HRM: Total Rewards

Book chapters 10 and 11.

This weeks topics are managing compensation and rewarding performance.

There are many different ways we are compensated for our work, and they have to do with the way we are payed or by the benefits we receive. Different variations can affect the employee motivation in various ways and make the employee want to work and do good for you. The most common ways are fixed pay, bonuses rewarding good performance (commissions, monthly bonuses, movie tickets etc.) and benefits (health care, dental care, company cars, company laptops). There are many things that need to be considered when structuring the pay for the employees to make them motivated and to keep them happy. The most valuable thing for employees is the pay. Whether it is a monthly fixed salary, or a hourly salary with commissions. Also certain pay raises will keep the employees, giving seniority bonuses, for example 1$/hour more to long time workers. If you want to keep the entire group motivated you might even consider group pay, where the entire group in charge gets payed a total sum and then divided equally between the members. This may cause problems if there are people taking advantage of the paying method. One thing that is quite taboo is asking how much other people earn. Having a open pay might cause friction between workers, if someone who is getting payed less is putting in more work. Comparing your compensations to competitors and seeing whether it is lower or higher, will make the employee want to stay since they know they can not get better anywhere else. For compensation there are two main methods: job — and skill based approaches. Job based approaches contain: evaluating the worker compared to their peers, commissions based on standards set by other companies, and for individuals seniority, experience and performance based bonuses. The laws that go in to compensation make sure the employees are treated equally. Many countries have minimum wage and over time pay laws, to make sure people are not being over worked and get paid enough to survive. The Equal Pay Act makes sure that everyone, no matter what gender and ethnicity, gets payed equally for the same job. This has been recently in the news numerous times, especially talking about equal pay for women, who are getting payed 5% less for the same jobs men do. Also some countries have set standards saying that for this job you have to get payed a minimum of this. This will make sure people want to do other jobs as well and want to work on their skills so they can be employed. Countries also set various licenses that are required when doing certain jobs. People with those licenses get paid much more, because of their knowledge. A good example is the fire work license in Finland (gives you the right to solder and use fire for metal work). Employees with this license get payed 500 euros more a month at many jobs.

Rewarding performance can be just as tricky as rewarding, but by thoroughly planning it well it can be an enormous motivator. The main challenges with pay per performance are: only focusing on the pay, loss of teamwork, disbelief in performance leads to better things, creating stress from having to compete constantly, and lack of self motivation. Pay and performance should be balanced and there should be a clear way of tracking it, using it as a part of a larger incentive, building employee trust, showing people that performance leads to good things, many different levels of rewards, asking the employees opinion on what should be used as a reward and what is too much, and giving other than money rewards. The most common pay per performance plans are merit pay and rewards, determined by the bosses appraisals (may not be equal due to favoritism). A professionally higher way of rewarding would be rewarding groups who work on certain tasks together, achievements or bettering the work environment (with money or movie tickets, dinners etc). Plants and business units use gainsharing rewards, they are rewarded when they save money with financial rewards. At the highest level are the entire corporation bonuses, most commonly payed when the company has done good to all of the employees (EmployeeStockOptionPlans).

These earlier mentioned methods do not fit executives and salespeople as well as basic employees. By using the before mentioned methods to better the working environment and making the company more successful and meet company set goals. For salespeople the most common way of rewarding them is commission. The company rewards them for positive performance, such as good customer feedback, good service, amount of sales. It is important to keep the salespeople motivated, since they are the face for the company when selling the product or service. This may lead in an increase of sales and build competition. It is advised to use team bonding and team building activities to keep the work environment non hostile between the competition. Small firms have a much harder time to set the most beneficial reward program, since they may not have the experience and knowledge. It is very important for them to think thoroughly about their plan, since in a smaller firm it has a larger impact.

Rewarding the employees in a way that seems equal, achievable and most importantly benefits the company, is the goal of rewarding the employees for their performance. Lack of motivation between workers can spread like wildfire and also a constant need to outwork others can lead to stress. Companies should invest in good health plans for their employees and ways to vent their frustration. Whether it is an open door policy for their superiors or a company therapist.


Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London. Chapter 10 and 11.