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An Assignment On ‘‘A Study of Incentives, Rewards and

Benefits in an Organization”

Course Title : Human Resource Management

Course Code : MGT - 325

SUBMITTED TO

Md. Awal Hossen Lecturer

Department of Business Administration LEADING UNIVERSITY, SYLHET

SUBMITTED BY

Torch bearers

Name ID

Syed Ali Hasan 1201010248

Ehsan Ahmed Chowdhury 1201010230

Masum Hussain 1201010202

Mahmudul Karim Newaz 1201010205

Abdul Motin 1201010219

Abu Ahmed Shahib 1201010247

Section : E Semester : 8th Batch : 30th

Department of Business Administration

LEADING UNIVERSITY, SYLHET

SUBMISSION DATE : 25 August, 2014

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Acknowledgement

At first, we are grateful to Almighty Allah for creating us in

such a beautiful country like Bangladesh and also for controlling our

life. For the mercy of him, we have got such courage to start this

assignment on “A study of Incentives, Rewards and Benefits in an

Organization”

After that we would like to give thanks to our honorable Head

of the Department Dr. Bashir Ahmed Dr. Bashir Ahmed Dr. Bashir Ahmed Dr. Bashir Ahmed Bhuyian Bhuyian Bhuyian Bhuyian for giving us the

opportunity to study in this subject. We would like to express our

thanks to the librarian of Leading University for all his help that we

have received.

Our respected parents who gave us mental support and

inspiration for our assignment, there is a special thanks for them.

We also would like to give a lot of thanks to our honourable

course teacher, Md. Awal HossenMd. Awal HossenMd. Awal HossenMd. Awal Hossen for giving us a wonderful

opportunity to make such an interesting and valuable assignment and

giving us a clear concept about the assignment.

At last but not the least, without the help of our friends and

classmates it was quite impossible to prepare such kind of

assignment. They give us some necessary information about this topic

which is unknown to us. So, we would like to give thanks to all of

them.

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Abstract Workforce today is more articulate about their needs. Employees desire the best of everything – competitive salaries, comfortable & inspirational lifestyles, job security, career enhancement options, work-life balance, and so on. Competition for talent is ever increasing and organizations need to have well-defined philosophies and strategies to help them develop innovative ways of tapping intrinsic motivation of employees by engaging their hearts and minds. While many organisations are struggling to make sufficient progress in this direction, there are organizations that have institutionalized robust practices and effective processes in different people practice areas that go a long way in positively impacting employee perception. In this regard, two types of reward are identified, and they are intrinsic reward and extrinsic reward. Extant research showed that reward can affect job satisfaction and thereby employee performance, so this study proposes a new framework based on mediating role of job satisfaction. India’s Best Companies for Rewards and Recognition was conceptualized to recognize companies who are leading the way in the area of Rewards and Recognition for us learns from. Human resources are the most important among all the resources an organization owns. To retain efficient and experienced workforce in an organization is very crucial in overall performance of an organization. Motivated employees can help make an organization competitively more value added and profitable. The present study is an attempt to find out the major factors that motivate employees and it tells what is the relationship among reward, recognition and motivation while working within an organization. The data were collected from employees of diverse type of organizations to gain wide representation of sectoral composition. The participation in survey was voluntary and confidentiality of responses was ensured. The statistical analysis showed that different dimensions of work motivation and satisfaction are significantly correlated and reward and recognition have great impact on motivation of the employees. Implications of the study for managers and policy makers in the context of human resource practices have been discussed. Limitations and guidelines for future research are also provided. A meta-analytic review of all adequately designed field and laboratory research on the use of incentives to motivate performance is reported. Team-directed incentives had a markedly superior effect on performance compared to individually- directed incentives. This effect was not influenced by the location of the study (business, government, or school), the competitive structure of the incentive system (programs where only the highest performers get incentives versus programs where everyone who increased performance receives incentives), the type of study (whether the study was a laboratory experiment or a field study), or the performance outcome (quality, quantity, or both). In these studies, money was found to result in higher performance gains than non-monetary, tangible incentives (gifts travel). More research is needed on the relative cost-benefit of cash and gift incentives, and the way different types of tangible incentives are selected. Long-term programs led to greater performance gains than shorter-term programs did, and somewhat greater performance gains were realized for manual than for cognitive work. Explanations based on cognitive psychological principles accompany each of the analyses.

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Contents

Subjects pages

1. Introduction 5

2. Literature Review 7

3. Types of Incentives 7

4. Other forms 8

5. Importance of incentives 8

6. What is reward? 9

7. Types of rewards 9

8. Other kinds of tangible rewards 10

9. Schedule of rewards 11

10. Length of reward program 12

11. Effect of reward’s on stages of work 13

12. Goals/Importance of a Reward System 13

13. Motivational Theories 14

14. What is Benefit? 15

15. Types of Benefits 15

16. Equity-based compensation 16

17. Relationship of Incentives, Rewards and Benefits with Organization 18

18. Conclusion 21

19. References 22

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Introduction

Human resources are the most important among all the resources an organization owns. To retain efficient and experienced workforce in an organization is very crucial in overall performance of an organization. Motivated employees can help make an organization competitively more value added and profitable. The present study is an attempt to find out the major factors that motivate employees and it tells what is the relationship among reward, recognition and motivation while working within an organization. The data were collected from employees of diverse type of organizations to gain wide representation of sectoral composition. In all, 250 self administered questionnaires were distributed among the employees of different sectors and they returned 220 completed useable questionnaires for response rate of 88%. The participation in survey was voluntary and confidentiality of responses was ensured. The statistical analysis showed that different dimensions of work motivation and satisfaction are significantly correlated and reward and recognition have great impact on motivation of the employees. Implications of the study for managers and policy makers in the context of human resource practices have been discussed. Limitations and guidelines for future research are also provided.

As competitive pressures mount, organizations are compelled to consider strategies that will help them become more innovative, productive, and efficient. It is essential that organizations maximize all resources to optimize the effectiveness of their operations. While many factors impinge upon this effectiveness, labor is an important resource that often represents a significant portion of expenses incurred by organizations. Considering the need to remain competitive, innovative compensation strategies such as incentive programs are often developed in an attempt to align individual motivation and goals with the objectives of the organization. Considerable research exists on psychological theories explaining how and why incentive pay motivates performance. Likewise, there is considerable research on typologies of incentive pay. Since the research in these areas is rather mature and quite voluminous a complete review of such research is outside the scope of this article. Research related to incentive programs in unionized organizations will also be avoided since these programs are usually a function of labor negotiations and not a result of the organization’s desire to tie compensation to organizational performance. As stated previously, competitive pressures in the domestic and global market are placing demands on organizations to be more productive and efficient than ever. This competitive pressure is evident in human resource strategies utilized by corporations. To some degree, the risk faced by corporations is now being shared with the workers. Tully (1995) pointed out that employees are sensing an increased level of anxiety, since they might not know from one year to the next whether they will receive compensation increases or even have a job. Tully points out that this collective risk is being operationalized in incentive programs that often impact as much as 30% of a manager’s income.

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Objective of the Study Primary Objective

The first and most important objective of the assignment is to gather knowledge about Reward, Incentive and Benefit System and effect of different classes of Rewards, Incentives and Benefits in an Organization. Moreover we will know deeply about the implementation of it, Application, Importance and Limitation of it in an Organization.

Secondary Objective

1. Help students to acquire knowledge and skills about Different Motivational Theories for the Organization.

2. To help students for increasing their Motivational Skills. 3. Gather information and ideas. 4. Apply questions to decision-making situations in Organization. 5. Increasing the vocabulary of students. 6. To identify the impotence of Applying Rewards, Incentives and

Benefits in the Organization. 7. Help students to use skills in Applying Motivational Theories in

Organization.

Limitation of the Study i. Time Limitation: All of we know that Muslim’s One of the biggest

religious festival has gone that is Eid-ul-fitr. As our submission date of assignment is After the Eid and we were all busy to perform the religious activity so we couldn’t get enough time to collect necessary data for enriching the assignment.

ii. Budgetary Limitation: we are living in developing country & we are also student that’s why we don’t have sufficient money to spend for betterment of the assignment.

iii. Internet Limitation: In our country the internet service is too slow that’s why we can’t access to internet so easily and find the necessary information regarding the assignment. Besides Our internet facility is so costly and that’s why the entire student can’t use the facility.

iv. Shortage of necessary books: There is shortage of sufficient books in our campus library about this topic. As well as we searched the different books related to this topic but we can’t get or collect enough and needed information to make the assignment.

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Literature Review Incentives

An incentive is something that motivates an individual to perform an action. The study of incentive structures is central to the study of all economic activities (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different organizations within a society) largely amounts to characterizing the differences in incentive structures faced by individuals involved in these collective efforts. Ultimately, incentives aim to provide value for money and contribute to organizational success. Something that incites or has a tendency to incite to determination or action --- Business Dictionary Types of Incentives

Incentives can be too classified according to the different ways in which they motivate agents to take a particular course of action. One common and useful taxonomy divides incentives into four broad classes:

Class Definition

Remunerative incentives Are said to exist where an agent can expect some form of material

reward – especially money – in exchange for acting in a particular way. Financial

incentives

Moral incentives

Are said to exist where a particular choice is widely regarded as the right thing to do, or as particularly admirable, or where the failure to act in a certain way is condemned as indecent. A person acting on a moral incentive can expect a sense of self-esteem, and approval or even admiration from his community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community.

Coercive incentives

Are said to exist where a person can expect that the failure to act in a particular way will result in physical force being used against them (or their loved ones) by others in the community – for example, by inflicting pain in punishment, or by imprisonment, or

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by confiscating or destroying their possessions.

Natural Incentives

such as curiosity, mental or physical exercise, admiration, fear, anger, pain, joy, or the pursuit of truth, or the control over things in the world or people or oneself.

Other forms

These categories do not, by any means, exhaust every possible form of incentive that an individual person may have. In particular, they do not encompass the many other forms of incentive – which may be roughly grouped together under the heading of personal incentives – which motivate an individual person through their tastes, desires, sense of duty, pride, personal drives to artistic creation or to achieve remarkable feats, and so on. The reason for setting these sorts of incentives to one side is not that they are less important to understanding human action – after all, social incentive structures can only exist in virtue of the effect that social arrangements have on the motives and actions of individual people. Rather, personal incentives are set apart from these other forms of incentive because the distinction above was made for the purpose of understanding and contrasting the social incentive structures established by different forms of social interaction. Personal incentives are essential to understanding why a specific person acts the way they do, but social analysis has to take into account the situation faced by any individual in a given position within a given society – which means mainly examining the practices, rules, and norms established at a social, rather than a personal, level.

Importance of incentives Are your employees singing the blues? Are they seemingly unmotivated? Are you having a tough time getting them fired up about safety? If so, then you might be thinking about starting an incentive program. And if that's the case, then a new study, "Incentives, Motivation and Workplace Performance: Research and Best Practices," contains some interesting information. For example, the study found that team-based incentives work best, and incentives can have a positive impact on the negative attitudes that adversely affect achievement of work goals. The study is the most comprehensive ever done on the effectiveness of the $27 billion incentive industry and its usefulness to employers in determining the relationship between incentives, motivation and performance in the workplace. "This definitive study shows that tangible incentives dramatically increase work performance by an average of 22 percent," says Mike Hadlow, president of the SITE Foundation, which released the study today. "No CEO in the world can afford to ignore this compelling finding. Incentive programs may be the single most important performance-improvement tool available to executives today."

Incentives provide a spur or zeal in the employees for better performance. It is a natural thing that nobody acts without a purpose behind. Therefore, a hope for a reward is a powerful incentive to motivate employees. Besides monetary incentive,

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there are some other stimuli which can drive a person to better. This will include job satisfaction, job security, job promotion, and pride for accomplishment. Therefore, incentives really can sometimes work to accomplish the goals of a concern. The need of incentives can be many:-

1. To increase productivity, 2. To drive or arouse a stimulus work, 3. To enhance commitment in work performance, 4. To psychologically satisfy a person which leads to job satisfaction, 5. To shape the behavior or outlook of subordinate towards work, 6. To inculcate zeal and enthusiasm towards work,

To get the maximum of their capabilities so that they are exploited and utilized maximally.

What is Reward?

Like a child being given a chocolate cupcake and a big hug after cleaning her room, rewards and recognition can be powerful tools for employee motivation and performance improvement. Many types of rewards and recognition have direct costs associated with them, such as cash bonuses and stock awards, and a wide variety of company-paid perks, like car allowances, paid parking, and gift certificates. Other types of rewards and recognition may be less tangible, but still very effective. These "non-monetary" rewards include formal and informal acknowledgement, assignment of more enjoyable job duties, opportunities for training, and an increased role in decision-making. This paper focuses on non-monetary rewards, and as we will see, these types of rewards can be very meaningful to employees and so, very motivating for performance improvement.

Money or another kind of payment that is given or received for something that

has been done or that is offered for something that might be done --- Business Dictionary

Types of Reward

Rewards serve many purposes in organizations. They serve to build a better employment deal, hold on to good employees and to reduce turnover. The principal goal is to increase people's willingness to work in one’s company, to enhance their productivity.

Most people assimilate "rewards", with salary raise or bonuses, but this is only one kind of reward, extrinsic reward. Studies proves that salespeople prefer pay raises because they feel frustrated by their inability to obtain other rewards, but this behavior can be modified by applying a complete reward strategy.

There are two kinds of rewards:

� Extrinsic rewards: Concrete rewards that employee receive.

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� Bonuses: Usually annually, Bonuses motivates the employee to put in all Endeavours’ and efforts during the year to achieve more than a satisfactory appraisal that increases the chance of earning several salaries as lump sum. The scheme of bonuses varies within organizations; some organizations ensure fixed bonuses which eliminate the element of asymmetric information, conversely, other organizations deal with bonuses in terms of performance which is subjective and may develop some sort of bias which may discourage employees and create setback. Therefore, managers must be extra cautious and unbiased.

� Salary raise: Is achieved after hard work and effort of employees, attaining and acquiring new skills or academic certificates and as appreciation for employees duty (yearly increments) in an organization. This type of reward is beneficial for the reason that it motivates employees in developing their skills and competence which is also an investment for the organization due to increased productivity and performance. This type of reward offers long-term satisfaction to employees. Nevertheless, managers must also be fair and equal with employees serving the organization and eliminate the possibility of adverse selection where some employees can be treated superior or inferior to others.

� Gifts: Are considered short-term. Mainly presented as a token of appreciation for an achievement or obtaining an organizations desired goal. Any employee would appreciate a tangible matter that boosts their self-esteem for the reason of recognition and appreciation from the management. This type of reward basically provides a clear vision of the employee’s correct path and motivates employee into stabilizing or increasing their efforts to achieve higher returns and attainments.

� Promotion: Quite similar to the former type of reward. Promotions tend to effect the long-term satisfaction of employees. This can be done by elevating the employee to a higher stage and offering a title with increased accountability and responsibility due to employee efforts, behaviour and period serving a specific organization. This type of reward is vital for the main reason of redundancy and routine. The employee is motivated in this type of reward to contribute all his efforts in order to gain managements trust and acquire their delegation and responsibility. The issue revolved around promotion is adverse selection and managers must be fair and reasonable in promoting their employees.

Other kinds of Tangible Rewards

1. Intrinsic rewards: Tend to give personal satisfaction to individual

i. Information / feedback: Also a significant type of reward that successful and effective managers never neglect. This type of rewards offers guidance to employees whether positive (remain on track) or negative (guidance to the

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correct path). This also creates a bond and adds value to the relationship of managers and employees.

ii. Recognition: Recognition: Is recognizing an employee’s performance by verbal appreciation. This type of reward may take the presence of being formal for example meeting or informal such as a “pat on the back” to boost employees self-esteem and happiness which will result into additional contributing efforts.

iii. Trust/Empowerment: in any society or organization, trust is a vital aspect between living individuals in order to add value to any relationship. This form of reliance is essential in order to complete tasks successfully. Also, takes place in empowerment when managers delegate tasks to employees. This adds importance to an employee where his decisions and actions are reflected. Therefore, this reward may benefit organizations for the idea of two minds better than one.

Intrinsic rewards makes the employee feel better in the organization, while Extrinsic rewards focus on the performance and activities of the employee in order to attain a certain outcome. The principal difficulty is to find a balance between employees' performance (extrinsic) and happiness (intrinsic).

The reward also needs to be according to the employee’s personality. For instance, a sports fan will be really happy to get some tickets for the next big match. However a mother who passes all her time with her children, may not use them and therefore they will be wasted.

When rewarding one, the manager needs to choose if he wants to rewards an Individual, a Team or a whole Organization. One will choose the reward scope in harmony with the work that has been achieved.

a. Individual

• Base pay, incentives, benefits

• Rewards attendance, performance, competence

b. Team: team bonus, rewards group cooperation

c. Organization: profit-sharing, shares, gain-sharing

Schedules of Rewards

Considering when to reward an employee is critical in ensuring the reward system has the largest possible impact on behavioral change. In many cases, the schedule of reinforcement can actually be more influential on behavioral change than the magnitude of the reinforcement.

There are two types of reinforcement schedules: 1. Continuous reinforcement

Continuous reinforcement is when every target behavior is rewarded. An example of this is paying a bonus every time an employee reaches a performance

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target. This type of reinforcement schedule is very effective in quickly shaping employee behavior when starting an unfamiliar task. 2. Intermittent reinforcement Intermittent reinforcement is when the reward does not follow every target behavior response. This type of reinforcement will result in higher frequencies of the desired behavior. It is effective in maintaining the desired behavior after it has become a habit. There are 4 types of intermittent reinforcement schedules and each has a different impact on employee behavior:

a. Fixed ratio This type of reinforcement schedule is when a fixed number of behavioral responses occur before giving the reward. An example of this is a bonus that is tied to a fixed number of units sold. This reinforcement schedule will increase performance.

b. Variable ratio This type of reinforcement schedule is when a random number of behavioral responses occur before the reward is given. An example of this is gift cards given randomly to employees. This type of reinforcement will result in an increase in desired behavior and the behavior will be more resistant to extinction (weakening).

c. Fixed interval This type of reinforcement schedule is when the first behavioral response after a specific period of time has elapsed is followed with a reward. An example of this is a salary paid on a regular basis. This type of reinforcement will produce an inconsistent performance pattern amongst employees.

d. Variable interval This type of reinforcement schedule is when the first behavioral response after random periods of time have elapsed is rewarded. An example of this is a supervisor who gives praise randomly to excellent employees. This type of reinforcement schedule will result in an increase in desired behavior and is resistant to extinction (weakening). Continuous reinforcement is very effective in quickly shaping employee

behavior until it becomes a habit. Once the behavior has become a habit, variable ratio and variable interval schedules of reinforcement are the most effective schedules of reinforcement. Using these schedules of reinforcement results in the most significant behavior change in employees and this change is most resistant to weakening.

Length of Reward Program

The length of the employee rewards program has an impact on employees’ subsequent performance. A recent meta-analysis found that, in general, the longer the implementation of an incentive program, the greater the performance gains:

• Long-term incentive programs (last longer than 6 months) increased employee performance by 44%

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• Intermediate length incentive programs (last 1-6 months) increased employee performance by 30%

• Short-term incentive programs (last less than 1 month) increased employee performance by 20%

The effect of long term incentive programs may be so robust because they act to continually shape employee behavior in order to make it a better fit for the organizational culture and preferences. This results in work performance that is more in line with company standards and as a result, contributes more value to the company. Thus, when deciding on the length of an employee rewards program, managers should consider making it long term (last longer than 6 months) in order to gain the most desired results.

Effect of reward’s on stages of work

Rewards have a different impact on the employee’s motivation and subsequent performance during each stage of their work. Rewards can act to motivate the employee to:

• Start a new task. In this initial stage of work, rewards serve to promote “buy in” to start a new task. Rewards increase an employee’s motivation to start a new task by 15%.

• Persist. In this middle stage of a task, rewards serve as motivational maintenance. They will contribute to an employee persevering in the face of distractions, challenges and competing work tasks. Rewards increase employees’ motivation to persist on a task by 27%.

• Work smarter. In this stage of a task, rewards serve to increase the quality of the performance on the task. They will contribute to the employee investing more mental effort, thinking of creative approaches to solve problems and strategies to be more effective and efficient. Rewards increased working smarter by 26% in employees.

In sum, rewards have significantly less of an impact on an employee starting a new task (15% increase in performance), than they do in motivating them to persist at the task (27% increase in performance) and to work smarter on the task (26% increase in performance).

Goals/Importance of a Reward System

Identifying the desired outcome of rewards is essential in developing the most effective rewards program in a company. The goals of a good rewards system should be multifaceted. It should be designed to:

• Attract talented employees. Rewards should be used to entice talented employees to the company or position. Companies should allocate a certain amount of funds to the recruitment and hiring of high caliber employees.

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• Motivate employees to perform optimally. Most programs focus on the motivational component of rewards. They use rewards to shape employee behavior in the most desired direction. This outcome should be carefully considered when designing a rewards program.

• Foster personal growth and development. Rewards should be used to encourage and promote personal growth and professional development. When rewards are used to encourage employees to engage in behavior that will increase their work performance, the company ultimately benefits from a more skilled workforce.

• Increase employee satisfaction with their work. Rewards can promote engagement with work, resulting in increased workplace satisfaction. They can motivate an employee to persist in the face of challenges, come up with creative solutions to tackling tasks and encourage them to derive more pleasure with their work.

• Keep talented employees from leaving. When employees love what they do and are rewarded for their performance, they are less likely to leave their company. Keeping talented employees on board should be a priority of any company. Thus, companies should devote resources necessary to ensure that their rewards program meet the needs of their most talented employees.

Managers seeking to create an effective rewards program should ensure that the program’s objectives are multifaceted. Including each of these 5 goals is critical to the success of any rewards program.

It is critical that managers seeking to develop or enhance an employee rewards program must first understand the components required for success. Doing so could mean the difference between implementing an ineffective program and a successful one. Implementing a successful employee rewards program will result in increased profits, increased employee satisfaction and a larger ROI.

Motivational Theories

Motivational theories are split into two groups as process and content theories. Content theories endeavor to name and analyze the factors which motivate people to perform better and more efficiently while process theories concentrate on how different types of personal traits interfere and impact the human behavior. Content theories are highly related with extrinsic rewards, things that are concrete like bonuses and will help improve employees' physiological circumstances whereas process theories are concerned with intrinsic rewards, such as recognition and respect, which will help boost employees confidence in the work place and improve job satisfaction.

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A famous content theory would be Maslow's Hierarchy of Needs, and a famous process theory would be the equity theory.

Theories of motivation provide a theoretical basis for reward management though some of the best known ones have emerged from the psychology discipline. Perhaps the first and best known of these comes from the work of Abraham Maslow. Maslow’s Hierarchy of Needs describes a pyramid comprising a series of layers from at the base the most fundamental physiological needs such as food, water, shelter and sex, rising to the apex where self-actualization needs included morality and creativity. Maslow saw these levels of needs being fulfilled one at a time in sequence from bottom to top. Employment and the resources it brings are classed under ‘safety needs’ (level 2) while the workplace may also contribute to a sense of ‘belonging’ (level 3) and recognition at work can satisfy the need for ‘self-esteem’ (level 4).

Frederick Herzberg’s motivator-hygiene theory, first published in 1959, argues that an employee’s job satisfaction or dissatisfaction is influenced by two distinct sets of factors and also that satisfaction and dissatisfaction were not at opposite ends of the same continuum but instead needed to be measured separately. The two sets of factors are motivator factors and hygiene factors. According to Herzberg, real motivation comes from the work itself, from completing tasks, while the role of reward is to prevent dissatisfaction arising.

Expectancy Theory is the theory which posits that we select our behavior based on the desirability of expected outcomes of the action. It was most prominently used in a work context by Victor Vroom who sought to establish the relationship between performance, motivation and ability and expressed it as a multiplicative one – where performance equals motivation x ability. There are a lot of attractions for this kind of approach, particularly for employers who can target their motivation effort and anticipate a definable mathematical return for them. As this is a cognitive process theory it relies on the way employees perceive rewards these three theories plus variants of them have been used in countless research studies and continue to inform the practice of reward management up to the present day.

What is Benefit?

An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment. Investment risk and portfolio management are entirely under the control of the company. There are also restrictions on when and how you can withdraw these funds without penalties. This fund is different from many pension funds where payouts are somewhat dependent on the return of the invested funds. Therefore, employers will need to dip into the company’s earnings in the event that the returns from the investments devoted to funding the employee's retirement result in a funding shortfall. The payouts made to retiring employees participating in defined-benefit plans are determined by more personalized factors, like length of employment.

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A payment or gift as one made to help someone or given by a benefit society, insurance company or public agency. The company offers its employees a pension plan , free health insurance and other benefits. --- Business Dictionary

Types of Benefits

1. Guaranteed Pay Guaranteed pay is a fixed monetary (cash) reward. The basic element of

guaranteed pay is base salary which is paid on an hourly, daily, weekly, bi-weekly or monthly rate. Base salary is typically used by employees for ongoing consumption. Many countries dictate the minimum base salary defining a minimum wage. Employees' individual skills and level of experience leave room for differentiating income levels within a job-based pay structure. In addition to base salary, there is other pay elements which are paid based solely on employee/employer relations, such as salary and seniority allowance. 2. Variable Pay

Variable pay is a non-fixed monetary (cash) reward that is contingent on discretion, performance, or results achieved. There are different types of variable pay plans, such as bonus schemes, sales incentives (commission), overtime pay, and more. An example where this type of plan is prevalent is how the real estate industry compensates real estate agents. A common variable pay plan might be the sales person receives 50% of every dollar they bring in up to a level of revenue at which they then bump up to 85% for every dollar they bring in going forward. Typically, this type of plan is based on an annual period of time requiring a "resetting" each year back to the starting point of 50%. Sometimes this type of plan is administered so the sales person never resets or falls down to a lower level. It also includes Performance Linked Incentive which is variable and may range from 130% to 0% as per performance of the individual as per his KRA. Benefits

There is a wide variety of benefits offered to employees such as Paid Time-Off (PTO), various types of insurance (such as life, medical, dental, and disability), participation in a retirement plan (such as pension or 401(k)), or access to a company car, among others. Some benefits are mandatory which are regulated by the government while others are voluntarily offered to fulfill the need of a specific employee population. Benefit plans are typically not provided in cash but form the basis of an employees' pay package along with base salary and bonus. In the United States, "qualified" employee benefit plans must be offered to all employees, while "non-qualified" benefit plans may be offered to a select group such as executives or other highly-paid employees. When implementing a benefit plan, HR Departments must ensure compliance with federal and state regulations. Many states and countries dictate different minimum benefits such as minimum paid time-off, employer’s pension contribution, sick pay, among others. Equity-based compensation

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Equity based compensation is an employer compensation plan using the employer’s shares as employee compensation. The most common form is stock options, yet employers use additional vehicles such as restricted stock, restricted stock units (RSU), employee stock purchase plan (ESPP), and stock appreciation rights (SAR).

i. External equity External equity refers to the similarity of the practices of other organization of the same sector. If perceived like this, it can be said that the program is considered competitive or externally equitable. Usually, these comparisons are done in external labor markets where the wages vary. There are various factors that contribute to create these differences, for example, geographical location, and education and work experience. ii. Internal equity Internal equity is employees' perception of their duties, compensation, and work conditions as compared with those of other employees in similar positions in the same organization. As this comparison is always made within the company, problems with internal equity can result in conflict among employees, mistrust, low morale, anger and even the adoption of legal actions. Workers can make the evaluation of internal equity regarding two main points. On the one hand, procedural justice is the person’s perceived fairness of the process (assigned tasks) and procedures used to make decisions about him/her. On the other hand, distributive justice refers to the perceived fairness in the distribution of outcomes (salaries). The classic objectives of equity based compensation plans are retention, attraction of new hires and aligning employees’ and shareholders’ interests with the long-term success of the company. Organizational place

In most companies, compensation & benefits (C&B) design and administration falls under the umbrella of human-resources. HR organizations in large companies are typically divided into three sub-divisions: HR business partners (HRBPs), HR centers of excellence, and HR shared services. C&B is an HR center of excellence, like staffing and organizational development (OD). Main influencers

Employee compensation and benefits main influencers can be divided into two: internal (company) and external influencers. The most important internal influencers are the business objectives, labor unions, internal equity (the idea of compensating employees in similar jobs and similar performance in a similar way), organizational culture and organizational structure. The most important external influencers are the state of the economy, inflation, unemployment rate, the relevant labor market, labor law, tax law, and the relevant industry habits and trends. Bonus plans

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The concept saying bonus plans can improve employee performance is based on the work of Frederic Skinner, perhaps the most influential psychologist of the 20th century. Using the concept of Operant Conditioning, Skinner claimed that an organism (animal, human being) is shaping his/her voluntary behavior based on its extrinsic environmental consequences – i.e. reinforcement or punishment. This concept captured the heart of many, and indeed most bonus plans nowadays are designed according to it, yet since the late 1940s a growing body of empirical evidence suggested that these if-then rewards do not work in a variety of settings common to the modern workplace. Research even suggested that these types of bonus plans have the potential of damaging employee performance. Bonus plans are variable pay plans. They have three classic objectives:- i. Adjust Labor Cost to Financial Results : The basic idea is to create a bonus plan where the company is paying more bonuses in ‘good times’ and less (or no) bonuses in ‘bad times’. By having bonus plan budget adjusted according to financial results, the company’s labor cost is automatically reduced when the company isn’t doing so well, while good company performance drives higher bonuses to employees. ii. Drive Employee Performance : The basic idea is that if an employee knows that his/her bonus depend on the occurrence of a specific event (or paid according to performance, or if a certain goal is achieved), then the employee will do whatever he/she can to secure this event (or improve their performance, or achieve the desired goal). In other words, the bonus is creating an incentive to improve business performance (as defined through the bonus plan). iii. Employee Retention: Retention is not a primary objective of bonus plans, yet bonuses are thought to bring value with employee retention as well, for three reasons: a) A well designed bonus plan is paying more money to better performers; a competitor offering a competing job-offer to these top performers is likely to face a higher hurdle, given that these employees are already paid higher due to the bonus plan. b) If the bonus is paid annually, employee is less inclined to leave the company before bonus payout; often the reason for leaving (e.g. dispute with the manager, competing job offer) 'goes away' by the time the bonus is paid. The bonus plan 'buy' more time for the company to retain the employee. c) Employees paid more are more satisfied with their job (all other things being equal) thus less inclined to leave their employer. Relationship of Incentives, Rewards and Benefits with Organization Reward Systems and Organizational Change

In many major organizational changes it is difficult to change all the systems in an organization simultaneously. Typically, one or one set of changes leads to another set of changes. Reward systems change may either be a lead change or a lag change in the overall change process. Reward as a Lead

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There are a number of examples of pay being a lead change. Perhaps the most frequently discussed of these is the use of the Scanlon plan or some other forms of gain sharing to improve plant productivity (Moore and Ross, 1978; Lawler, 1981). In these situations, the initial change effort is focused on the development and installation of a gain sharing plan that pays bonuses based on improvements in productivity (Graham-Moore and Ross, 1983). In the case of the Scanlon Plan emphasis is also placed on building participative problem solving groups into the organization but the clear emphasis is on the gain sharing formula and the financial benefits of improved productivity. The participate management structure is put in for the purpose of supporting and making possible productivity improvement which in turn will result in gains to be shared. Not surprisingly, once gain sharing starts and inhibitors to productivity is identified, the result is other changes. Typical of these are improvements in the organizations structure, the design of jobs and work, and training programs. Often these are dealt with rather swiftly and effectively because the gain sharing plan itself provides a strong motivation to deal with them.

There are other reward system changes that also can key broader organizational change efforts. For example, the introduction of skill based pay can potentially key a broad movement to participation because among other things, it provides people with the sills and knowledge they need to participate. In somewhat different vein a dramatic change in the pay for performance system can be very effective in altering the kind of strategic directions that an organization takes. For example, installing bonus systems which pay off on previously unmeasured or unfocused upon performance indicators can dramatically shift the direction of an organization. Similarly, installing a long term bonus plan for executives can cause them to change their time horizons and their decision making practices in important ways. Reward as a Lag

In the majority of major organization change efforts pay ends up as a lag factor. This certainly is true in most change efforts that involve movement toward participative management. The initial thrust often is on team building, job redesign, quality circles, or some other area. It is only after these other practices have been put in place for a while that the organization tends to deal with the reward system changes which are needed to support these new practices. Often, there is surprise that these other important changes lead to a need for revision in the reward system. The connectedness nature of organizations makes it almost inevitable that when major changes are made in an organization's strategic direction or management style and practices, changes will also have to be made in the reward system. New participative plants represents an interesting example of where participative reward systems changes are put in at the same time as are other participative practices (Lawler, 1981, 1992). Indeed, one reason for their success probably is their ability to start with all their systems operating in a participative manner. Rewards as a Motivator of Change

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Finally, it is important to consider the use of rewards systems in producing organizational change. Major organizational changes are often difficult to accomplish. The forces of equilibrium tend to work to cancel out many changes. To the extent that changing one component of an organizational system reduces its congruence with other components, energy will develop to limit, encapsulate, or reverse the change. In addition, to the extent that management needs to give time and attention to directing a change, it may become diverted from other ongoing management tasks.

Management is therefore faced with two key tasks if change is to be brought about. The first task is motivating change, or overcoming the natural resistance to change that emerges and getting individuals motivated to behave in ways that are consistent with the immediate change goals and still consistent with long-range corporate strategy. The second major task is managing change. We can think of many organizational changes in terms of transitions (Beckhard and Harris, 1977). The organizational exists in a current state (C). An image has been developed of a future state of the organization (B). The period between A & B can be thought of as the transition period (T). The question is how to manage the transition.

The transition state frequently is overlooked. People become fixated with the future state and assume that all that is needed is to design the best possible future. They think of change as simply a mechanical or procedural detail. The problems created by the lack of concern for the transition state are compounded by the inherent uniqueness of it. In most situations, the management systems and structures developed to manage either C or B are simply not appropriate or adequate for the management of T. They are steady state management systems, designed to run organizations already in place rather than transition management systems. This suggests the need for temporary reward systems that are designed to operate during the transition period. One reason many change efforts are resisted by individuals is that they are often perceived to be a threat to their pay level. Particularly when the present system is highly job based and ties to objective measures, such as the number of subordinates, the vagaries of reorganization or other type of change may lead people to resist the change because of its unclear and potentially negative impact on their pay rate.

In the real world, it is very important to reward high performance levels because this motivates and controls the performance. Indeed, reward strategies confirm the level and the merge of non-financial and financial rewards required to attract, maintain and inspire skillful competent, and capable employees to make the organization prosperous. Although some of these benefits are financial forms, such as options for salary sacrificing and competitive pay, there are a lot of non-financial benefits which firms can provide its employees. They are, in fact, some factors that may motivate the staff. Therefore, for a manager, it is necessary to know what really inspires employees and perhaps they are not the same things that stimulate other employees.

Furthermore, Egwuridi (1981) did a research on the motivation of Nigerian workers and applied a sample of workers at both low and high occupational levels. At the end of the study, the hypothesis was not completed and verified which tested if low-income workers would be intrinsically motivated, and also there was not any

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proof to verify the hypothesis that higher-paid workers would place a greater value on intrinsic job-motivators than low-paid employees. This study obviously confirms the amount of worth placed on extrinsic job factors. In this case, the poor compensation depends on the profits made by firms (Akerele, 1991). On the other hand, wage and salary difference between low and high income earners can affect cause a low morale, low productivity, and lack of commitment (Nwachukwu, 1994). For example, the efficiency of Nigerian employees on several elements has shown to be up to the employer’s mismanagement to provide appropriate compensating ways for hard-workings of an honored group; and this is very discomforting to working layer and will decrease their efficiency levels. Based on all the current studies and by considering the relationships between all of the findings, one can normally find out that a valid compensation package, which includes financial rewards, causes higher efficiency and performance for the organization. This compensation package includes both intrinsic and extrinsic rewards. Extrinsic rewards consists of external and tangible rewards to the performed efforts and employees tasks, it can be in terms of promotions, salary/pay, bonuses, incentives, job security, etc. Overall, the highly-involved employees who are necessarily more oriented to their jobs depend more on intrinsic rewards than extrinsic ones (Wood, 1974).

Conclusion

In the current competitive business environment, the organizations are facing a lot of challenges and among these issues, getting the right employees and retaining them is one of the most important ones. In addition, today, the benefit of human resource is measured to be one of the most important advantages of any organization; and in order to acquire the results with the highest efficiency and effectiveness from human resource, motivation of employee is very essential. In fact, employees will do their highest when they feel or hope that their hard work are to be rewarded by their managers. In this regard, many factors are available that change employees‗ performance such as worker and employer relationship, working conditions, job security, training and opportunity of development, and overall rewarding policies of the company. In addition, among the factors which impact employee performance, motivation, as a result of rewards, is the most important aspect. Motivation is defined as the growth of different processes which express and control people’s behavior to achieve some specific goals (Baron, 1983). Therefore, understanding its importance is

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very necessary for all organizations managers. The maximum level of workers performance happens when they feel their endeavor is rewarded and compensated completely. Some other successful elements on employee’s performance include work conditions, the connection between employee and employer, process of training and improvement opportunities, job security and complete policies of firm rewarding. In addition, motivation, as the result of rewarding, affects the staff’s behavior and their performance directly. Actually, among all effective elements on employees performance, motivation, which is the consequence of rewarding, is the most important and essential element. This concept consists of different processes which affect employee’s behavior to achieve some definite goals (Baron, 1983). Extant research emphasized on relationships between job satisfaction with reward and employee performance, so this research tried to highlight the mediating role of job satisfaction in the relationship between reward and employee performance. Future study can be concentrated on testing the proposed framework of this study in different scopes and industries. There is scope to find the right balance between encouraging and rewarding individual excellence and encouraging and rewarding team performance. There is scope to ensure that “the means (actions and behaviours) and the ends (desired outcomes)” always run hand in hand and one of them is not sacrificed. There is scope to reward the short term performance as well as the long term contribution. There is scope to better recognize, appreciate and reinforce actions and behaviours that lead to the desired outcomes and not just focus on rewarding and recognizing results. There is scope to fine tune “differentiation” between the outstanding performers and solid performers (who constitute a large percentage of the employee population) so that while the outstanding performers feel highly appreciated, motivated and remain loyal, bulk of the population made up of solid performers don’t feel neglected or devalued, and thus, get alienated. To sum up, rewards and recognition programmes must connect to the emerging needs and expectations of the workforce and link them with the company’s overall goals and strategies to be successful. There needs to be more research on the impact of different types of Rewards and Recognition Programmes on diverse employee categories to be able to “provide different strokes to different folks,” without sacrificing the all important sense of fairness and equity.

References

1. Human Resource Management, Garry Dessler, Global Edition 2014-2015.

2. http://www.ccsenet.org/ijbm

3. www.theirf.org

4. http://www.salary.com/hr

5. http://www.marshall.usc.edu/ceo

6. http://theirf.org/research/content/6083519/incentiveresearch- foundation-survey- says-economy-impactingincentive- trends/