Reward Strategy in HRM: Impact on Employee Performance and Retention

This report delves into the critical role of reward strategies within Human Resource Management (HRM). It begins by defining rewards and their significance in motivating employees, covering both tangible and intangible aspects. The report emphasizes the connection between reward strategies and key HRM functions like recruitment, retention, and employee performance. It explores the benefits of effective reward systems, such as increased employee ownership, reduced turnover, and enhanced financial performance. The report then examines the complexities of expatriate compensation, highlighting the importance of tailored reward packages that consider factors like location, cost of living, and family needs. Various payment models, including deferred payments, seniority-based pay, and team-based incentives, are analyzed, along with their respective conditions and applications. The report also addresses pay policies, both internal and external factors influencing them, such as ability to pay, business strategy, labor laws, and competitor practices. Finally, the report provides methods for evaluating the impact of pay strategies, including performance metrics, turnover rates, sustainability, and employee surveys, offering a comprehensive overview of the subject.

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1. Reward refers to the returns for good and evil received from an individual. In accordance
to organizational perspective, reward refers to the amount an organization is ready to pay to an
employee to accomplish the objectives that are either tangible such as salary appraisal or
intangible such as job promotion (Irshal & Afridi 2011, p.320). Reward strategy refers to the
payment design for the good by the organization to an employee, to motivate for further
improvement (Haider et al 2015, p.346). Human resource management refers to the planned
approach of managing people for improved performance. Human resource practices such
recruitment and firing, compensation and benefits, training and developments, rewards and
motivation, and employees support and services (Shrama & Shrama 2015, p.118). Reward
strategy is related and is part of the human resource practices that entails of sourcing for
employees, the motivation of the new employees and rewards that eventually affect the
performance of the organization.
Efficient management of reward strategy has numerous beneficial effects on the
performance. For example: Instill the sense of ownership among the employee. The sense of
ownership helps in facilitating a long-term relationship with the employee with the organization
and makes employees feel valued as their efforts get noticed and appreciated through a proper
reward system.
Human resource department main work is to source and retains the available workforce.
With a better reward strategy, the turnover rate of an organization tends to reduce as the existing
employees lack enough reason for looking for another opportunity with better pay (Fatima et

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al.2015, p.423). With high employee retention, the workforce skills of an organization get
retained hence providing a better opportunity in competing with the competitors.
Secondly, efficient reward strategy enhance employee’s interest on the financial
performance of the organization, as the motivated employee knows that a positive financial
reflection on the organization will lead to a positive financial gain of the best employee or all
employees(Dagne,Beyene & Berhana 2015,p.238). The expectancy of financial gain enhances
the efforts of the human capital of the organization, making the human resource department easy
time and no reason for sourcing for more productive workers.
Thirdly, reward strategy affects the rate of job offer acceptance of the company. In
organizations that have reduced reward strategies such as low salary and lack of bonuses on the
breakthroughs, job offer acceptance rate is always meager as many employees see small
benefits on offer(Ishrad 2011). While organizations with robust reward strategies such as
performance bonuses and right salary scale, job offer acceptance rate are always high as
employees relate the presented opportunity comes with enough and desirable benefits that will
improve their living standards.
2. Overseas assignments by companies are always considered as a promotion opportunity,
since there is always an expected increase in income. However, the salary increment does not
always reflect the hardships being faced by such expatriates in international countries most so the
hostile ones(Fechter $& Walsh 2010,p.1203). Therefore, as the Human Resource Director,
proper reward packages should always be identified and evaluated according to the task, region
or areas of posting, exchange rate, housing cost, family benefits, cost of living and many others.

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In determining the expatriate package, I will use two basic models: the basic home
model and the foreign country basic model, to determine the amount and benefits the expatriate
is supposed to receive while working in the home country as compared to the foreign
country(Tan 2016,p.58). The basic needs allowances always difference in countries and
therefore these two models will help in determining the basic salary, the benefit that the
expatriate is supposed to receive in Dubai.
Salary-A lot of people work to gain salary that is capable of maintains their needs.
Expatriation always brings about salary increment to employees and the amount is always
determined by the foreign country salary rate(Haider et al 2015,p.346). Dubai salary and pay
scale depend on the negotiation and qualifications since UAE Federal Labor Law has no
provisions for wages. Therefore the rating for salary increment for our expatriate employee will
be upon the company rating scale. The salary will also be calculated with Dubai taxes taken into
account but will not be more than $ 40,300 per month.
House allowance-The housing allowance must be an amount that will guarantee our
expatriate a good and safe house in Dubai. Within the house allowance, there will be the
inclusion of basic utilities and domestic help. Other allowances such as medical, education
among others will be calculated depending on the number of the expatriate household and
whether the expatriate is capable of taking the family to Dubai or living the family back home.
All the packages will depend on the Dubai’s taxation plan so as the expatriate is not left with a
minimal amount of money to make the life harder while executing duties in Dubai.

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3. Every organization adopted different payments models such as differed payments,
seniority-based payments, team-based payments, knowledge and experienced-based payments.
These payments are always determined by conditions.
Differed payments occurs in different conditions such as in salary reduction arrangement,
bonus deferral plans, supplement executive retirement plans, excess benefits plans(Diab & Hazer
2012,p.360). The salary reduction arrangement plan happens when an employee decides to
postponed part of the salary to a different year, for example, an employee who earns $80,000
may decide to defer $ 30,000 to a later year hence will only receive $ 50,000 and pay taxes on
this amount.
Supplemental executive retirement plans allow the company to contribute key
employee’s nonqualified plan so that on their retirement they will be able to access the accrued
funds if certain conditions were fulfilled such as vesting schedules( Haayashi & Keeton
2012,p.20). Excess benefit plans allow employees to contribute more than their normal
contribution limitations, such as the retirement plan for employees. The plan ensures that the
amount contributed in the present will only be paid in future and respect to the conditions.
Finally, the bonus deferral plan allows the employee to defer the amount they are supposed to
pay as a bonus to a different year or until they will be financially stable.
Seniority refers to the periods an individual works for a company; thus seniority-based
payments is the monetary or other benefits an employee receives in regards to the time that
he/she has worked for the organization (Angrian, Foster & Hitczenki 2010,p.120). Those
individuals that have taken quite long time in a company tend to get promotions and salary

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increment than those with fewer days in the company. Seniority-based payments might be
adopted when an organization wants to retain the best-skilled employees by ensuring that they
stay quite long time in the company. Through seniority payment, those skilled employees will
receive quite more benefits than those that have no experience. Another condition for the
seniority-based benefit is when an organization always higher employees on wages that are less
than the value of their marginal product at the beginning and enter into an agreement to increase
the amount of salary of benefit with time in the company. This makes workers stay quite longer
time s as to reach the pay-back period of the bond.
4. Policies refer to set plans used as the decision-making basis. Therefore pay policies Pay
policies refers to the strategies used by an organization to compete with targets labor market in
recruiting employees. The policies are always critical in assisting the managers in making the
right decisions regarding the company human capital allocation (Ascari, Colciago & Rossi 2017,
p.880). The pay policies are determined by organizational internal or external factors. Internal
factors include the ability to pay, business strategy, employee, and job evaluation and
performance appraisal.
The organization ability to pay determines the amount of salary an employee receives, for
example, big organizations tend to have strong financial base hence pay more salary than the
smaller organizations. The business strategy of an organization determines the amount of salary
paid to employees for example if a business wants to outdo the competitors, then it must contract
skilled employees who require higher salaries, and if the company is contented with the
performance then, it will accommodate the available employees with the minimum salary
cut(Block et al 2017,p.1113). Job evaluation and performance appraisal tend to create a
differential of jobs stating minimum and maximum salary an employee is supposed to receive.

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The performance of an employee also tends to affect the salary as the best performing always
request more salary than the poor performing employees. Employees too affect the pay policy
through the accrued level of experience, performance, and potentiality.
The external factors such as the cost of living, labor laws, labor unions, productivity also
affect the pay policy and compensations in an organization. Labor unions are always powerful in
championing for the employees’ rights such as salaries. The non-unionized companies tend to
enjoy more freedom concerning fixation of the compensation plan more than the unionized
companies. The cost of living affect the prices of basic commodities such as food, shelter, and
clothes; therefore any change in the consumer index affects the wage salary.
The labor laws developed by governments determine the minimum amount that all
employees are supposed to receive, and organizations face the consequences of failure to adhere
to such laws. The productivity of an organization affects the amount of salary received by
employees. The increment of the productivity motivates the managers to increase the employee
salaries and compensation, while a drop of productivity level forces the managers to reduce
expenses by cutting down the salary. Finally, the prevailing going rate of competitors affects the
pay policy of an organization of the same kind, as all are striving for the labor market.
5. Pay impacts can be evaluated in some ways for example through performance, turnover
rate, sustainability, evaluation survey(Fanrong & Jiannan 2017,p.1311). The performance
evaluation method of the pay impacts such as short and long-term goals. When the objectives are
achieved then the pay strategy is effective, and when the objective is not achieved, then the pay
scheme is effective.

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Turnover rate- most employees always work with the single aim of acquiring salary that
is capable of sustaining their daily needs. Such employees tend to change job when a new
greener pasture arises, hence organizations tend to use reward schemes to retain employees. The
effectiveness of the reward system, therefore, can be evaluated by the effectiveness of reducing
the employee turnover rate.
Level of Sustainability- the impact of the pay can be evaluated by defining the
sustainability of the company. Some organizations enter into pay schemes that are financially
heavy to the company, hence within a short time the company collapse. When the company is
capable of sustaining the pay scheme, employees get motivated hence increases their production
rate that is eventually translated into the company’s success.
Use of evaluation question or survey- the company can use question evaluation method to
determine the feelings of the employees after the implementation of the pay strategy. The short
questions answered by the employees provide an overview of the motivational status of the
employees and can be compared with previous motivational status. A more satisfactory report,
therefore, is an indicator that the pay scheme as positive effects and a negative report shows that
the pay scheme has no significance.
Workforce composition- the effectiveness of the pay scheme can be evaluated by the
composition of the workforce. In situations where the pay scheme is ineffective, the workforce
tends to be weak as the most skilled personnel shift job positions and companies, whereas an
effective pay scheme ensures the retention of the skilled employees leading to the strong
workforce.

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Job offer refusal rate- the effectiveness of pay scheme can also be evaluated through
analysis of the job offer refusal rate. In organizations that have a high rate of job refusal, as a
result of small salary pay or increment regarding the assigned task, then the conclusion that
should be made is that the pay scheme is ineffective. Whereas in an effective pay scheme,
employees tend to welcome new job assignments since the incentives offered are appropriate in
respect to the assigned task.
6. Broadband refers to the practices by organizations in evaluating and constructing a job
grading structure or salary band. Broadband tends to have 100 percent salary difference between
maximum and minimum while a typical salary band has 40 percent salary difference. The
process determines the amount of salary required paying a particular position and it has both
positive and negative effects (Shrama & Rattan 2010, p.91). The following are the advantages of
broadband.
Broadband helps to streamline organizational hierarchy. Organizations at times become
too hierarchical for strategic direction resulting in slow responses and slow communication from
both managers to staffs and from staffs to managers due to a large number of layers. At such
situations, broad banding tends to reduce the layers within an organization, flattening the
organizational structure and collapsing the salary range, thus reduces the hierarchy.
Broadband helps in facilitating the internal movement of an organization in situations
where the job positions are lateral. In such organizations, employees always consider transfer as
a demotion since the salary band always remains the same, while with broadband, internal
movements are increased . Broadbanding increase trust on the management since with

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broadband, managers have great latitude to pay whatever they feel like to the employees, hence
reducing the push and pull between the recruiting manager and the human resource department.
Finally, broadband helps in facilitating workers to acquire more knowledge and skills to adapt to
the new roles in the lateral organizational structure.
Broadbanding has disadvantages too, such as inequalities, lack of awareness of the
external market rates lack of cost controls and reduction in promotion opportunities.
Broadbanding reduces promotion opportunities by flattening the organizational structures. The
fewer salary bands result into fewer climbing steps for job promotions that have wide negative
effects such as job dissatisfaction, high rate of turnover.
lack of cost controls in an organization on some incentives. The widening of the salary
band tends to reduce bonuses that are received by employees since at times the company might
not be in a position to handle the total salary.
broadband may lead to salary inequalities. The widening of the wages tends to weaken
the linkage between the salary growth and skill development for higher job positions since the
motivation effect is lost . Finally, broadband reduces the awareness of the external market rates
as the midpoint are removed thus traditional salary can be related to the broadband salary. These
make manager to be confused when wants to pay an employee at the market rate.
7. Performance related pay is the organization’s compensation strategy that relates the
employee’s rewards to the organization's performance (Herst & Emmert 2017,p.9). The
financial incentives always motivate employees by aligning their efforts in achieving the
organization’s objectives, however, in some cases, the adoption of the performance related pay

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techniques resulted into poor performance or rater drop in the performance(Osborne 2014,p.14).
The following is a feasibility discussion of the adoption of the pay scheme in public school
teachers and bicycles couriers.
Performance related pay is advantageous to any organization and has always been applied
in public schools too. The performance-related pay takes many forms, for example, many regions
pay more to experienced teachers to mentor new teachers, some teachers are paid based on the
ability to serve as a curriculum specialist and even to teach the inner city schools (Whitaker et al
2012,p.632). However, controversy always arises on the student’s performance basis payment.
Students performance are the key determinants of the success of a school and are always as a
result of the great effort pumped be the teachers (Knudsen 2016, p.1850). The good performance
is always more observable in private schools than in public schools, thus leading to the
discrediting of the effectiveness of the performance related pay in public schools. In most
countries, the government remunerates the Public school’s teachers’ salary. Thus the salary tends
to be averaged and be equal among teachers of the same structural level unlike in private schools
that pay is on the level of performance.
Therefore using the PRP will not change the salary level received by teachers on the
same income structure as schools performance is not based on the teamwork of the teachers to
foster the student’s academics development. Adoption of the PRP will tend increase
competition among the teachers, with a few getting motivated while others lag behind,
eventually breaking the teamwork among them leading to the poor performance of
teachers(Giele,Kerkhofs & Van 2010,p.293). Secondly, the success of an individual is not
based on the academic performance rather on many life basic skills such as music, art, and

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others: this makes the scheme more inappropriate in developing the academic performance of
students.
Bicycle couriers are individually employed by courier companies tasked to deliver items
such as a letter to the customer's homes. Performance related pay is essential to the bicycle
messengers since there work individualized, and salary calculation is based on the number of
trips covered by an individual(Pupo & Nock 2014,p.340). The scheme is more appropriate with
the bicycle messengers as one will make more trips to gain a lot of money at the end of the
day(Georgantzis, Vasileiou, &Kotzaivazoglou 2017,p.15).
8. Expectancy theory is a motivational theory that explains why individuals get agitated to
perform when they feel that there is a reward at the end of the activity or their actions will lead to
the anticipated results (Hsiu et al 2011, p.258). The theory proposed by Victor H. Vroom is on
the assumption that behavior of an individual is as a result of the choices made concerning the
alternative course of action that is connected to the psychological activities taking place
simultaneously with the behavior.
Vroom recognized that employee performance is established on personality aspects such
as expertise, know-how, understanding, abilities, and personality. Vroom maintained that power;
accomplishment and motivation of an individual are inter-related to individual’s motivation, and
use three components that are expectancy, instrumentality, and valence to justify the stand
(Soyoung & Sungchan 2017, p.78). Expectancy refers to the belief that increased effort leads to
higher performance, hence affect acquisition of skills, and necessary support. Instrumentality is
the belief that good performance leads to reception of high valued results, for example, the good
results obtained in the first level leaders to good results in the second level.