What are the types of rewards in HRM?

When we discuss rewards, we move on to classifying the different ways to better value your employees. Over the past two decades, we have seen a steady increase in companies investing in rewards in HRM systems. What is the core reason behind it? Due to the fact that it works. When people feel valued, they are:

Get a pleasant sense of accomplishment, resulting in higher job satisfaction and productivity.

More likely to improve job performance and organizational outcomes.

Improves employee experience and inspires loyalty.

Overall, having a rewards and recognition program is beneficial for the staff and the company.

Let’s take a look at the three different types of rewards and what they all contain.

Three main types of rewards

Intrinsic vs Extrinsic Reward:

The satisfaction one gets from the job itself is the intrinsic reward in HRM. These gratifications are committed rewards, such as taking pride in your work, a sense of achievement, or being part of a creative team. The methodology of flexible time, job enrichment, shorter work weeks and job rotation can provide internal rewards by providing energetic and challenging jobs that give the employee a greater sense of liberation. Click here to see HR Consultants in Pakistan.

On the other hand, external types of rewards usually include promotions, money, and other fringe benefits. Their common feature is that extrinsic rewards are visible to the job and come from an outer source, primarily management.

So when an employee experiences feelings of achievement or personal growth from a job, we label such rewards as intrinsic rewards. If the employee receives a salary or a raise, or an article in the company magazine, we mark those rewards as extrinsic rewards.

Meanwhile, we have emphasized the role of external rewards in motivation; we should point out that intrinsic and extrinsic rewards can be closely related.

Financial vs. Non-Financial Reward:

Rewards may or may not improve employees’ financial well-being. If they do, they can also do so directly through wages, salaries, bonuses, profit sharing or indirectly through supportive benevolence such as pension plans, paid vacations, paid sick leave and purchase discounts.

Non-financial rewards may be the sole responsibility of the organization. They do not improve the employee’s financial position; instead of making the employee’s life better than work, non-financial rewards emphasize making life more eye-catching.

There is a well-known saying that “one man’s food is another man’s poison”, this usually applies to all reward topics, but specifically to the non-financial reward system. What one person sees as something I have always longed for, another finds superfluous. Therefore, the right non-financial HR reward must be ensured for each individual, but where the selection is done carefully, the benefits to the organization must be worth it.

Some employees are very status and ego conscious. A lucrative ambiance, along with an attractive office, carpeted or wood floor, large executive desk or private restroom, can be exactly the office decor that boosts a highly impressive job title of an employee, their business card, their secretary or well. -located parking lot with their name painted under the “Reserved” sign.

Performance-Based vs Association-Based Reward:

It can be said that the rewards that a company awards depend on performance criteria or membership. Meanwhile, the managers in most companies will constantly argue that their reward system pays based on performance; you must recognize that this is almost always not the case. Few companies compensate employees based on their productivity output. However, without a valid question, membership is the dominant basis for reward in HR allocations in the organization.

Performance-based compensation is illustrated by commission, piece rate plans, incentive systems, group bonuses, or other forms of merit compensation plans. On the other hand, membership based rewards include price of living, profit sharing, perks and salary increase that relates to the job market, rank, credentials or future potential. For example, a company paid membership to a country club or company luxury vehicles may be given by executives for membership or based on performance output. If it’s helpful to mention that all mid-level and higher-level executives, then they are membership base. Suppose, however, that they are selectively made available to certain managers based on their performance rather than their entitlement, meaning that they can also be taken away. In that case, we should treat them as performance-based rewards for those who find them attractive.

Practical goals

For practical purposes, we should split membership-based rewards into two groups. One group includes benefits and services that go to all employees regardless of their level of performance. We will call them Explicit Membership-Based Rewards, as benefits and services are explicitly awarded on a membership basis. All other membership based rewards are catapulted into the second group that we will mention implicitly. You may wonder why the need to distinguish between two groups?

We’ve split the membership-based rewards into two groups to address what is often disturbing in practice. Most companies consider benefits and services to be the only membership-based rewards. All other rewards are traditionally considered achievement-oriented. This is, of course, both inappropriate and deceptive labeling. In practice, performance is merely a small factor in determining rewards. This is a fact despite academic theories that high motivation depends on achievement rewards. In practice, a lot of lip service is paid to the value of good work. But organizational rewards do not closely parallel employee performance.

In summary, you should recognize that there are performance-based rewards, explicit membership-based rewards, which we call benefits and services, and implicit membership-based rewards. Practice managers often call the latter group performance-oriented, but they are not. Click here to see HR Recruitment Agencies in UAE.