Reward Management Report: Analyzing Pay Disparities at Technip FMC

This report delves into the realm of reward management, focusing on the specific case of Technip FMC, a well-known oil and gas company, and addresses the issue of pay discrepancies within its procurement department in Norway. The report begins by establishing the fundamental principles of reward management, including the importance of fair and equitable compensation, and the distinction between extrinsic and intrinsic rewards. It then examines the relationship between reward management strategy and the organizational environment, emphasizing the significance of pay structure, employee benefits, and organizational commitment. The core of the report analyzes the pay disparities observed within Technip FMC, where new employees often receive higher salaries than long-standing employees performing similar roles, leading to dissatisfaction. The report explores the reasons behind these discrepancies, considering factors such as education, experience, and market conditions. The report also evaluates the company's reward strategy and equal opportunities policy, aiming to identify areas for improvement and provide recommendations for a more consistent and equitable reward system. The report incorporates relevant theories of reward management and provides a comprehensive analysis of the case study, offering valuable insights into the challenges and complexities of managing employee compensation in a globalized and competitive business environment. The report also discusses transactional and relational rewards.

RUNNING HEAD: REWARD MANAGEMENT
Reward Management
Name of Student:
Name of University:
Author Note:

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Introduction:
Reward management is an essential and one of the most crucial function to be performed
by the HR. The total process is related with the formulation as well as the implementations of
policies of rewarding the employees of an organization fairly and equitably (SHAHID, H.,
Usman, Mahmood and Siddiqui 2015.). The total process is about the analysis and controlling of
the compensations and remunerations of the employees in accordance to their values in the
organization. This is an area that seeks to retain the talents of the companies by means of various
ways of regarding.
The remuneration or the salary is one of the most important part of this reward
management strategy. This forms the basis of the reward management system and then comes
the other benefits and recognitions. Often in various cases, however it is found that the pay
structure are not same even if the employees are doing the same job. There is a sense that arises
out of this that the organization is having discrepancy regarding the pay structure.
The present report deals with the Norwegian company where old employees receive the
same standard salary according to our salary grade and new employees receive way more as they
come from other companies that pay a higher salary, therefore there are discrepancies and salary
is not based on what the level of experience or education but it flows according to individual´s
current condition in other companies. The report will analyse the basic theories of the Reward
management system and will thus in turn shed light in the situation of the company discussed.
Reward Management:
The policies regarding awarding an employee on a fair and equitable basis, depending on
their consistency aligning with the organisational principles forms the idea behind Reward

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Management. Challenging works, praise and options for growth and development are example of
employee rewards. When management allocates challenging work to an employee, it showcases
belief of the company on that employee, which acts as a morale booster and thus is a form of
reward. Rewards can also consist of promoting or sending employees for higher level training for
the hard work done by the employee.
Rewards can be classified into two categories:
Extrinsic Rewards:
The awards which satisfy the basic needs of recognition fall in this category. These rewards work
as hygiene factor for the fundamental need for feeling rewarded. Some examples include
satisfactory job security, monetary incentive based on performance.
Intrinsic Rewards:
Non-monetary rewards which acts and form the soft form of motivation falls in this category.
These rewards involve paying personal and close attention for development, recognition of the
hard and good work.
Relationship between reward management environment and strategy:
Reward management strategy:
Anderson (2016) stated that according to him reward management strategy is basically the
implementation and formulation of policies and strategies for rewarding employees equitably,
fairly and consistently aligning with their work and values toward the organisation thereby
helping the organisation achieve its goals. The purpose of this strategy is to implement, maintain
and design reward systems, that is the practices and the procedures which in the long run is in

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accordance with the organisation and the stakeholders. Reward management is the process of
analysing and maintaining employee remuneration as well as other forms of benefits for the
employees. The aim is to form and effectively operate a structure of rewarding for the
organisation. Armstrong (2017) further stated that non-monetary rewards are as important as the
monetary ones. According to him rewards which are non-financial like learning opportunities,
increased job security and recognition are very important part of the reward structure.
Pay Structure:
Pay structure is basically the framework which fixes the employee remuneration based on the job
or group of jobs that the employee undertakes. The main use of pay structure is in determining
the pay rate for jobs, based in the content, nature and requirements of the job. According to Blau
and Kahn (2003), Milkovich and Newman (2008) the range of rates of payment that an
organisation provides for various performances and jobs forms a pay structure. There are three
main characteristics of policies concerning pay structure, namely, the number of levels, criteria
and differentials (Lazear & Rosen, 1981; Milkovich & Newman, 2008). Pay structure policies
have many tiers, levels and huge pay differentials in hierarchical pay distribution (Lazera &
Rosen, 1981; Milkovich & Newman, 2008).
Employee Benefits:
The compensations or remunerations that are given by the firms, in excess to the regular salary
or wages and are paid in part or fully by the employer is called employee benefits. Christoph
(1996) stated that for the development of industrial correlation one of the most important factors
is employee benefits. Examples of employee benefits are vacation, paid holidays, social security,
retirement plans, hospitalisation and medical care, child and elder cares, unemployment
insurance, worker compensation. The economic security of staffs receives a boost due to

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presence of employee benefits. According to Marsh and Kleiner (1998), benefits can vary widely
and exists to serve various economic and social needs. The law also stipulates that there is some
relating to the security of the employees that must be given to the employees. Benefit packages
like piece rates, bonuses, compensation and tips are identified by Dorantes and Mach (2003).
Organisational Commitment:
The relationship that exists between an organisation and its employees, when shown via
psychological concept is called organisational commitment. Allen and Mayer (1990) states that a
psychological state of mind by which an employee feels bound with the organisation can be
referred as commitment. It gives an explanation of the relation between organisation and
employee and further discusses the continuity in organisation. Commitment is directly
proportional to compatibility, productivity and loyalty, according to Bayram (2005). Allen and
Mayer (1990) say (a) continuance commitment and (b) affective commitment as some
organisational commitment indicators.
Transactional and Relational Rewards:
There are mainly four categories of rewards. Relational, individual, transactional and communal.
Sometimes these categories are not clearly defined.
Transactional rewards are palpable. These are mainly financial rewards. Industrial competitors
can copy these rewards. Individual rewards are specific to a particular employee that is they are
individual in the true sense. Contingent pay is an example of transactional individual reward.
Contingent pay is the additional remuneration paid in connection with performance, contribution,
competence, experience and skill (Armstrong M., 2007)

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Intangible rewards are mainly in relational awards faction. These essentially enhance the
transactional tangible rewards. These are in fact not easy for competitors to copy (Anderson M.,
2017). Rewards involving community and/or work environment are the communal rewards. This
makes it a part of relational reward and thereby relating to it. Employee recognition and voice
are examples of relational communal reward.
Employee voice is the situation when an organisation gives weight to its employee’s suggestions,
and acts upon them. Employee voice covers a whole range of structures and processes which
empowers and enables employees to undertake decision making at the firm (Anderson M., 2017).
This is considered to be a part of rewards since it gives recognition to employees who in turn
affect the well being and success of the organization (NYANDORO and GOREMUSANDU
2016).
Recognition is one of the most important ways of employee recognition. It shows the
appreciation of the company towards the efforts of the employees. This way of rewarding
increases the morale and self esteem of the individual, allowing him/her to be comfortable at
workplace. It also makes them feel that they hold a respectable position in the company. Positive
feedback from managers or promotion is two of the most effective ways of employee
recognition.
Background of the situation:
The Technip FMC is a well known oil as well s gas company that provides a complete
project life cycle for the energy industry. This company is basically a merger of the FMC an the
K based company Technip. The main areas of operations of the company are the surface
projects, the subsea and the offshore as well as the onshore projects. There has been a rising

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senses of dissatisfaction between the employees of the company in the Norway’s branch
regarding the question of salary discrepancy. The employees of the organization argued that even
if they are doing the same job, in case of remunerations and rewards, there are growing sense of
disparity by the management. This has mainly been noticed in the procurement department of the
company. It is thus necessary to analyse weather the discrepancy is actually a result of the mal
management or there are legitimate reason behind the discrepancy.
Selected Area of Employment
The procurement department, a division of TECHNIPFMC PLC, Norwegian company forms the
selected area of employment. It is necessary to maintain a sustainable and competitive supply
chain for all the service providers and their partners. The employees who are recruited in this
division are given the task of maintaining and developing the supply chain as mentioned above.
Further it is important to maintain an online, effective and real time registration system for the
present and future suppliers, inviting tenders from future suppliers and consistent and online
tracking of prequalification status (Karami, Dolatabadi and Rajaeepour 2013). The employees in
this division are given all the above mentioned tasks. These employees work under a different
pay structure. This gives an opportunity to study and understand differential pay structure, the
role that a policy on equal opportunities play and its effect on legal and HR practices and
policies.
Scope of the Report
In this report, instead of focusing on the broad spectrum of reward strategies and reward policies
of organisations, we narrow our focus on the subject of evaluation of employment on topics such

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as organisational strategy, reward strategy, environmental change and equal opportunities
policies (CIPD, 2017). The reward management system comprises of organisation practices,
processes and policies, which enable an organisation in rewarding their employees in accordance
with their abilities, artifice and contribution. These form the rationale for the narrowed down
focus of this report. Further if we assume that there is a reward system which has been exploited
and that employee performance forms a core part of the business environment in an organisation,
then the above rationale is backed by Path-Goal theory (Güngör, 2011). Due to the merger, these
aspects can be easily seen in the procurement department.
Justification of the Choice of Area of Employment
Increased competition and uncertainty is quickly becoming a prevalent characterisation of the
gas and oil industry business environment (Oil and gas journal, 2016). As an after effect,
industries are currently facing issues with gaining ideally from the synergies and also with
reaching their optimal operational efficiencies TECHNIPFMC PLC, Norwegian company having
merged two of their operations, which were possibly their largest, ones, have successfully
achieved the optimal operational synergy and efficiency. A streamlined management and
operations has a positive effect on entrepreneurial drive to attain low oil prices for a long period
of time. Horváthová and MIKUSOVA(2011 ) stated that if a merging process is successful then
it would have a positive effect helping in streamlining operations and management, thereby
having the above effect.
There are growing need of growing world class talents, improving and developing
employee capacity in their operations and finally enhancing recruitment strategies for HR. These

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present some of the impact of HR strategy. A master plan involving HR strategies along with
integrated workforce planning is a guiding force behind the merger process. Thus the recruitment
is now linked with the ability based reward system and business strategy. With the inclusion of
various policies and structures, It is a possibility that the employees who remains can be on a
different pay structure even if they would be present in the same role and hold same
qualifications as before.
Explanations for Pay Disparity
Many times legitimate and logical reasons are present behind pay disparity between two workers.
Education is one the main causes. If a worker holds an advanced degree or a certification then by
virtue of that he becomes eligible for higher pay grade. Another important factor determining the
pay structure is experience. Considering a situation, where an employee who has been working
for 12 years at another company, was just hired by a company, It can happen that he might
qualify for a higher pay grade than an employee who has been working for the company for the
last 10 years, because of his previous work experience.
Protected Classes
If employees in similar jobs are paid differently, then the issue of discriminatory payment may
creep up, especially if the employee in the lower payment spectrum belongs to a protected class.
Employee discrimination based upon race, sex, religion, colour and national origin is prohibited
by the Title VII of the Civil Rights Act of 1964 (.Hoole. and Hotz 2016.) Ocasio had said that
very few times it might happen that an employee does not belong to any of the protected classes.

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But he also stated that just hailing from a protected class does not give an employee grounds for
filing a pay disparity law suit based on discrimination. The operations manager of Trinity Door
Systems Inc, Allison Dunham, said that to her the effects of pay disparity like attrition, lack of
motivation and falling out among colleagues are more of concern than an impending law suit.
She has been quoted saying that at companies with ethical values, leaders strive to correct pay
disparity whenever such issues are found.
Market Demand
HR managers have noted that market demand plays a role in pay disparity. They have noticed
that when someone is hired when their skills were in lower demand in the market, then that
someone is likely to face pay disparity. Dunham, the operations manager quoted above has stated
that this situation should not be allowed to continue. She has said that these presents good
reasons behind the current situation of pay disparity, but immediate action should be taken to
correct this issue. They produced a new wage structure with improved starting wages which in
turn would help in figuring out the wages of new hires. Further they revised the wages of the
experienced staffs according to the new structure and moved them to the new stricture of wages
within a stipulated time (O'Lear, Plimme. and Robinson 2015.). She further stated that if
according to market demand a job’s importance changes, then all employees doing the same job
should be moved to the same pay structure, irrespective of when they were hired. According to
HR managers, pay analysis done in a periodic fashion should be undertaken. This helps the
company when it faces a law suit regarding pay disparity. The HR manager who was interviewed
stated that documented reasons for differential payment structure for the same role should be
kept. Data showing non-discriminatory differential payment structure should be entered in the

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documents attentively. Helen Brown, SHRM-CP, HR manager of EnSync stated that if and when
they had an established system of report keeping, it becomes easy to conduct analysis. They use
both internal and external benchmarking.
Recommendation:
In order to rule out the dissatisfaction and the disengagement of employees, concerning
the issues of rewards and recognition, the following measures can be taken:
1. Introduction of an effective performance appraisal system- the performance management is
not only related with the performance management in the organization, but also in deciding
the pay structures of the employees (Arulrajah Opatha and Nawaratnen2015.). The main
objective of the performance appraisal is to review the performance of the employees in a
given period of time. The gap between the desired and he actual performance is a great
indicator for the compensation and benefit set ups for the employees. the job evaluation is
one of the most significant function required for the performance measurement. In setting up
the compensation package, the organizations generally evaluate the worth of a particular jobs
to other jobs and set up a particular pay structure. Rewarding employees based on their
abilities and performance is decided upon the efficiency of the performance and the
criticality of task. In the particular situation, the company is facing dissatisfaction among the
employees based on the disparity in pay structure. While the tenure and the past experience
accounts much in the decision of this difference in pay structure, it seems like that it is not
been acceptable by various employees. to increase the transparency of the process, the
company can initiate an effective performance measurement system (Sharples and Domingue
2016). In such case, the company can take into account the present performance and the work
engagement of an individual, the past experience and expertise along with the behavioral

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aspects of the employees and grade them as level 1, level 2, level 3 and so on. Pay structures
based on such grading will not only foster a sense of transparency in the system, it will also
motivate the other employees to reach in the higher levels. The discrimination between the
old and the new will be ruled out and at the same time the company will have the option of
balancing their budget.
2. Training and development- the common argument by the company regarding the difference
in the pay structure is about the reason that new employees receive way more as they come
from other companies that pay a higher salary. Thus, it can focus on the training and
development of their existing employees so that they can meet the expertise level of the new
employees who have greater exposure. This will also motivate the employees in self
development and thereby increasing the profitability o the company. The training benefits
will also act as a recognition reward for the employees.
3. Non monetary rewards- the inclusion of the non monetary rewards will also help in the
reward management process. While the new employees coming from other companies is paid
more, the old employees will be more liable for promotion and loyalty benefits.
Conclusion:
The report over all analysed the reward management as a theory as well as its practical
usage. In discussing the theoretical parts, the report examined the scope and different varieties of
reward management. in putting those theories in practical solution, the report further explained
the points for and against the pay structure discrimination.