HRM107 Study Guide - Final Guide: Enterprise Bargaining Agreement, Expectancy Theory, House Training
4 Jun 2018
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Week 11: Chapter 10
Strategic reward management
A reward may be anything tangible or intangible that an organisation offers to its employees in
exchange for their potential or actual work contribution. Also known as remuneration or
compensation, pay typically takes the form of an annual cash salary or a weekly/hourly wage. How
employees are paid shapes both organisational outlays and outcomes; pay is a major contributor to
bottom line financial performance.
The importance of rewards lies not just in what is offered by the employer but also in how
employees respond to what is offered. For rewards to be meaningful - to influence thought, feelings
and behaviour - the reward must attach a positive value.
Total reward management
A holistic approach to reward management means choosing financial rewards compatible with the
various non-financial rewards that the organisation may offer its employees. Aka total reward
approach. Rewards can be divided into 2 broad categories:
1. Extrinsic: arise from factors associated with but external to the job that the employee
does/job context. 3 main types of extrinsic rewards include:
• Financial rewards (base pay, benefits like superannuation/personal health insurance,
performance-related pay to increase incentives)
• Developmental rewards: are associated with personal learning, development and career
growth such as skills training and leadership coaching.
• Social rewards: indirect benefits with the organisational climate, performance support, quality
of supervision, work-life balance, flexible working time arrangements etc.
2. Intrinsic: arise from the content of the job itself including the interest and challenge it
provides, the task variety and autonomy, the degree of feedback, and the meaning and
significance attributed to it.
A key step in framing a total reward approach is to determine the respective roles of financial and
non-financial rewards. This may require an audit to identify what non-financial rewards and extent
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to which these may assist to attract, retain and motivate employees. May offer high job security, in-
house training and development etc.
Strategic reward management
Has 2 main requirements.
1. Must be informed by the organisation's overall HR strategy, plans, policies and aligned. This is
internal fit.
2. Should align with and support overall strategic business plan in its environmental context. This
is external fit.
Depending on objectives, different firms should adopt different approaches and practices. The
critical message here is that one size does not fit all. While complying to legal obligations and
entitlements, reward practices above this mandatory baseline should be tailored specifically to the
particular strategy of each organisation. The aim is to develop and maintain a reward system that
matches organisational and business unit performance factors.
Objective:
Reward philosophy and strategy
• One critical step: formulate a statement of overall reward strategy - general blueprint for
guiding the process of ensuring that reward practices are aligned both internally and
externally. To achieve strategic reward fit, HR factors of identification, application,
measurement and reward is used to maximise effectiveness.
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• Advisable to incorporate into a brief statement of reward philosophy, purpose and strategy.
• Reward strategy statement should indicate the primary purposes to which reward
management will be directed. E.g. focus on staffing, motivation, cost-effectiveness or 3 way
balance?
Pay determination in the changing Australian regulatory environment
The decentralisation of pay determination: causes and consequences
• To illustrate how developments in the external operating environment shape the strategic
reward choices made by individual organisations, consider recent developments in the
Australian regulatory context. This can be seen in the changes of employment relations law
and regulation at the national level.
• Movement towards enterprise bargaining and collective agreement-making.
• The federal Workplace Relations Act 1996 and the Workplace Relations Amendment Act 2005
were designed to hasten the trend away from award regulation and register individual
contracts of employment.
• Fair Work Aus to oversee new workplace relations system including power to vary awards,
make minimum wage orders and approve agreements
• NES: creation of new, simple modern awards
• Special provisions to assist low-paid workers who have missed out on benefits of bargaining in
the past
Heterogeneity in pay-setting methods in Australia. Reflect the combined influence of historical
practices, environmental factors and strategic management choices on organisational approaches to
the employment relationship and reward system configuration.
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Document Summary
A reward may be anything tangible or intangible that an organisation offers to its employees in exchange for their potential or actual work contribution. Also known as remuneration or compensation, pay typically takes the form of an annual cash salary or a weekly/hourly wage. How employees are paid shapes both organisational outlays and outcomes; pay is a major contributor to bottom line financial performance. The importance of rewards lies not just in what is offered by the employer but also in how employees respond to what is offered. For rewards to be meaningful - to influence thought, feelings and behaviour - the reward must attach a positive value. A holistic approach to reward management means choosing financial rewards compatible with the various non-financial rewards that the organisation may offer its employees. Rewards can be divided into 2 broad categories: extrinsic: arise from factors associated with but external to the job that the employee does/job context.
