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Rewarding performance and it’s impact to employee turnover.

Rewards refer to all forms of financial returns and tangible services and benefit an employee receives as part of an employment relationship (Edirisooriya, 2018).  Employees will be well motivated and perform well if they are rewarded. There is a direct relationship between rewards and employee performance. If the employees are rewarded, then the employee performance will be increased. In this way employee think that they are being valued. (IPM, 2010).

A reward system consists with financial rewards, other benefits as well as non-financial rewards such as recognition, responsibility career prospects etc. The total reward system consists with mix of financial rewards, employee benefits and non- financial rewards (Armstrong, 2002 cited in Mendis, 2017). According to the above definition the below figure shown how the total reward system can be illustrated.

Figure 1.0 Components of Total Reward System, Mendis, 2017. 

When deciding a proper reward, it is important that staff are believe in rewarding system which should have a clear connection between incentive plan and staff job performance. (Sammer, 2007).

Below points explain the characteristics of successful incentive plan. (Joanne Sammer cited in Bohlander  & Snell , 2012).

  • Identify important organization metrics that encourage employee behavior. (Joanne Sammer cited in Bohlander & Snell, 2012).

it is important to articulate the goal of the incentive plan.” If the company is not able to articulate why it needs an incentive plan, it becomes more difficult to design a plan that will be successful. (Sammer, 2007).

  • Involve employees, Incentive plan should seem fair to employees. (Joanne Sammer cited in Bohlander  & Snell , 2012).

E.g.: if employees are underperforming because of a skill or training deficiency or poor management, an incentive plan could simply exacerbate the situation as employees grow frustrated with their inability to earn a payout. (Sammer, 2007).

  • Find the right incentive payout. (Joanne Sammer cited in Bohlander & Snell , 2012).

A study shows that supervisors and product development managers in the United States and Europe responded best to bonuses of about 30 percent of their annual salary. However, in situations where a product is complex and involves technological and market uncertainty, the study found that optimal bonuses for this group were less than 30 percent of annual salary. (Sammer, 2007).

  • .Establish a clear link between performance and payouts. (Joanne Sammer cited in Bohlander & Snell , 2012).

   If incentives are to get individuals to change their behavior or improve their performance,    employees must see a clear link between their efforts and their incentive payouts. (Sammer, 2007).

 


References.

Bohlander G W & Snell S A. (2012) Principles of Human Resource Management. 16th Edition. South-Western: Cengage Learning.

Edirisooriya W. A. (2018) the impact of reward on employee performance: with special reference to electrico. ReasearchGate [online] Available at (PDF) The Impact of Reward on Employee Performance: with Special Reference to ElectriCo (researchgate.net) Accessed on 25th April 2022. 

Mendis M. V. S. (2017) The Impact Of Reward System On Employee Turnover Intention: A Study On Logistics Industry Of Sri Lanka. International Journal of Scientific & Technology research, 6(9):67-72.

Sammer J. (2007) Incentive plans should motivate employees to perform at a higher level, not encourage them to engage in questionable behavior. HR Magazine: Weighing Pay Incentives, 52 (6) 1-3.


Comments

  1. ChulangaPereraMay 6, 2022 at 11:47 PM

    Agreed with you Dulanjana.With the recent economy, compensation may be more important, but it will not serve as a strong motivator for everyone. A cash bonus is a permanent salary to encourage employees to work hard and meet company goals additional payment on top (Hodder Education, 2009). A bonus, motivates the employee to understand exactly what the corporate objectives are, as well as being a profitable employee and making sure the goals are met.

    ReplyDelete
    Replies
    1. Dulanjana Hashali PeirisMay 7, 2022 at 3:51 AM

      Hello. Yes Very correct. Individual turnover decisions suggests several strategic insights
      beyond compensation and benefits that can be instrumental in any organization’s employee retention management efforts. (Bryant & Allen, 2013).

      Delete
  2. Dileksha Harshani Magedara VithanageMay 18, 2022 at 7:37 PM

    Hi Dulanjana, Further more the organizations can use reward philosophy. The reward philosophy of the organization represents its beliefs about how people should be rewarded. Reward philosophies can be expressed as guiding principles that define the approach an organization takes to dealing with reward (Amstrong and Taylor, 2014).

    ReplyDelete

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