• “The extent to which an individual perform his/her duty will depend on the perceived attractiveness of the rewards offered”.
  • How much and employee should be paid? , is deal with compensation management.

Reward is something of value given in return for an act. In other words, reward is what employees received after his/her contribution in an organization. E.g. pay, benefits services etc. In organization, reward is a vital factor for employees’ motivation. So reward system must be managed effectively, for the effective performance of employees.

According to Gary Dessler “employee compensation /reward refer to all forms of pay or rewards going to employees and arising from their employment”.

Types of Rewards

There are two types of rewards. They are:

  1. Intrinsic reward: Job related rewards are intrinsic rewards. They are the satisfaction one gets from the job These satisfactions are self-initiated rewards, such as having pride in one’s work, having a feeling of accomplishment, or being a part of a team. The techniques to provide intrinsic rewards are job enrichment, job rotation, flex time, shorter work-weeks etc.
  2. Extrinsic reward: Money related rewards are extrinsic They include money, promotions, other fringe benefits and the facilities provides from management etc. They are external to the job and come from management. Extrinsic rewards are further classified into two categories. They are:-
  1. Non-financial rewards: They do not enhance employees’ financial position .Instead, they emphasis on making the life on job more attractive. E.g. preferred (advanced) office furnishing, private parking spaces, business cards, one’s own secretary, impressive title etc.
  2. Financial rewards: Financial rewards include both direct and indirect financial E.g. salary, wages, incentives, medical insurance, paid leaves, pension etc. Financial rewards if further divided into two categories. They are:-
  • Performance based reward: when the reward is allocated or pay-off for performance, it is called performance based reward. E.g. commission, piece work pay plans, incentives system, group bonuses etc. This type of reward system helps to enhance the performance of employees and increases job satisfaction.
  • Membership based rewards: When the reward is allocated on the basis of being a permanent member of the organization, it is called membership based This includes, cost of living increases, profit sharing, benefits, salary increase on the basis of seniority etc.