Impact of Non-Monetary Rewards on Compensation Management

This article discusses the impact of non-monetary rewards on compensation management. It explores the advantages and disadvantages of implementing non-monetary benefits and how they can motivate employees and attract top talent. The article also covers the different types of non-monetary compensation and their importance in fulfilling employees' needs. Additionally, it discusses the use of Maslow's theory to reward and motivate employees.

Running Head: COMPENSATION MANGEMENT 0
Compensation management
Impact of Non- Monetary rewards
System04122
2/14/2019

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Compensation management is a practice of an organization that involves monetary and
non- monetary benefits. Compensation program is a dynamic process if it is with correct
executive benefits (Landsberg, 2012). Non- monetary benefits are those kinds of benefits like
flexible hours of work, discounted parking, free beverages and food, on job child care facilities,
discounted gym membership, in- office massage and yoga, casual Fridays, cross training, fun
activities and office parties which are provided by an employer to the employee which are above
the compensation packages like salary, which is usually motivate the employees (Carroll, 2019).
These things are done to compensate for the time they give to their job. Non- monetary
compensation is very essential in the development of the total compensation management. In
today’s world employees give more importance to the non-monetary benefits rather than the cash
or salary. Employers who offer good non- monetary rewards actually stand out among the peers
(Sonawane, 2008). There are various kinds of non-monetary benefits such as rewards and cross-
training and all these things have advantages and disadvantages both, advantages such as,
encouraging employees, positive work place relationships and motivation to the employees while
disadvantages are that these things are usually coastally and time consuming. This research is
done by using secondary sources and this is a descriptive research of how compensation
management is impacted by the non- monetary rewards, different types of non-monetary benefits
and their advantages and disadvantages.
There are various types of non-monetary compensation; it can actually include a lot of
different elements such as discounted parking, picnic or free coffee. Most of the times it refers to
more of traditional benefits, these benefits usually include things such as Medicare, insurance or
social security, it also includes various voluntary benefits like- dental and health insurance also
mostly it includes some type of retirement plan as well (Carroll, 2019).

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The most important reason because of which the employees highly value non- monetary
compensation in the total package is that it is easier for them to reduce their household expenses
for example: giving an employee health insurance can save a lot of money for him and his
family. Apart from the all the material benefits there are some other benefits, some companies
offer their employees with very rich retirement plans which also send a very good message that
they value their employees and also want to support and promote long term relationships with
their employee (Peluso, Innocenti & Pilati, 2017). The employees nowadays are looking the
organizations that invest in the employees by providing a fair salary and a fair benefit package.
Nowadays employees choose firm (Carroll, 2019). that offers a good compensation package
rather than the one, which pay high with little benefits.
There are many benefits of the non- monetary compensation plan for the employees. For
an employer is necessary to focus on the increasing value of non- monetary benefits for the total
compensation package, the most important reason for this that government gives companies a
lot of tax incentives for the different types of benefits they offer to the employees (Williams,
2019).
Apart from this offering certain benefits can help in increasing retention among the
employees, for example as when an employee is given more cash per paycheck the reward is
instant but really short lived, but when an employee is offered with benefits for the retirement
plan, which contributed to their life after few year, it increases an employee’s interest in the job
and it helps them in staying longer with the organization. Such investments can bring the
employer savings as it lowers the employee turnover and the organization gets committed
workforce.

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Non- monetary benefits also help in attracting top talent, in today’s world a lot of top
performers are looking for organizations that not only provides cash compensation but other
basic benefits also. Employees nowadays look for a job which has flexible shift timings,
education benefits and well trained manger to work for such things are nowadays more important
the other traditional benefits
Using Maslow’s theory to reward and motivate the employees:
Motivation and reward is something which is really important as it reduces the employee
turnover and gives high proactivity. A lot of time the employees leave good companies due to
this single issue. Maslow’s theory of needs show the basic need of all the human beings. It is
explained through a pyramid which has the largest and the basic need at the bottom and other
needs at the top of the pyramid (Lester, 2013).
self- actualization
Esteem
Love and Belonging
Safety Needs
Physiological Needs

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This theory states that without meeting the basic needs of a human being, a person cannot
raise the higher level of pyramid for example, job performance, managers are always told about
this concept so that they can recognize the basic and important needs of their employees and
reward them properly.
First thing is the Physiological needs; the most basic needs fall into this category. Most of
the needs are not considered in the physiological needs as it is a benefit to the employment. It is
not important for human survival but a fair compensation falls in this category, to buy the basic
necessities, benefits which fall in this category are the things such as a safe and a clean
environment to work. This includes things such as: Vending machines, Cafeterias and the
Drinking fountains
Second thing is Safety/ security. After the physical needs, the sense of safety becomes
priority for the people. Basically all the safety needs should be taken care of by the company.
Things like financial security and health care and life insurance fall under this category and also
the retirement benefits, this offers long term security to the employee and the family. This stage
usually includes the intangible things such as mental health and the wellbeing of the employees.
This category includes: Wages and salaries, Retirement benefits, Fringe benefits, Medical
benefits, Rest periods, Solving employees problems, Working conditions and Flexible shift
timings
Third comes, Love and belongingness. This category includes the intrapersonal
relationships and a sense of belongingness, it is important to build happy, positive and productive
workplace relationships with the employee. This can be done by hosting events for the
employees, team building, group training and activities, these things are usually not taken care of

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by the employers but it is the most important thing for an organization to follow. This category
includes: Encouraging social interactions, creating team spirit, encouraging the social activities
and the Participation of all employees in activities
Forth one is Self – esteem. Everyone in this world has the need to be respected which
includes self- esteem and self- respect. A lot of people gain self- esteem through the confidence
they gain at workplace, in an organization it is very important to help employees in success and
encourage them to respect and appreciate others. In this thing the pay for performance also plays
an important role. Employers usually reward people for their performance and helps in fulfilling
this need. This category includes: Using praise and awards, Give training, Encourage
participation, Designing challenging jobs and Give responsibilities.
And the last one is Self- actualization. Maslow once said that “what a man can be he must
be” and this is what self- actualization is based on, self- actualization basically means to
accomplish everything a person can. For employees to be thriving and happy, but it is also
important to provide the employees with the basic resources in order to make them happy .This
category includes: Providing challenges and Encouraging creativity
Reward programs are also part of the non- monetary benefits. Reward programs in an
organization can serve lot of purpose. First of all they retain the employees who stay with the
company because they are committed to the company and passionate about the work, which the
result of being appreciated by the employers, secondly the reward programs boost the
productivity of the employee and gives the company profits. Studies also show that workers stay
motivated when there is reward system in an organization and the best part is that this reward
does not always include monetary benefits (Fusion, 2019).

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The first thing is flexible hours and time off; it is one of the popular reward programs.
Some organizations provide flexible hours and time off as incentives. For example: Alcera
consulting, it is an American company, it allows its workers to adjust their schedules for doctor
appointments and for other important issues, and another example is talentfuse.inc which
rewards its employees with flexible timings in order to provide them flexibility and more time to
spend with the family (Fusion, 2019).
Another thing is advance opportunities. The employees who work hard appreciate
rewards that have involvement of advance opportunities. In such programs they are made a part
of special and important project team or they are involved in important management decisions.
Employees often have many ideas which they feel like expressing and this program helps in
good interactions with the management, such things can make an employee’s career without
costing a thing to the company and can give high amount of profits to the company.
Another thing is prizes, events and rewards, all these things boost the employee morale
and confidence. Also providing a positive and a good work environment helps in keeping the
employees engaged, for example: QUALCOMM’s headquarters, they award the employees by
learn to programs like scuba diving, surfing and other things.
There are many advantages and disadvantages of non-monetary benefits; the first
advantage is that non- monetary benefits motivates employees. There are some employees that
do not need such push to be an outstanding performer but through such things, even the
underachievers can become the star performers, which turn out to be good for an organization
Second advantage of non- monetary benefits and rewards is that it puts the employees in control.
Through this thing the employee feels secure in their work environment and that this can give

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them an opportunity to earn more things. The job satisfaction increases and it also encourages the
employees to stay with the company or the organization.
The next advantage is the increased competition some of the reward activities include
reaching to a certain benchmark while others are the competitive one. The competitive edge
between the employees encourages them to outperform in comparison to other people. But in this
it is also important to design careful competitive programs as employers should not feel it’s
unfair otherwise they can easily get demotivated which makes them change their job (Gerard,
2019).
Apart from this there are lot of disadvantages as well such as employee resentment,
sometimes the employees who try to do their best does not get qualified for the rewards and
hence this leads to demotivation and the employee give up easily. Another very major
disadvantage is built in limitations incentive programs are easier to apply in some of the areas
than the other like in the manufacturing you can give the incentives as per the products produced
and in the sales according to the amount of sales but for others it is important to design or build
certain matrix that would work.
There is also a side effect of this model sometimes employees can try various harmful
ways for earning the incentives which can have impact on the company as a whole for example
in a factory if output is considered as a benchmark then the workers might prioritize the speed
and leave the quality, such things have a long term effect on the image of the company and can
affect the company as a whole.
Another type of non- monetary benefit is cross training the employees. When a particular
employee has gone through all the selection process like the hiring, interview and etc. they are

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then send for training especially when a person is hired on a managerial level they are cross
trained and asked to perform multiple task and roles in the organization. There are a lot of
benefits and disadvantages of this non-monetary benefit
First and the foremost advantage is stability and maintaining complete coverage. It is an
advantage because incase an employee goes on leave or quits , if other would know how to do
all kind of work then it is easier to deal with such issued , as sometimes it takes time to hire
more employees till the time the other employee can be temporarily filled in. next advantage is
the growing employees skills, cross training is something that provides the employees with a lot
of opportunities it allows an employee to grow professionally and also expands their skills , it
also allows them to have a diversified work experience , a study also shows that the employees
like being challenged and cross training is one of the best way to encourage the growth of
employees (Sherman, 2019).
Another benefit of the cross training is that it empowers employees , employees usually
feel encouraged and empowered by growing their skills and this offers them with high level of
independence in the new knowledge they gain, this also helps the employees to expand their
leadership quality and skills also this is one of the most effective motivational tool. With this it
has one more advantage and that is it encourages team work, as cross training promotes team
work and also gives the staff opportunities to know their co-workers this process helps in better
understanding of the organization and also increases productivity and collaboration with other
people.
Everything has its disadvantages too and so does cross training, the very first
disadvantage of this process is that it is very time consuming. For applying cross-training in an

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organization it takes a lot time, dedication and effort, all of these things depend on the size of the
organization, also it takes a lot of training sessions to make this happen successfully in an
organization. Second disadvantage is the initial costs, cross training needs a lot of investment for
example: of any external person it need for conducting the training, it involves a lot of money
and time both.
Apart from this, managers who usually invest their time in promoting or conducting such
activities also cost to the organization as the productivity of the organization is impacted. Cross
training gives a lot of access to the employees as every single employee gets more access to the
information of an organization, for example, in a firm if an employee get to know about the
sales figures of an organization, it can easily open room for fraud.
This essay showed the how non-monetary benefits impact compensation management,
Non- monetary rewards are really important for an employee and an organization both.
Nowadays employees while finding a job focus more on the non- monetary benefits rather than
the salary, there many non- monetary benefits like rewards and cross training as discussed above.
There are various advantages as well as disadvantages for all kind of non- monetary benefits, but
apart from that it is one of the best way to motivate employees and for building positive and
long-term work place relationships, this essay also shows the relation between compensation
management and Maslow’s need theory, which states that all the basic need of a human being
should be fulfilled in order to keep them motivated and encouraged, the Maslow’s model
basically include 5 types of need and that are: psychological, safety , love and belonging, self-
esteem and self-actualization. There should be reward programs in every organization as it helps
the employees to feel motivated and encouraged. The reward programs have a lot of advantages
and disadvantages as these programs might need lot of initial investment but are very useful in

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the long-term for the employees and the organization as well. In today’s world job seekers and
employees have become particular about the non- monetary benefits and the organizations that
provide good non-cash reward often stand out against its competitors. Cross training is
something, which motivates employees; it helps in increasing the skills of the employees and
gives them a sense of responsibilities. At the same time cross training have a lot of disadvantage
to. Sometimes this can impacts an employee’s morale and respect, As cross training employees
usually include taking responsibility from one employ and passing it to another and such things
can sometimes put a negative impact on the employee as they lose confidence and they can feel
that they are not good enough and can be replaced anytime easily. These essays have showed
why non- monetary benefits are important for an employee in relation with Maslow’s needs
theory. Non- Monetary benefits are something, which all organizations should include in the
compensation as these things builds a good environment in the organization and keeps a positive
environment for the employees. There are various kind of Non-monetary benefits which attract
the employees such as: Flex-time schedules, Free or discounted parking, On-site childcare, ,
Gym membership discounts, Free or discounted food and drinks In-office, Casual Fridays,
massage or yoga, Free or discounted educational and training opportunities, Mentoring programs
for career advancement, Cross-training in other areas of the business, Work opportunities in
multiple locations, Annual or quarterly company parties.

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References
Carroll, S. (2019). Non-monetary compensation. Retrieved From:
https://www.payscale.com/compensation-today/2009/08/non-monetary-compensation
Fusion, J. (2019). Reward Programs in the Workplace. Retrieved From:
https://smallbusiness.chron.com/reward-programs-workplace-1065.html
Gerard, J. (2019). Disadvantages of Rewarding Employees with Gifts. Retrieved from:
https://smallbusiness.chron.com/disadvantages-rewarding-employees-gifts-24166.html
Landsberg, R. (2012). Executive Benefit Planning and Compensation Management. Journal of
Financial Service Professionals, 66(2)
Lester, D. (2013). Measuring Maslow’s hierarchy of needs. Psychological reports, 113(1)
Peluso, A., Innocenti, L. & Pilati, M. (2017). Pay is not everything. Evidence based HRM, 5(3)
Sherman, F. (2019). Advantages & Disadvantages of Employee Incentives. Retrieved From:
https://smallbusiness.chron.com/advantages-disadvantages-employee-incentives-
21220.html
Sonwane, P. (2008). Non-monetary rewards: employee choices & organizational practices.
Indian journal of industrial relations, 44(2)
Williams, O. (2019). Benefits of an Effective System of Non-Monetary Awards. Retrieved From:
https://smallbusiness.chron.com/benefits-effective-system-nonmonetary-awards-
72718.html

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