ARMSTRONG'S

HANDBOOK
OF REWARD MANAGEMENT
PRACTICE
Improving performance
through reward
3RD EDITION

Michael Armstrong

KoganPage
LONDON PHILADELPHIA

NEW DELHI

Fundamental concepts 19. Introduction 6. The elements of total rewards 42. Characteristics of reward management 7. Effective reward management 23. Pay level concepts 22. The problem with the concept of strategic reward 64. The Reward System 26 Introduction 27. Guiding principles 66. References 60 4. The significance of total rewards 43. References 24 2. Reward philosophy 65. Implementing reward strategy 84. Achieving the aims in general 11. Conclusion 60. Total rewards defined 40. The rationale for strategic reward 63. Components of a reward system 28. Strategic Reward Introduction 62. Achieving the specific aims 14. References 85 62 . Introducing total rewards 49. Reward strategy 72.Contents Introduction 1 Parti Essentials of Reward Management 3 An Overview of Reward Management 5 1. Reward systems in action 35. Characteristics of strategic reward 65. Models of total rewards 44. Contextual factors 16. Models of total rewards produced by other consultants 47. Underpinning concepts 41. The reward management framework 9. Developing reward strategy 79. How a reward system operates 27. References 38 3. Reward management denned 6. Strategic reward management defined 63. Total Rewards 39 Introduction 40. Total rewards in practice 55. Aims of reward management 9.

Enhancing engagement 132. Rewards for expatriates 92. References 166 10. Financial Rewards 136 Introduction 137. Research on the effectiveness of financial rewards 147. References 96 Part II 6. The role of money 143. Conclusions 156. Engagement and Reward 127 Introduction 127. Why engagement is important 130. Developing engagement policies through reward 133. Performance-related pay 169. International Reward 87 Introduction 87. The theoretical framework 139. References 124 7. Managing organizational performance 113.iv Contents 5. Impact of reward on organizational performance 112. Managing team performance 117. Incentives and rewards 138. High-performance cultures 106. The meaning of employee engagement 128. Types of non-financial rewards 161. Objectives of contingent pay 168. References 185 . Views about the importance of pay 143. Individual intrinsic rewards 163. Contribution-related pay 173. Collective extrinsic rewards 164. The international scene 88. Collective intrinsic rewards 165. References 135 8. Contingent Pay Schemes Introduction 167. References 156 9. Criteria for success 168. The significance of non-financial rewards 161. The meaning of performance 102. Impact of reward on individual performance 112. Individual extrinsic rewards 162. High-performance work systems 108. Non-financial Rewards 160 Introduction 161. Performance and Reward Performance Management and Reward 99 101 Introduction 102. • 167 . Criteria for effectiveness 154. The factors that influence engagement 131. Managing individual performance 118. Skill-based pay 181. International reward strategy 89. Summary of individual contingent pay schemes 183. Arguments for and against financial rewards 152. Influences on performance 103. Competency-related pay 180. How does reward impact on performance? 105. Overall conclusions on contingent pay 183.

Risk assessment 275. Examples of recognition schemes 217 Part III 15. How team pay works 200. Job analysis for job evaluation 248. Market pricing 245. Introducing a bonus scheme 195. Rationale for bonus schemes 189. Defending an equal pay claim 276. Benefits of recognition schemes 213. Requirements for team pay 202. Equal Pay Introduction 264. Rewarding for Business Performance 206 Introduction 206. Computer-aided job evaluation 249.Contents 11. Pay levels within organizations 229. Advantages and disadvantages of team pay 202. References 233 16. Types of schemes 207. References 205 13. Types of scheme 191. Choice of approach 251. Achieving equal pay 273. References 278 264 . Rationale for team pay 200. References 211 14. Developing a point-factor job evaluation scheme 255. Profit-sharing 208. Valuing and Grading Jobs 221 Pay Levels 223 Introduction 224. Share ownership schemes 209. Designing a recognition scheme 216. Team Pay 197 Introduction 197. NHS case study 204. References 263 17. Reasons for unequal pay 266. Non-analytical schemes 242. Factors affecting pay levels 232. Types of recognition 214. Developing team pay 203. Aims 207. Determinants of pay 224. Aims of bonus schemes 188. Bonus Schemes v 187 Introduction 187. Job Evaluation Schemes 235 Introduction 236. Bonus schemes defined 188. Principles of recognition 213. Team pay defined 198. Criteria for a bonus scheme 190. Gain-sharing 210. References 196 12. The equal pay legal framework 268. Examples of non-cash awards 216. Levelling 246. Recognition Schemes 212 Introduction 212. Pay systems 230. Designing a bonus scheme 193. Recognition schemes defined 212. Achieving the purposes 237. Save-as-you-earn schemes 209. Analytical job evaluation schemes 238. Aim of team pay 199. The purposes of job evaluation 236.

Broad-banded structures 301. Single status and harmonization 377. Rewarding Knowledge Workers 359 Introduction 359. Narrow-graded structures 293. Choice of grade and pay structures 322. Salary only 349. Job matching 282. Individual job grades 321. The concept of a market rate 281. Directors' and senior executives' remuneration 342. Factors affecting the pay of manual workers 366. References 346 21. Spot rates 321. Sources of market data 284. Broad-graded structures 297. Career-family structures 308. Rewarding Special Groups 333 Rewarding Directors and Senior Executives 335 Introduction 336. Approaches to rewarding knowledge workers 361. Rewarding Manual Workers Introduction 366. Collective schemes 373. Corporate governance and executive remuneration 340. Rewarding sales representatives 348. Rewarding customer service staff 354. Payment by results schemes 370. Incentive schemes for manual workers 368. Rewarding Sales and Customer Service Staff 348 Introduction 348. Pay structures 367. Grade and Pay Structures 290 Introduction 291. Pay structures 292. Interpreting and presenting market rate data 286. References 378 365 . Assessment of schemes 373.vi Contents 18. Developing a grade and pay structure 325. Guiding principles for grade and pay structures 293. Service contracts 346. Pay spines 320. Combined career/job-family and broad-banded structures 318. Use of benchmark jobs 283. Factors affecting the level and nature of executive rewards 337. Contingent pay schemes 372. Why has executive pay grown so much? 340. Benefits 345. Job-family structures 314. Grade structures 291. References 364 23. Executive pay levels 336. References 358 22. References 332 Part IV 20. Time rates 367. Market Rate Analysis 280 Introduction 281. Using survey data 289 19. What motivates knowledge workers? 360.

Reward policies 422. Conducting pay reviews 429. Communicating to employees 437. Evaluating Reward Management Introduction 440. Reasons for introducing flexible benefits 388. Why occupational pensions are provided 395. What can be done about it? 443. What occupational pension schemes provide 395. Managing Reward Systems 421 Introduction 422.Contents Part V 24. Reference 403 Part VI 27. Advice from practitioners 415. The approach to development and implementation 410. Advising employees on pensions 401. Incidence of benefits 385. Types of flexible benefits schemes 389. The development and implementation programme 413. References 420 28. Monitoring and evaluating reward policies and practices 427. Administering employee benefits 386. Other types of pension schemes 400. Flexible Benefits 388 Introduction 388. References 451 440 . Employee Benefit and Pension Schemes • Employee Benefits vii 379 381 Introduction 381. The state pension scheme 401. Rationale for employee benefits 382. Objective setting 408. Total reward statements 386. Introducing flexible benefits 392. Why evaluate? 441. Employee benefit strategies and policies 382. Reward procedures 434. Reference 393 26. Evaluating the impact of reward innovations 449. Reference 387 25. Controlling reward 426. Developing and communicating pensions policies 402. Pension Schemes 394 Introduction 394. The two main types of occupational schemes 396. References 439 29. The Practice of Reward Management 405 Developing Reward Systems 407 Introduction 407. Choice of benefits 386. General reviews 429. Types of benefit 383. Reward effectiveness reviews 444. The use of computers in reward management 435. Individual reviews 430. The task of developing and implementing reward systems 408. Why don't people evaluate? 442.

viii Contents 30. Using reward consultants 456. The role of the reward professional 452. Responsibility for Reward 452 Introduction 452. References 457 Appendix A: Reward Attitude Survey 459 Appendix B: Employee Engagement Survey 461 Index 463 This book is accompanied by additional online material. To access these resources go to www. . Role of line managers 455.com/resources and under 'Academic Resources' click on either 'Student Resources' or 'Lecturer Resources' as appropriate.koganpage.