By definition, a reward system is one that is “put in place to provide a systematic way to develop positive consequences” (Wilson, 2003, p. 29). O'Neill, (1995) suggested that employee remuneration represents significant expenditure in any organization.This review aims to firstly,define strategic reward management and explain the underlying principles of a reward strategy,secondly, to explain how a reward strategy helps to meet organizational and employee needs as well as explain the essential building blocks of a total reward management needed to establish a reward strategy. Finally, it will explain the performance pay and show its links with performance management and training and development as well as explain benefits and non-financial rewards.
Strategic Reward Management
Strategic reward management is an “approach to the development and implementation of reward strategies and the guiding principles that underpin them” (Armstrong, 2010, p. 63). Rewards can be financial, that is, cash-based for example a basic salary, indirect (benefits) or incentives or they can be non-financial in nature (Chiang, 2007). They are sometimes used by companies strategically in order to gain a competitive advantage over other firms (Chiang, 2007).
Reward management has shifted dramatically over the years from a micro-behavioral approach to a more large-scale or stratgeic management orientation (Chiang, 2007). Armstrong, (2010) states that reward strategies in the past have sometimes put more focus on the needs of the business, however if employees fail to see fairness and equality in their rewards, the strategy is unlikely to be delivered in practice. In addition to that, reward management is an important factor in establishing a good and healthy employment relationship, where there is affinity between management and employees and this helps to develop a good foundation of trust...