Human Resources in Business Strategic Aspects Of Reward and Variable Pay - Essay Example

Every organization should construct a system to reward its employees – both financial (salary, bonuses) and non-financial (social events, training). The most important goals of every reward system is to maintain the organization’s objective, to exercise control over performance and to ensure internal equity. Reward strategies also have economic influence. They affect the business competition and create greater job mobility. The connection between business, Human Resources and Reward is that in terms of business, rewarding improves customer service.

The reward strategy also influences how employees acquire additional skills and competences. Looked through the employer’s perspective employees are rewarded for their skills (potential and output), for their input (presenting competencies). From the employee’s point of view being rewarded means that they are treated as stakeholders and that the expectations of the management have been met. Rewarding also entitles employees to bargain their wages with labour unions and to seek consultations via work and staff councils.

As a statistical summary, it can be said that in the last 5 years, 60% of the companies have introduces new reward systems into their organizations. As a general rule every employee has to be advised before starting work about the payment structures, the salary progression, the monthly benefits (if/after the target is reached), and incentive plans. Not all organizations have a delegated Human Resource department. Smaller businesses prefer to allocate the role to the owner/manager. Therefore, employees have a direct access to the management and can try to negotiate their pay progression.

In a bigger company though, employees have more benefits – bonuses, training programmes, social events.In traditional organizations for example in Japan, the progression of the salary depends on the length of service. These are centralized policies, and usually they have very cautious response to the economic market pressures. That is why in traditional organizations job evaluation is widespread and there are small performance rewards, but mainly aimed to the senior employees. Leading organizations have strong emphasis on performance and there payment is directly linked to individual performance.

They exercise decentralized policies and have more flexibility in teamwork and line management. Leading organizations have different reward system for the various departments and they do not automatically apply the same rewards for everybody.Usually there is a basic payment and a bonus one. The bonus works as a stimulus for high performance and reached targets. Often employees can not meet the target, because the objectives are unclear. Also when setting up targets, there is no guarantee that the productivity will increase.

Moreover, there is the divide between those achieving the goal and those who don’t. This forms a chance in attitudes, which is not always into positive direction. Schemes which are forced upon the staff quickly and with no explanation, usually do not work. Recently, a survey has been conducted by the Institute of Personnel and Development on whether performance is related to the pay. The findings show that employee’s performance improves with the increase of the payment. Of course there is conflicting evidence to what extent this is successful.

This can be easily applied to organizations where the output is measured.