  5. Comply with legislation
  6. Internal & external equity
  7. Financially sustainable
  8. Efficiently administered
  9. Retaining the employee
  10. Attracting new employees
  11. Avoid cost of hiring and training of new employee
  12. Encouraging positive attitude
  13. Encouraging honesty and loyalty
  14. Provoke employees to seek advancement
  15. Help strengthen company’s reputation

Therefore, management of reward in a company helps to motivate and retain employees in the company itself.

Compensation system is an important aspect of HRM as a well-designed reward system always leads towards company’s productivity and employees satisfaction.

Also, reward management is a unique process of implementing, creating, and controlling a fruitful reward system in the company which helps to improve and maintain company’s performance. It observes the strategic purposes of motivating, attracting, and sustaining the employees.

Reward management is a critical aspect of Human Resource Management and revolves around development, designing and implementation of appropriate salary system. This system surely helps improve company’s performance and keep employees motivated at work.

Trivia: Reward management has developed based on the grounds of psychologists’ behavioral research and has been an interesting topic since the year 1990.

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