CHAPTER TEN REWARD AND THE EMPLOYMENT RELATIONSHIP

Objectives of this chapter Explore the relevance of reward to the employment relationship Examine the relationship between reward and the psychological contract Outline different approaches to reward, and consider their impact on the employment relationship Consider the different impacts of individual and team- based pay Examine how inequality in pay arises and the impacts of this Consider the importance of non-financial rewards within the context of total reward

Purpose of a reward system To recruit and retain sufficient employees To motivate employees To encourage employees to follow rules and required behaviours

Reasons why people leave an organisation Promotion outside the organisation53% Lack of development or career opportunities42% Change of career 41% Level of pay37% Retirement20% Redundancy19% Level of workload11% Childcare issues11% Lack of support from line managers10% Level of working hours 9% Ill health (other than stress) 7% Stress of job/role 6% Leaving to look after family members (not children) 4% Relocation 3% Other 11%

Difficulties in recruitment Lack of required specialist skills 63% Lack of required experience 59% Wanted more pay than could be offered47% No applicants 29% Image of sector/organisation16% Lack of interpersonal skills12% High cost of living in the area 9% Lack of required formal qualifications 7%

Reward and motivation Little evidence that money is a direct motivator Instrumental and symbolic meaning of money Needs theories of motivation Cognitive theories of motivation

Reward and the psychological contract Expectations are not stated Changing nature of the psychological contract Short-term and situational

Performance-related pay Part of pay linked to performance Explains what is important Employee does not always have full control over performance Inhibits teamwork Assessment can be subjective

Competence-related pay Clear to the employee Employer can determine what is important to the organisation Subjective assessment Definition of levels of competence

Skills-related pay Employee understands what skills are valued Employer can determine what is most important Subjectivity Disagreements on assessment

Contribution-related pay Combine competence/skill and performance Employer can identify what is valued Subjectivity Differences in interpretation

Service-related pay Does not reward for contribution No subjectivity

Individual v team pay Must be clearly defined team Individuals do not all contribute equally Perception of fairness

Business results driven scheme SAYE Share incentive plans Profit sharing Gainsharing

Inequalities in pay Differences in educational levels and work experience Part-time working Travel patterns Occupational segregation Workplace segregation

Equal Pay Act Like work Work rated as equivalent Work of equal value

Defences in equal pay claims Different negotiating groups Experience Red-circling Location

Total reward Variation in components of reward result in longer-lasting impact on motivation and commitment of employees Employment relationship enhanced by balance of transactional and relational rewards Allows greater flexibility to meet individual needs of employees Can have a direct positive impact on the psychological contract