Week 9 - Remuneration

In general terms, remuneration refers to the way in which employees are rewarded at the workplace. These rewards can take various forms, often a broad distinction being drawn between intrinsic and extrinsic reward. Intrinsic reward is a self-generation outcome such as personal esteem and fulfillment derived from say undertaking ‘interesting’ or ‘useful’ work. Extrinsic reward is reflected in more tangible monetary and non-monetary payments in the guise of wages or fringe benefits provided by others. This range of available rewards is reflected in Bloom and Mikovich’s definition of remuneration as a ‘bundle of returns offered in exchange for a cluster of employee contributions’ [1].

However, a range of social science disciplines work on the basis of very different assumptions about the way individuals, groups, organizations and societies functions;

Psychologists – focus on the effectiveness of reward, in terms of individual and group motivation, e.g. the link between motivation, reward and perceived employee needs and values.

Economists – more narrowly focus on pay, e.g. how employers and workers have used pay in the rational pursuit of their respective objectives.

Sociologists – emphasis on the influence of social norms and values in shaping the selection, operation and impact of reward systems at different societal levels.

In practice, extrinsic rewards review the link between pay and job, performance and person have been affected by competition, the changing nature of the workforce and regulation. It is argued that the impact of these pressures on approaches to pay should not be exaggerated’ practice still lags behind rhetoric. However, there have been changes given to the respective pay contingencies and been reflected in a new concern with pay processes rather thatn narrowly conceived pay outcomes [2].

The range of jobs are differential worth to management and therefore they need to be differentiated by hierarchy with pay determined by where exactly each individual is positioned. After following the completion of a job evaluation exercise, an organization will have to decide how to position its pay rates for the evaluated jobs in relation to external labor market rates.

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Reference:

[1],[2] Stephen Bach, Blackwell Publishing 2005, Managing Human Resources: Personnel Management in Transition