Task one – Report
Importance of aligning the reward framework to organisational context and strategy
Cotton (2023) defines rewards as financial and non-financial provisions that the employers give to their employees as compensation for their contributions and effort to work. The employees receive pay in form of cash and benefits. Employee rewards are in two types, the fixed pay and the variable pay. Fixed pay is the kind of payment that the employees receive in form of wages, following the National Minimum Wage regulations. Fixed pay is guaranteed after a specific period as agreed between the employer and the employee. Variable pay, on the other hand, is not guaranteed, and examples include bonuses given to the employees, incentives and overtime allowances.
Organisations engage in developing reward strategies that align to the organisation values, goals and culture. Developing a reward strategy forms a framework that focuses on analysing the external and internal factors affecting the business, with considerations of the economic, legal, social, political, technological and environmental factors affecting employers’ decisions when making reward decisions. Reward strategies change depending on change within the external environment, and this is beneficial in determining the extent to which the organisation achieves a vertical and horizontal fit within the people practice environment. Perkins and White (2020) asserts that people professionals have a responsibility to ensure that they develop a reward policy that creates a fit that enhances effective maintenance of the reward environment. For example, after the Covid-19 pandemic, people professionals were engaged in the process of developing policies and practices that enhance effective compensation for the employees. Thus, when developing the reward strategies, they had to analyse the issues that contribute to development of effective reward systems (Whitehouse, 2020).
Promoting employee training and development is one of the aspects that contribute to development of a learning culture, which enhance skills and knowledge development for increased employee pay (Armstrong and Taylor, 2023). When the employees learn and receive better compensation, they gain more motivation to work, which enhances performance improvement. Thus, when aligning the reward framework to the wider organisation guides people professionals to design and deliver improvement in people practices, which helps improve workforce characteristics. For example, an organisation with a good reward framework attracts a wide pool of talented candidates from the labour market, which is crucial in attracting candidates with knowledge and skills that the organisation requires for progress. Depending on the size of the organisation, the employer should consider a priority to ensure that they hire the number of people that the organisation is able to pay, and whose contribution to the organisation drives success and meets the organisational goals and objectives.
However, it is crucial to note that, even with a good reward system, an organisation may experience challenges in recruiting candidates, especially when the organisation operates in a tight labour market environment. In a CIPD release, many employees exit the labour market and people professionals are giving attention to developing policies that will enhance provision of regular pay to the employees in order to keep them at work (CIPD, 2022). Thus, people professionals have to develop their capacity to maintain reward systems that will allow for the retention of employees in the organisation. In my organisation, I have been working with the senior people practice professional, and I have realised that before making reward decisions, they analyse the market price to understand the pay grade for the employees in the different positions. This information helps in guiding them through the employee lifecycle from employee attraction and recruitment. The benefit in this case is that the senior professionals get to gauge the organisation capability to reward, and in the process enhance development of reward options that will enhance achievement of wider organisation objectives.
Impact of organisational reward strategies to attract, motivate and retain talent
A reward strategy to pay an employee for a specific role in the organisation, depending on the organisation hierarchy is a crucial process in attracting candidate to join the organisation. This falls in line with the role of people professionals in identifying the employees’ pay grades for a particular position in the market. Getting an insight on what the organisation should offer to an employee in a specific role requires the employers and people practice professionals to engage in the salary benchmarking process, to evaluate the financial pay and non-financial benefits that the employees in that particular position receive within the labour market. According to Cotton (2022), job evaluation becomes an important method in helping professionals design the best alternatives to compare employees’ pay rates and develop a fair reward system. For example, when deciding on the pay to give the HR administrator in organisation A, people professionals should be keen to analyse pay given to employees working in the same position in competing organisations B and C. With this kind of information, organisation A makes the pay decision depending on market pricing, and strive to ensure that they recruit and retain employees whom they can be able to pay to avoid losing them to the competing organisations within the same sector of business operations.
Understanding the employees’ voice in reward is a strategy effective to ensure that the employees give ideas, opinions and suggestions on the compensation offers that would be satisfactory to them. Peters (2022) asserts that the voice of the employees help motivate them and create an opportunity for them to explain their views. The employers who give employees an opportunity to explain their thoughts and concerns on a specific people practice issue help develop a positive working relationship that contributes to improved people motivation and engagement. For example, an employer may decide to engage in discussion forums and provide suggestion schemes for employees who are not willing to engage in the discussions. These opportunities enhance data collection and make use of it to ensure that they design and implement the perfect reward systems that motivate the employees. Additionally, giving the employees a voice help ensure that the employees feel valued, respected and appreciated for their engagements to work. There are various benefits to giving employees a voice to engage on matters relating to reward strategies. These include development of an organisation culture that give employees the confidence to discuss issues, limits centralisation in decision-making and improves workplace behaviours. However, the limitation is that the employer might be unable to implement all ideas into the reward system, making it impossible to satisfy all employees’ concerns.
Recognising the diversity aspect in managing employees’ expectations is essential in developing reward strategies within the organisation. According to Ali (2022), acknowledging diversity means that the employers should understand and respect people from their backgrounds. By doing this, the employers also follow the Equality Act 2010 regulations, and helps minimise cases of employee pay discrimination. Appreciating and including all employees helps in motivating the employees, because they experience a sense of belonging at work. According to Tursunbayeva (2022), following the diverse interests and implementing diversity policies is helpful in ensuring that the organisation recognises its reward achievements, hence create an opportunity to help people understand their views and concerns on pay and rewards. For example, an organisation that has developed its policy in diversity is capable of developing its brand in the labour market; hence attract diverse groups of people whose contribution is crucial for organisation success. Such employees would want to retain in the organisation for a longer time as long as they receive fair and equal rewards from the employers.
Total rewards approach, including monetary and nonmonetary incentives
Cotton (2023) defines total rewards as the aspects that the employers and employees consider of value at work. These are additions to the financial rewards or pay that the employees receive from the employers. Employers consider total rewards approach to be an innovative to increase employee satisfaction and options to increase employee engagement to work. Total rewards are holistic to ensuring that they attract and retain employees, and should best fit to ensure that they align to organisation culture, structure and business processes. Total rewards should integrate with other business policies to enhance innovation and should be strategic to promote positive employee behaviours and values. Total rewards should be people centred, and appreciate employees as the individuals who engage in actions that support organisation progress and success. Employers should customise total rewards in a manner to meet the needs of the employees in the organisation, and should be distinct to embrace the diverse set of workers. Therefore, when developing total rewards for the employees in organisation A, the people practice professionals should be willing to voluntarily, engage the workers to have an understanding of their views on financial and non-financial offers, and have an insight on developing unique total reward approach to meet employees’ needs.
Examples of monetary incentives total rewards include fair pay and benefits to the employees. Cotton (2022) explains that fair pay eliminates chances of employee discrimination and provides an environment where accountability and transparency are key in developing a reward system. Examples of non-monetary incentives in total rewards include flexibility in employees’ working options to increase employee performance and achieve overall business goals and objectives. McCartney (2022) encourage employers to offer flexible work options to allow create work-life balance, which sows employers’ care to employees’ concerns.
For example, when offering the monetary and non-monetary rewards to the employees, the employers in my organisation strive to understand the workers’ interests and needs. This might be challenging, but effective during the recruitment process. According to Cotton (2022), when designing the job description and person specification for a specific position in the workplace, recruitment experts should partner with the reward experts to make a decision on the financial and non-financial offers that the potential candidate expects to receive. This is one way of attracting a candidate whose interests and needs align to organisation objectives, hence determine the kind of employees that the organisation works with.
Understanding the significance of other aspects such as performance-related pay, competence-related and contribution-based pay is crucial in helping reward experts implement the total rewards approach. These aspects contribute to development of meaningful work, freedom and autonomy as well as recognition of employees’ achievements, whether as teams of individuals, towards achieving organisation goals and objectives (Cotton, 2023). The advantages of implementing total rewards approaches are that they enhance transparency, allow for personal and professional development among the employees, strive to attract, motivate and retain employees, and becomes significant in communicating employees’ value propositions.
In my current working organisation, the employers and senior reward experts have been making effort to give employees an opportunity to work from home, which I have found significant in motivating the employees to engage in work, and strive to be higher performers for us to receive performance-related pay.
Advantages and disadvantages of using incremental pay scales
Cotton (2022) defines incremental pay scale as the progression to a higher pay depending on the employees’ length of service at work, skills development, and employees’ rank and seniority in the organistaion. When an organisation choses incremental pay scales, they should put into consideration the aspect of pay structure, which analyses the number of pay grades in the structure and the span that an employee should stay within each band. Understanding these issues help analyse the advantages and disadvantages of implementing the incremental pay scales within the workplace, and their significance in attracting, motivating and retaining employees at work. Additionally, people practice professionals and organisational employers have a responsibility to ensure that they follow the law and ethical practice to avoid unlawful bias and making unfair decisions that might affect their work relationships (Green and Russell, 2022).
Incremental pay depending on length of service determines the pay points for the employees after working in the organisation for a specific time. The advantages of considering this are that it enhances employee motivation and retention to stay in the organisation, with the hope to receive additional pay for service within a specified timeframe. Additionally, incremental pay is motivating to the employees compared to receiving a flat salary, which limits the level of employee engagement to service. Either this however, has a limitation to the female workers who sometimes may take time off work, for example during pregnancy leave or other events where they strive to accomplish family responsibilities. For example, after working for a period of five years an employee receives a 4% pay increment. This has a great effect on employees’ motivation to work.
Another consideration is skills-based pay, where the workers receive increased pay after acquiring additional skills (Cotton, 2022). The advantage is that the organisation encourage employees to engage in learning to acquire more certificates that are formal and skills development, as well as engage in work-based learning to increase their knowledge. However, the limitations are that the employees will have to incur financial costs to engage in formal learning, which might limit their increase in pay within the organisation. Additionally, striving to strike work-life balance might be a challenge for the workers, which might limit their productivity and engagement at work as well.
Understanding the market pay rise is an aspect that the organisation should consider in determining the incremental pay scale for the workers. When the salary range increase for the employees in the labour market, the organisation has to consider increasing pay for similar jobs (Cotton, 2022). For example, my organisation has started making use of technology in recruiting candidates from the market. The employees who have a good understanding of the recruitment software in the labour market have been receiving additional pay for their engagements at work, compared to the pay the recruiters received in their previous roles. My employer has taken this with concern to avoid losing the already hired recruit experts, and has agreed with the senior HR to increase their pay to avoid losing them to other competing organisations in the labour market.
According to Jeffrey (2019), getting to understand what the employees should receive as pay, and evaluating the degree to which the employer decides to increase employees’ pay are crucial aspects that help determine the kind of engagements that they have in making reward decisions on pay increase. Thus, an employee may benefit from pay increment depending on their length of service, skills development and market pay rise. When all these are in favour of the employee, chances of experiencing employee turnover are minimal, which is a great advantage to the organisation. However, there are possibilities of unfair pay when the employees working in similar roles receive different pay because they have different work start dates.
Benefits and challenges of using performance appraisal to guide pay progression
Performance appraisal refers to the provision of feedback on employee performance; with the intention to assist people practice professionals make informed administrative decisions on aspects such as employee pay and bonuses. Performance appraisals are meant to help employees understand their strengths and weaknesses, and with the help of the senior managers and people professionals, design programmes to support learning and development to improve on the weaknesses (Gifford, 2022). Performance appraisal guides pay progression decisions as the employers make judgements on whether the employees’ performance is valid to receive additional pay.
People professionals and organisational managers use real-time data to measure performance based on the employees’ involvement in work. This measures on the outcome of the data, and hence determine whether an employee should receive progressive pay or reward (Cappelli and Tavis, 2016). For example, in my organisation, employees in the marketing department were given a target to making sales of the company products within a one-year period. The marketing manager has to conduct a performance appraisal using real time data to find out the employee with the highest target, and performance was based on the outcome. The sales employees with the highest sales would receive additional pay.
Performance appraisals may be in form of feedback from colleagues and senior managers in the workplace. Gifford (2022) explains that the employers may design questionnaires that assist in collecting performance feedback. Organisational managers in this case have a responsibility to guide stakeholders in providing performance feedback, and this is helpful in minimising bias during the process. In order to obtain good feedback, the people professionals should have different skills to ensure that they do not limit the professionals’ capability to attain feedback. Examples of these skills include good questioning skills, and the questionnaires should have both close-ended and open-ended questions to allow the respondents give with range of information. Additionally, the people professionals should not be subjective when analysing the feedback. They should reinforce positive attitude to give insight on developing people strengths.
The advantages of using performance appraisals are that it enhances development of fair compensation strategies for the different employees working in the organisation. performance appraisals allow for rewarding of employees who out extra effort to their work, and this acts as a form of motivation to ensuring that the employees receive additional pay, as well as benefit from other opportunities such as promotions, where they automatically receive more pay. Ashdown (2018) considers this as an appropriate process to ensuring that the employees receive recognition for their efforts. The employees gain more motivation to work, and they tend to be more specific in developing performance goals. Additionally, the feedback acts as a guide to people professionals, to allow the experts design alternatives to enhance improved performance. For example, my organisation focuses on the design and delivery of coaching programmes to assist the employees improve on the weaknesses.
The disadvantages of performance appraisals in determining pay progression are that the results from the appraisals may be biased, especially when the information is collected from colleagues without using real-time data. Gifford (2022) explains the possibilities of personal liking to have an effect on the feedback that people give towards a certain individual at work. Another challenge relates to lack of financial capability to enhance pay progression for the employees who perform well. This happens when many employees have attained the target set, and the organistaion has to alter the budget to meet employees’ expectations.
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COTTON, C. (2022) Job evaluation and market pricing. Available from https://www.cipd.org/en/knowledge/factsheets/market-pricing-factsheet/ [Accessed 18th June 2023]
COTTON, C. (2022) Pay structures and pay progression. Available from https://www.cipd.org/en/knowledge/factsheets/pay-structures-factsheet/ [Accessed 19th June 2023]
COTTON, C. (2023) Reward: an introduction. Available from https://www.cipd.org/uk/knowledge/factsheets/reward-factsheet/ [Accessed 17th June 2023]
COTTON, C. (2023) Strategic reward and total reward. Available from https://www.cipd.org/uk/knowledge/factsheets/strategic-total-factsheet/ [Accessed 17th June 2023]
GIFFORD, J. (2022) Performance reviews. Available from https://www.cipd.org/en/knowledge/factsheets/appraisals-factsheet/ [Accessed 20th June 2023]
GREEN, M. and RUSSELL, T. (2022) Ethical practice and the role of people professionals. Available from https://www.cipd.org/uk/knowledge/factsheets/ethics-role-hr-factsheet/ [Accessed 19th June 2023]
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Task 2 – Response to information request
Legal requirements relating to pay and reward
The legal requirements that relate to pay strive to ensure that the employees within an organisation receive equal and fair pay, and eliminates all cases of pay discrimination. Ali (2022) explains the consideration of the Equality Act 2010 regulation when making reward decisions to avoid any form of discrimination on basis of protected characteristics such as age, gender, sex, religion, race, sexual orientation, pregnancy or disability. Specific legal requirements as follows;-
Equal Pay Provision
According to CIPD (2022), equal pay under the Equality Act 2010 regulation covers all employees working on either full time or part-time basis. The provision also covers aspects that relate to employees’ basic pay, sick pay, redundancy pay, and performance related pay. The regulation avow to the concept of ‘like work’, which explains the value of giving equal pay to the employees working in similar positions, and employees with similar knowledge and skills.
National Minimum Wage rates
The National Minimum Wage Regulation has increased the employees’ wages across different age categories for the employees. Workers who are 23 years and over receive £10.42 per hour, workers between the ages of 21 and 22 receive £10.18. Workers aged 18-20 years receive £7.49 per hour and workers aged 16-17 years receive £5.28. The apprentice rate is £5.28. These changes became effective in April 2023, and there was a 10.9% increase for the workers aged 21 and 23 years.
Implications of non-compliance
Non-compliance with the regulations leads to cases of claims in tribunal courts. For example, in the case of Patterson v Morrisons Supermarket, Patterson was initially working part-time and had been promoted to a full-time worker. However, the management later realised that she was pregnant, and she even requested for maternity leave. On her return to work after the leave, the management withdrew the promotion and insisted that Patterson should continue working part-time, even though there was an agreement on her working full time before she went for maternity leave. This was against the Equality Act 2010 regulation because Patterson experienced discrimination because of pregnancy, and her pay and schedule of work changed consequently because of this kind of discrimination. In the ruling, Patterson received an award of £60,442 as compensation for unfair discrimination (CIPD, 2023).
When an organisation fails to comply with the legal requirements related to pay and reward, an employee may report the case to the tribunal court, and the court makes a ruling after listening to both the plaintiff and the defendant.
Transparency and fairness approaches to rewards
Transparency and fairness approaches are crucial to ensuring that all the workers in the organisation understand the criteria that the managers use in rewarding employees. Organisational managers and people professionals create an open platform where employees understand the reward policies and practices. They provide information on employee wages in different positions at work, share insight on salary raise and bonuses, and ensure that they are open about any possible changes in reward decisions. According to CIPD (2021), transparency and fairness promotes equity and trust among workers, which is an appropriate step to creating a fair reward system.
Merits and impacts
Transparency and fairness helps reduces possibilities of making inconsistent reward decisions. the value of transparency and fairness is that it reduces the gaps that result to inconsistencies in reward decision-making, and makes it possible for the workers to understand the proportionate of the pay they receive to the effort they put to work (Dabrowski, 2023). Specific impacts include;-
Transparency and fairness promotes inclusivity, where every worker feels recognised and appreciated for the effort they make at work. This goes hand in hand with the ‘like work’ concept under the Equal pay provision, which acknowledge the value of equal pay for all working engaging in similar tasks and assigned in the same position. Ali (2022) considers this as significant in reducing discrimination. Additionally, making the employees feel included becomes a priority to the employers, who strive to acquire feedback on employees’ concerns relating to pay (Dabrowski, 2023).
Equal and fair pay is evidence of organisation concern to the workers’ wellbeing. According to Suff (2023), employers improve worker wellbeing by ensuring that they are content and they benefit mutually from the organisation. Fair reward approaches enhance employee resilience, promotes engagement, enhances productivity, and reduces cases of increased absenteeism. All these are attributes that contribute to wellbeing and development of a better work and working lives for all the employees.
Employer of choice
Fair and transparency in rewards enhance development of a good organisation image with a positive reputation. This enhance attraction of skilled and talented personnel from the labour market, who choose the organisation because of its capability to reward the employees accordingly. For example, an organisation that is open on the salary range given to the employees attracts candidates who feel that the reward is fair, and they often want to relate with the organisation brand because of its positive reputation in the labour market (Suff, 2022).
Positive psychological contract
The effect of fair and transparent pay is that the employers develop a positive relationship with the employees. This is because the employers act according to employees’ expectations, and their commitment to meeting employees’ needs. This builds a positive psychological contract, as the employees tend to become more productive and meet the employers’ expectations. The consequences of a positive psychological contract from fair and transparent rewards include increased job security and increased management support, which result to increase in employee satisfaction and commitment to work.
Fair and transparency in rewards result to increase employee retention. According to Peters (2023), understanding turnover in the labour market where an organisation operates is crucial in helping employers make reasonable decisions on different people practice issues. For example, bad reward policies have a negative outcome on employee retention, and this may lead to employees seeking other job opportunities in the competing organisations. However, fair, equal, transparent and consistent reward decisions and policies enhance employee retention, which contributes significantly to good work and positive relationships with other organisation stakeholders.
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DABROWSKI, E. (2023) How do you ensure fairness and transparency in recognition and rewards decisions and processes? Available from https://www.linkedin.com/advice/0/how-do-you-ensure-fairness-transparency-recognition-1e [Accessed 21st June 2023]
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PETERS, R. (2023) Employee turnover and retention. Available from https://www.cipd.org/en/knowledge/factsheets/turnover-retention-factsheet/ [Accessed 23rd June 2023]
PETERS, R. (2023) The psychological contract. Available from https://www.cipd.org/uk/knowledge/factsheets/psychological-factsheet/ [Accessed 23rd June 2023]
SUFF, R. (2023) Wellbeing at work. Available from https://www.cipd.org/en/knowledge/factsheets/well-being-factsheet/#everyone-has-responsibility-for-fostering-wellbeing [Accessed 22nd June 2023]
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