Kojar Ahmed P3 – Reward Systems
In all work environments, employees will expect some kind of reward for their work, mainly in the
form of pay. However, there are other reward systems that help to motivate employees and act as
incentives for hard work, I shall explore these reward systems and outline how they work in the
workplace.
Performance-Related Pay:
Performance related pay is different to the usual standard of pay because it varies depending on the
performance of the employee, usually it does not decrease the amount of pay given to employees
but it can provide bonuses if an employee has performed exceptionally well. This type of pay is
usually used in professions like car salesmen. This is because their pay may increases depending on
how many cars they sell etc. This type of pay can also be implemented in retail and manufacturing
jobs, being offered as incentives for employees to sell more products.
Employers should make sure their way of measuring employee performance is easily understandable
and does not discriminate on the basis of race, gender or religion.
Pension Schemes:
Most businesses by law are obliged to offer their employees some kind of pension scheme, although
this does not stop them from offering their own, tailored pension scheme if they wish. Pension
schemes are rewards offered to employees in the form of a cash sum to help them in their old age or
once they are retired. There are two different types of pension schemes, these are contributory and
non-contributory. Contributory schemes are where both the employee and the employer contribute
a cash sum to the scheme every month or however often the employee is paid. This sum Is usually
deducted from the employee's pay before it is taxed etc. This is the standard pension scheme that is
enforced by the government. If a business has their own pension scheme it allows the employee to
increase or decrease the amount of money that goes into their pension scheme every month.
Profit sharing:
Profit sharing is when a business gives their employees a share of the profits the business has made
based on their performance in the market. For example, if a business does really well and makes a
substantial profit in a certain period, they may wish to reward their employees with a share of those
profits. This is usually more common in smaller businesses where employers are more aware of the
staff they have employed, therefore being more incentivised to reward these employees as they can
personally see how their performance may have led to their large profits. A way in which businesses
distribute these profits is based off how long employees have workers there and how high up they
are in the organisation. Profit sharing is an effective reward system for employees because it makes
them feel like part of the team and allows them to enjoy the businesses success. This also acts as an
incentive in the future to work harder.
Employee share options:
Some employers offer employees the opportunity to buy company shares at a discount for however
long they are with that company, some companies even offer free shares. These shares can then be
sold at any time the employee wishes, although they must still be with that company in order to do
so. Attaining discounted or free shares simply means that the employee owns a small part of the
company, this will sometimes in itself act as a motivator to employees who will want to see the
business do well so the value of their shares can increase. A disadvantage to using shares as a
motivator is that it can be difficult for employees to see how their actions are affecting the business
in terms of share price.
In all work environments, employees will expect some kind of reward for their work, mainly in the
form of pay. However, there are other reward systems that help to motivate employees and act as
incentives for hard work, I shall explore these reward systems and outline how they work in the
workplace.
Performance-Related Pay:
Performance related pay is different to the usual standard of pay because it varies depending on the
performance of the employee, usually it does not decrease the amount of pay given to employees
but it can provide bonuses if an employee has performed exceptionally well. This type of pay is
usually used in professions like car salesmen. This is because their pay may increases depending on
how many cars they sell etc. This type of pay can also be implemented in retail and manufacturing
jobs, being offered as incentives for employees to sell more products.
Employers should make sure their way of measuring employee performance is easily understandable
and does not discriminate on the basis of race, gender or religion.
Pension Schemes:
Most businesses by law are obliged to offer their employees some kind of pension scheme, although
this does not stop them from offering their own, tailored pension scheme if they wish. Pension
schemes are rewards offered to employees in the form of a cash sum to help them in their old age or
once they are retired. There are two different types of pension schemes, these are contributory and
non-contributory. Contributory schemes are where both the employee and the employer contribute
a cash sum to the scheme every month or however often the employee is paid. This sum Is usually
deducted from the employee's pay before it is taxed etc. This is the standard pension scheme that is
enforced by the government. If a business has their own pension scheme it allows the employee to
increase or decrease the amount of money that goes into their pension scheme every month.
Profit sharing:
Profit sharing is when a business gives their employees a share of the profits the business has made
based on their performance in the market. For example, if a business does really well and makes a
substantial profit in a certain period, they may wish to reward their employees with a share of those
profits. This is usually more common in smaller businesses where employers are more aware of the
staff they have employed, therefore being more incentivised to reward these employees as they can
personally see how their performance may have led to their large profits. A way in which businesses
distribute these profits is based off how long employees have workers there and how high up they
are in the organisation. Profit sharing is an effective reward system for employees because it makes
them feel like part of the team and allows them to enjoy the businesses success. This also acts as an
incentive in the future to work harder.
Employee share options:
Some employers offer employees the opportunity to buy company shares at a discount for however
long they are with that company, some companies even offer free shares. These shares can then be
sold at any time the employee wishes, although they must still be with that company in order to do
so. Attaining discounted or free shares simply means that the employee owns a small part of the
company, this will sometimes in itself act as a motivator to employees who will want to see the
business do well so the value of their shares can increase. A disadvantage to using shares as a
motivator is that it can be difficult for employees to see how their actions are affecting the business
in terms of share price.
