Recent Trend of Reward Systems in India

Reward systems helps in increasing performance and creating happier employees. The greatest
management principle is that the things that get rewarded get done. All reward systems are based on the
assumptions of attracting, retaining and motivating people. Financial rewards are an important component
of the reward system, but there are other factors that motivate employees and influence the level of
performance.

Those organisations which gives the maximum reward attracts and retains most people. Higher rewards
will give higher satisfaction. This will lead to lower turnover and more job applicants. It is difficult to retain
the best performers in any organisation. They will get higher offers from competitive organisations and
may leave the company. For retaining the best performers, the organisation needs to reward people at a
level above the reward standards in similar organisations.

In some organisation, reward system is based on performance and skills of the employees. So higher
rewards will motivate skilled employees to perform better. In hierarchical organisations, reward system
acts as a motivation for lower cadre employees to learn those skills which will lead to promotion to the
higher levels. The reward system contribute to the overall culture and climate of organisations.

Reward systems are a major cost factor in many organisations. There are some criteria for building
effective reward systems.

* Give Value for the employees preference in the reward system. Employees prefer rewards in different
ways like cash awards, plaques, recognition in award ceremonies and company newsletters.

* Reward systems should simple and specific. Easy understanding of the system will make the system
work effectively. Elaborate procedures, evaluations and review by different levels will lead to confusion
among people. A line of sight should be maintained between rewards and actions.

* Rewards should be timely. The recognition/rewards should be provided frequently enough to make
performers feel valued for their efforts.

* Reward systems should be fair and effective.

* It should be reliable, that is, the program should operate according to its principles and purpose.

* Involve people in the formulation of the reward system. By ensuring the participation of the people in the
reward system, the company can empower them to do the needful.

For most people, the most important reward is the pay they receive for their work. Effectively planned and
administered reward systems will enhance motivation thus performance also. Employees who work hard
and produce better quality products should get higher pay than the poor performers. The employees
should be satisfied with the rewards they receive for their good work. They should be given extrinsic
rewards like pay, promotion and other status symbols. This will give them a feeling of competence,
achievement, personal growth and self-esteem.

In India, rewards are given in the form of financial benefits, incentives, profit sharing, gain sharing and
stock options. Financial rewards are given to employees for their achievements. Pay is of many types like
Competence related pay, Skill-based Pay, Team-based pay and merit pay.
 An Example of Reward System in India
Reward system in SS Starch Industries :
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I am familiar with SS Starch Industries, give description of the company here.

At SS Starch rewards are clearly linked to performance. About half of pay is tied to company and
divisional performance. The reward system reinforces the company's high expectations of its employees
to grow, learn, and lead. The appraisal and reward system is aimed at increasing employee involvement
in the goals and objectives of the organisation, and encouraging individuals to go beyond their scope of
work, undertake voluntary projects that enable them to learn, and contribute innovative ideas in meeting
the targets of the company. Reliance places great emphasis on soft, conceptual and cross-functional
skills, especially at managerial levels.

The company's reward system improve performance throughout the organization. The employees are
given good pay packets. SS is a hierarchical organisation. So the higher pay and benefits of higher
positions motivates lower cadre employees to perform well and acquire promotions.

Strategies for rewarding employees’ performance and contributions include both non-financial and
financial mechanisms. Some of the primary ones are discussed below.

* Progression through the salary range - Employees receives salary increases to recognize the
attainment of new and/or the enhancement of existing skills/competencies or for assuming increased
responsibilities within the scope of the current position. The salary increase represents a progression
through the salary range approved for the position.

* Promotions - Promotions are typically associated with an increase in salary, and the increase may be
any amount up to 10% of an employee’s current salary. The new salary also will be within the salary
range approved for the position.

* Merit Pay - Supervisors gives employees an annual merit increase to recognize consistently meritorious
performance or successful completion of a project that had a significant impact on a department or the
company itself. To be eligible for a merit increase, employees must have been employed for at least six
continuous months and at least six months must have elapsed since the employee's last salary increase
or promotion.

* Praise/recognition from supervisors - Praise and recognition from supervisors is consistently found to
be among the most important motivators. Employees want to be recognized and feel their contributions
are noticed and valued.

* Bonus - Bonuses are paid on the basis of firm performance relative to the industry and on customer
satisfaction.

* Paid Leave - Supervisors may award employees up to 32 hours of paid leave annually in recognition of
meritorious performance

* Informal rewards - When warranted, supervisors may choose to give employees informal rewards for
specific accomplishments/contributions. Supervisors can be creative in identifying informal rewards.

Impact on productivity :
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The reward system has worked very well in SS starch. The employees developed new skills. This helped
the company to produce quality products. SS' products are considered as high quality by the customers
and orders are piling up. The managerial staff in the R&D department are also paid and rewarded for their
contribution to the development of new products. Productivity has increased with the team effort of all the
employees from the General Manager to the go down workers.

Conclusion:
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Human resources strategies, compensation and reward strategies and the culture the company has built
are critical to maintaining the environment needed to attract the types of workers who will allow the firm to
stay on the cutting edge of changing technologies and markets in its industry. Its social contract therefore
focuses on providing a financially and psychologically rewarding place to work.

Author:
Prof.S.Hariharaputhiran
Dept.of Management Studies,
VSB Engg.College,Karur
Sri_puthiran@rediffmail.com