THE PRACTICE OF REWARD

MANAGEMENT

THE PRACTICE OF REWARD MANAGEMENT:

SESSION PLAN (PART 1)
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Reward management defined

Aims of reward management
Components of the rewards system
Financial rewards
Non-financial rewards
Pay determination
Market pricing
Job evaluation
Analytical job evaluation schemes
Non-analytical job evaluation schemes

THE PRACTICE OF REWARD MANAGEMENT:

SESSION PLAN (PART 2)
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Base pay management

Grade and pay structures
Types of grade and pay structures
Model of a narrow graded structure
Model of a broad graded pay structure
Model of a broad banded pay structure
Model of a career family structure
Model of a job family structure
A pay spine
Scope of contingent pay
Types of contingent pay
Performance-related pay model
Competency related pay model
Contribution-related pay model (1)
Contribution-related pay model (2)
Model of evidence-based reward management
Pay matrix

REWARD MANAGEMENT DEFINED

Reward management is concerned with the strategies,
policies and processes required to ensure that the value
of people and the contribution they make to achieving
organizational, departmental and team goals is
recognized and rewarded

AIMS OF REWARD MANAGEMENT

Support the achievement of business goals

Promote high performance
Support and develop the organizations culture
Define the right behaviours and outcomes
Reward people according to the value they create
Align reward practices with employee needs
Help to attract and retain high quality people

THE REWARD SYSTEM

A reward system consists of the interrelated processes

and practices that combine to ensure that reward
management is carried out effectively to the benefit of
the organization and the people who work there

REWARD SYSTEM COMPONENTS

Base pay
Contingent pay
Employee benefits

THE COMPONENTS OF TOTAL REWARD

Base pay
Transactional
rewards

Contingent pay

Total
remuneration

Employee benefits
Total reward
The work itself (job design)
Relational
rewards

The work experience

Recognition, achievement, growth

Non-financial
rewards

FINANCIAL REWARDS
Financial rewards comprise all rewards which
have a monetary value and add up to total
remuneration:
base pay
pay contingent on performance, contribution,
competency or skill
pay related to service
financial recognition schemes
benefits such as pensions, sick pay and health
insurance.

NON-FINANCIAL REWARDS
Non-financial rewards are those which focus on the
needs people have to varying degrees for recognition,
achievement, responsibility, autonomy, influence and
personal growth

PAY DETERMINATION
Pay determination is the process of deciding on the level
of pay for jobs or people. Its aims, which frequently
conflict, are:
To be externally competitive in order to attract, engage
and retain the people required by the organization
To be internally equitable in the sense that rates of pay
correctly reflect the relativities between jobs

MARKET PRICING
Market pricing is the process of making decisions on pay
structures and individual rates of pay and obtaining
information on market rates (market rate analysis)

JOB EVALUATION

Job evaluation is a systematic and formal process for

defining the relative worth or size of jobs within an
organization in order to establish internal relativities,
carried out through either an analytical or a nonanalytical scheme

ANALYTICAL JOB EVALUATION

SCHEMES
Analytical job evaluation is based on a process of
breaking whole jobs down into a number of defined
elements or factors such as responsibility, decisions
and the knowledge and skill required
The two main schemes are point-factor rating and
analytical matching

NON-ANALYTICAL JOB EVALUATION

Non-analytical job evaluation schemes enable whole
jobs to be compared in order to place them in a grade or
a rank order they are not analysed by reference to their
elements or factors

BASE PAY MANAGEMENT

The management of base pay uses the information from
market pricing and job evaluation to design and operate
grade and pay structures that cater for job-based pay
and allow scope for pay to progress within the structure
through person-based pay

GRADE AND PAY STRUCTURES

Grade and pay structures provide the framework for
base pay management so that an organizations pay
policies can be implemented

TYPES OF GRADE AND PAY

STRUCTURES

Narrow-graded
Broad-graded
Broad-banded
Career family
Job family
Pay spine

MODEL OF A NARROW-GRADED STRUCTURE

MODEL OF A BROAD-GRADED STRUCTURE

MODEL OF A BROAD-BANDED STRUCTURE

Kkkkkkk

MODEL OF A CAREER FAMILY STRUCTURE

JE points

Career families

MODEL OF A JOB FAMILY STRUCTURE

Job families

A PAY SPINE

Pay
spine

SCOPE OF CONTINGENT PAY

Contingent pay provides financial rewards that are

related to individual, team or organizational performance
or a combination of these

TYPES OF CONTINGENT PAY

Performance-related pay (merit pay)

Competency-related pay
Contribution-related pay
Skill-based pay

PERFORMANCE-RELATED PAY MODEL

Pay related to the achievement of agreed results (targets or outcomes)

Agreed
outcomes
(targets)

Performance
measures

Performance

Rating

Formula

Performance
pay

COMPETENCE-RELATED PAY MODEL

Pay related to the level of competence achieved

Agreed
competence
levels

Competence
level
definitions

Competence
(evidence of
level)

Rating or
assessment

Formula or
methodology

Competencerelated
pay

CONTRIBUTION-RELATED PAY MODEL (1)

Pay related to the both outcomes (results) and inputs (level of competence) achieved

Agreed
Outcomes
(results)

Performance
measures

Performance
(results
achieved)
Rating or
assessment

Agreed
competence
levels

Competence
level
definitions

Competence
(evidence of
level)

Formula or
methodology

Contribution
pay

CONTRIBUTION-RELATED PAY MODEL 2

90%

Recruitment
Consolidated increases
related to competence

100%

Reference point
A
B

110%

Fully competent aligned to

market rate
Bonuses for exceptional
performance successive
bonuses consolidated

Consolidated increases related to competence up to reference point; cash bonuses paid above reference point
for special achievements

A MODEL OF EVIDENCE-BASED REWARD MANAGEMENT

Review

Set goals
and
success
criteria

Implement

Develop

Measure

Evaluate

PAY MATRIX
Percentage pay increase according to performance rating and
position in pay range (compa-ratio)
Rating

Position in pay range

80%-90%

91%-100%

101%-110%

111%-120%

Excellent

12%

10%

8%

6%

Very effective

10%

8%

6%

4%

Effective

6%

4%

3%

Developing

4%

3%

Ineligible