Key components (financial and non-financial) that are required to achieve an effective total reward system

 Key components (financial and non-financial) that are required to achieve an effective total reward system
A total reward system is an all-inclusive approach to employee compensation involving monetary and non-monetary rewards. It encompasses more than fixed pay and benefits and considers intangible rewards like personal growth opportunities, job satisfaction, and a supportive work environment. A total reward approach aims to create a work atmosphere that meets employees’ requirements and encourages them to go beyond their usual work output. By combining various reward elements to complement and reinforce each other, total reward strategies can promote internal consistency and alignment with overall business goals (Armstrong, 2007).

A total reward system includes five key components. The first is base pay, which refers to the fixed salary or wages an employee earns based on job responsibilities, skills, and experience. The second component is contingent pay, which includes bonuses, commissions, and other variable forms of payment based on performance. Employee benefits are also important and can include health insurance, retirement plans, and other perks. Learning and development opportunities are the fourth component, including training and professional development. Finally, work experience, which includes the overall work environment, culture, and relationships between employees and managers, is also crucial. A positive work experience can lead to job satisfaction and engagement, while a negative experience can decrease productivity and turnover (Armstrong, 2007).

Reward systems offer several benefits, such as increasing productivity, eliminating the need for close supervision, and reducing employee turnover. However, increased costs and complexity are the main disadvantages of these systems.

The relationship between reward and performance and the links to motivation. (AC 5.2),
Maslow’s theory, developed by Abraham Maslow, argues that human needs are arranged in a hierarchical order, with physiological needs at the bottom and self-actualization needs at the top. The theory suggests that unfulfilled needs motivate behavior, and higher-level needs can only emerge once lower-level needs are met. Herzberg’s Two-Factor Theory, on the other hand, developed by Frederick Herzberg, posits that job satisfaction and dissatisfaction are influenced by two types of factors, hygiene and motivator factors. Hygiene factors are necessary to maintain a reasonable level of satisfaction, and their absence leads to dissatisfaction. In contrast, motivator factors are inherent to the job and lead to higher satisfaction levels. According to Herzberg, an effective reward system must address hygiene and motivator factors to enhance employee motivation and performance (Surbhi, 2020).

The relationship between reward, performance, and motivation is complex. While rewards can increase motivation and improve performance, they need to be designed to meet employees’ specific needs and preferences (Johns et al., 2015). For example, monetary rewards may be effective for meeting lower-level needs. Non-monetary rewards may be more effective for addressing higher-level needs such as recognition and growth opportunities. Additionally, rewards must be tied to performance and achievement to motivate employees effectively.

Paying higher salaries to employees doesn’t necessarily lead to better performance. Money is important to prevent dissatisfaction, but more is needed to motivate employees. Job satisfaction, work-life balance, and growth opportunities are equally important for motivating employees and enhancing performance.

The relationship between reward and performance and the links to motivation
Treating employees fairly in terms of pay has numerous benefits for employees and employers. Firstly, it can attract and retain skilled and talented employees. Secondly, fair pay can increase employee motivation, engagement, and productivity. In addition, it can promote a positive organizational culture, leading to employee loyalty, collaboration, and commitment to the organization’s goals. This positive work environment can ultimately positively impact the organization’s overall performance. Many firms are beginning to offer more perks to employees to create a more employee-friendly culture (Fauver et al., 2018). However, it is important to consider whether this behavior aligns with maximizing shareholder value. Studies have shown that firms with a more employee-friendly culture, providing benefits, training, and equal opportunities for advancement, have higher valuations. Therefore, treating employees fairly in terms of payment can benefit employees and employers, ultimately contributing to the organization’s success.

Conclusion:
In conclusion, this briefing paper has provided the essential knowledge and understanding of performance management and reward for the Healthcare on Hand management team. It covers the purpose and components of performance management, factors to consider when managing performance, different performance review methods, key components of an effective total reward system, the relationship between reward and performance, and the reasons for treating employees fairly about pay. By understanding these concepts, the management team can improve their performance management strategies and design and implement an effective total reward system that aligns with the organization’s goals and objectives. This will ultimately result in increased employee productivity, job satisfaction, and reduced employee turnover, leading to overall success for the organization.