Using Rewards to Motivate

Employees
Given that pay is so important, will the
organization lead, match, or lag the
market in pay? How will individual
contributions be recognized? In this
section, we consider
 What to Pay: Establishing a Pay
Structure
The process of initially setting pay levels entails balancing:
1. internal equity—the worth of the job to the organization (usually
established through a technical process called job evaluation)
2. external equity—the external competitiveness of an organization’s
pay relative to pay elsewhere in its industry (usually established
through pay surveys).

Obviously, the best pay system pays what the job is worth
(internal equity) while also paying competitively relative to the
labor market.

Pay more, and you may get better-qualified, more highly

motivated employees who will stay with the organization longer.
 How to Pay: Rewarding Individual
Employees Through Variable-Pay
Programs
The different types of variable-pay programs:

1. Piece-Rate Pay
2. Merit-Based Pay
3. Bonuses
4. Skill-Based Pay
5. Profit-Sharing Plans
6. Gainsharing
7. Employee Stock Ownership Plans
8. Evaluation of Variable Pay
 Flexible Benefits: Developing a
Benefits Package
flexible benefits individualize rewards by allowing
each employee to choose the compensation
package that best satisfies his or her current
needs and situation

The three most popular types of benefits plans

are :
1. modular plans
2. core-plus options, and
3. flexible spending accounts
 Intrinsic Rewards: Employee
Recognition Programs
Work rewards can be both intrinsic and extrinsic.
Rewards are intrinsic in the form of employee
recognition programs and extrinsic in the form of
compensation systems.

In most jobs, the criteria for good performance

aren’t selfevident, which allows managers to
manipulate the system and recognize their
favorites. Abuse can undermine the value of
recognition programs and demoralize employees.
THANK YOU