Your employees contribute to your organisation for a great many reasons – job satisfaction, career prospects, team-affiliation, job security and of course the rewards that they receive.
The degree to which an individual allocates importance to each factor varies immensely over time depending on their needs, circumstances, ambitions, personality, age, etc.
So for example, a technical specialist might be so excited by his/her leading edge work that rewards and team are ‘off the radar’, someone working in a high unemployment area might value keeping their job and a salesperson might be highly motivated to achieve their sales targets and commission payments.
These examples are of course stereotypes and effective organisations take steps to make sure that their Rewards Policies cater for difference as far as they can, not forgetting that Rewards Policies do have to align to the organisation’s ability to pay (budget).
What is Recognition?
This is the very simple activity when leaders and managers notice when an individual or team has done something special or important or exceeding expectations and says something to that individual or team to praise and thank them for that contribution or achievement. It costs nothing, should happen close to the event and is always well received.
Recognition can be done public ally as in a company meeting or on the intranet or on social media or in a company magazine. And it can be done privately – one to one or one to the team. Some people prefer public recognition and some prefer private recognition – one size does not fit all.
Some organisations in addition choose to recognise their staff on a regular basis and have schemes like ‘Employee of the Month’ or ‘Salesperson of the Quarter’ or ‘Length of Service Awards’, perhaps with a photograph on the wall or website or a plaque for the desk and a small gift such as a bunch of flowers or chocolates or bottle of wine formally presented by the leader.
What are Rewards?
Most commonly used rewards are financial and they are usually given ‘after the event’ – typically pay levels, bonuses and commission payments. Pay is obviously for individual contribution although some rewards are given for team and/or company performance.
So many organisations get themselves tied into knots and need expert help from Compensation and Benefits (C&B) specialists and tax accountants – this Info Guide will just focus on the basics, starting with some definitions…..
- Market Salary Ranges – the range of salaries paid to jobs of a certain size in your market, established through research
- Salary Policy – the position of choice taken by a company against those ranges; ‘we want to be an upper quartile payer’; linked to their ability to pay
- Salary Bands – the bands published internally for jobs of a certain size
- Salary Position – the actual salary a job holder earns within a band, reflecting their performance and contribution
Individuals inevitably look at their salary position and make two types of comparison…
- Does my pay level compare well with my co-workers? This is called internal relativity
- Does my pay level compare well with other employers? This is called external relativity
- They may also approach this ‘felt fair’ issue irrationally, perhaps because their earnings don’t cover their outgoings – ‘I need more to survive!’
The best policy is for organisations to be open about their salary bands, respect the confidentiality of individuals’ salary positions and make sure that there are mechanisms in place to ensure pay levels are fairly, consistently and legally (Equal Pay Acts) arrived at.
Other Financial Rewards
Typically, these are made up of the following elements…..
- Other financial components – pensions; vouchers; cars
- Ex-gratia bonuses for results or effort; team or company
- Commission payments for sales performance and additional payments for over-achievement (accelerators and kickers)
- Share options – a complicated field where legal/accountancy advice should be sought
Most organisations will try to include several of these elements within their rewards system and many offer Flexible Benefits Plans which enable individuals to select the mix of elements most suited to their circumstances at the time – another area for specialist advice.
Typically, these are much more modest in nature and are made up of the following elements…..
- Holidays – one-off extras or increasing the annual allowance usually tied to length of service or seniority
- Presidents Club – the exotic location for a business meeting which in reality is just a company holiday break
- Dinner bookings – with a partner or for the whole team
- Flowers/chocolates/bottle of wine (also as a recognition tool)
- Cinema/theatre/concert/sporting tickets – special occasions
- Exec MBAs or Senior Development Programmes– usually very expensive and normally reserved for your
Put most simply, incentives are the promises made to an individual before they start work to reward that individual after they have achieved a particular thing. They work for some personality types but for others their impact can be small. If they are to be used, they should focus on goals which are stretching but achievable.
Promotion to the next level or grade in the organisation is usually seen as a reward for doing well in the last job and for demonstrating some potential for the next one.
Promotions are about increasing the job size that an individual is doing, thereby shifting their salary band and giving them increased salary ‘head-room’. Promotions should be accompanied by a new job description/objectives and where necessary extra training and time to get up to speed.
‘Job title inflation’ such as ‘engineer’ to ‘senior engineer’ or ‘team leader’ to ‘manager’ without increasing job size and training is not a promotion – it is simply a status shift and will often lead to confusion and resentment, because the ‘felt fair’ comparisons made by the peer group will be made and no rationale for the change will be seen.
Final words of caution
The laws on taxation vary between countries and over time within a country, so when preparing your Rewards Policy you should always seek professional advice from accountants and lawyers.
Copyright: © Clive Weston, The Hartwell Consultancy, 2020
Please contact us if you’d like to find out more, would like support or want to comment on this subject.