Prof. GURU PRASAD FACULTY MEMBER INC GUNTUR firstname.lastname@example.org
What reward system is? • A reward system is an important mechanism which motivates and encourages managers to achieve organisational goals. • Rewards create a sense of belonging in the individual which makes him feel more committed towards his work. • Rewards increase productivity and create a favorable image for the organisation, • Rewards either financial or non- financial are meant to boost the morale of the employees.
Components of Salary
• Salary : Salaries are usually paid every month. • Benefits: These help to deal with certain contingencies and meet certain social obligations, like safety measures, health benefits, pension, perquisites etc., • Incentives: These are short-term incentives plans and Long-term incentive plans.
Short-term incentive plans
• Total bonus pool: Wherein share holders vote on the formula to be used for deciding the total amount of bonus to be paid. • Carryovers: This is an annual carryover of a part of the amount determined by the bonus formula to the bonus pool. • Deferred payments: Bonus is calculated annually, but the employees receive the payments over a period of years, usually five.
Long-term Incentive plans • Stock options: Gives the employees the right to buy a certain no. of shares of the company at a fixed price for a certain no. of years. • Stock appreciation rights: Gives employees the right to receive cash payments based on the increase in value of stock from time to time. • Phantom stocks: Manager receives a no. shares of stock either in the form of cash or shares. • Performance shares: Under this employees are awarded a specific no. of shares when they meet specific long-term goals.
• • • • • •
Controllable Non controllable Financial Non financial The Balanced score cards Feedback