principles of rewarding employees

Financial reward is the core component of the employment transaction, but there are other important factors involved in the relationship between employers and employees, including the psychological contract (see ‘the unwritten psychological contract’ in chapter 2). Employers must be aware that financial reward alone will not retain top talent.

Established management theories demonstrate how employee motivation is driven by many factors, not just money. Workers are looking to their role within the organisation to provide a sense of identity and status, to fulfil their ambitions, and give them a sense of purpose and belonging. According to ‘Armstrong’s Handbook of Human Resource Management Practice’, reward management aims to:

  • support the achievement of business goals
  • attract and retain high-quality people
  • promote high-performance
  • support and develop the organisation’s culture
  • define the right behaviours and outcomes
  • reward people according to the value they create
  • align reward practice.

Enlightened employers do as much as they can to ensure employees are rewarded for their work in ways that embrace these factors. Employee recognition is important. According to management gurus Christopher Barlett and Sumantra Ghosal, the purpose of reward management is ‘to add value to people, rather than attaching value to them’. 

The formal arrangements for compensating employees for their time and work are built around specific financial and non-financial benefits; with the strength and appeal of total reward packages helping employers attract and retain top talent.

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