Reward Management: Internal and External Factors, Policies, and Implementation

Running Head: Reward
Reward

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Reward
Contents
Introduction.................................................................................................................................................2
Internal and External Factors of Reward System.........................................................................................2
Pay...........................................................................................................................................................2
Agency Theory........................................................................................................................................3
Equity Theory..........................................................................................................................................3
Wage Bargain Theory..............................................................................................................................4
Law of Supply And Demand...................................................................................................................4
Labor Market Price..................................................................................................................................4
Employers................................................................................................................................................5
Efficiency Wage......................................................................................................................................5
Ways of Gathering Reward Intelligence..................................................................................................5
Business Drivers..........................................................................................................................................5
Policies in Reward Management.................................................................................................................7
Guiding Principles...................................................................................................................................7
Fairness, Consistency, Transparency and Equity.....................................................................................8
Intrinsic and Extrinsic Rewards...............................................................................................................8
Intrinsic Rewards.................................................................................................................................8
Extrinsic Rewards.................................................................................................................................9
Implementation of Rewards in Pwc.......................................................................................................10
Design Phase.........................................................................................................................................11
Implement..............................................................................................................................................11
Manage and support..............................................................................................................................12
Line Manager’s contribution.....................................................................................................................12
Conclusion.................................................................................................................................................14
References.................................................................................................................................................15

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Reward
Introduction
The management of Rewards refers to the execution and the formulation of the strategies and the
practices and policies whose aims are to reward people in a fair way on the basis of the value
they possess in particular firm. Pwc is one of the firms which take care of the rewards a lot when
it comes to their employees. This all is linked with the remuneration and the compensation of
the employees (Armstrong et al., 2009). The major objective is to create an efficient reward
structure for any organization. For making it better, it should consist of the salary administration,
policies related to pay, Wages terms etc. Now this type of management is not just about the
money. It also relates with the type of rewards which are non financial for motivating the staff in
order to get good work from them. This management is very popular these days. This system was
incepted and developed on basis of psychologist’s behavioral research system. The theory was of
Freud’s theory of psychoanalysis. On this basis, the psychologists started attempting many such
theories of motivation. Reward management very strongly depends on this. It is very significant
to develop a reward system so as to make the employees understand as to what exactly is
expected out of them (David, 2015).
Internal and External Factors of Reward System
To know about the internal and external factors, there are some of the theories and factors which
should be studies and analyzed. These factors are as follows:
Pay
The financial face of the reward is known as Pay. It is considered to be very significant in reward
system as it is one of the major reasons for which people work. In the design of the pay
structure, the compensation fundamental policy problems are the level of pay, the structure of the
pay and the form of pay. There are two types of the pay structures. One is known as fixed pay
and the other one is variable (Chowdhury & Begum, 2012). The fixed pay as the name suggests

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Reward
is the compensation which is given on the contractual basis and it is continuously paid to the
employee for his work. This type of pay will never vary and depend on the performance. On the
other hand the variable pays differs always and depends on the performance of the employee and
it is mostly optional. The fixed pay is for meeting the requirement of the employees for the
stability of the income where as the variable pay for rewarding and taking out greater
contributions from the employees. The fixed pay would be in various forms like basic pay,
dearness allowance, house rent or compensatory etc (Eerde, 2017).
Agency Theory
This theory displays the contentious and dominant bodies of microeconomics. For some people,
it is very different and extraordinary theory which can be applied in all types of ways and gives
the conceptual base of the reward system understanding and also few contractual provisions, the
usage of the methods of accounting, corporate governance etc (Panda & Leepsa, 2017). For some
other people, it is considered to be the brain child of some of the cynical economists who are
actually responsible for the evil in the world. This evil consists of the band managerial practices
and Enron. People who are the owners of the company always differ from the staff members.
According to this theory, the principles are the owners and the agents are the employees. The in
between difference can create agency costs due to the agent might not be as productive as the
principles are. Latter hence, have to plan for the ways of motivation and control o ft he efforts of
the former (Namazi, 2013).
Equity Theory
According to Adams (1965), he claimed that in the Equity theory people seek for maintaining
both the internal and external factors. Internal factors can be comparison of the input which
people bring into the firm and they are received by the firm and external factors could be
comparing with the people who were around him and called referents (Al-Zawahreh & Al-Madi,
2012). In case of the pay allocation is taken to be fair, and then the motivation of the reward is
continuous. Though, if the staff consider themselves are not satisfactorily paid then they surely
will seek justice and the result of this would be that their motivation would be disrupted. On the