Workforce today is more articulate about their needs. Employees desire the best of everything – competitive salaries, comfortable & inspirational lifestyles, job security, career enhancement options, work-life balance, and so on. Competition for talent is ever increasing and organizations need to have well-defined philosophies and strategies to help them develop innovative ways of tapping intrinsic motivation of employees by engaging their hearts and minds. While many organisations are struggling to make sufficient progress in this direction, there are organizations that have institutionalized robust practices and effective processes in different people practice areas that go a long way in positively impacting employee perception. In this regard, two types of reward are identified, and they are intrinsic reward and extrinsic reward. Extant research showed that reward can affect job satisfaction and thereby employee performance, so this study proposes a new framework based on mediating role of job satisfaction. India’s Best Companies for Rewards and Recognition was conceptualized to recognize companies who are leading the way in the area of Rewards and Recognition for us learns from. Human resources are the most important among all the resources an organization owns. To retain efficient and experienced workforce in an organization is very crucial in overall performance of an organization. Motivated employees can help make an organization competitively more value added and profitable. The present study is an attempt to find out the major factors that motivate employees and it tells what is the relationship among reward, recognition and motivation while working within an organization. The data were collected from employees of diverse type of organizations to gain wide representation of sectoral composition. The participation in survey was voluntary and confidentiality of responses was ensured. The statistical analysis showed that different dimensions of work motivation and satisfaction are significantly correlated and reward and recognition have great impact on motivation of the employees. Implications of the study for managers and policy makers in the context of human resource practices have been discussed. Limitations and guidelines for future research are also provided.

1. 1
An Assignment On
‘‘A Study of Incentives, Rewards and
Benefits in an Organization”
Course Title : Human Resource Management
Course Code : MGT - 325
SUBMITTED TO
Md. Awal Hossen
Lecturer
Department of Business Administration
LEADING UNIVERSITY, SYLHET
SUBMITTED BY
Torch bearers
Name ID
Syed Ali Hasan 1201010248
Ehsan Ahmed Chowdhury 1201010230
Masum Hussain 1201010202
Mahmudul Karim Newaz 1201010205
Abdul Motin 1201010219
Abu Ahmed Shahib 1201010247
Section : E Semester : 8th
Batch : 30th
Department of Business Administration
LEADING UNIVERSITY, SYLHET
SUBMISSION DATE : 25 August, 2014

2. 2
Acknowledgement
At first, we are grateful to Almighty Allah for creating us in
such a beautiful country like Bangladesh and also for controlling our
life. For the mercy of him, we have got such courage to start this
assignment on “A study of Incentives, Rewards and Benefits in an
Organization”
After that we would like to give thanks to our honorable Head
of the Department Dr. Bashir AhmedDr. Bashir AhmedDr. Bashir AhmedDr. Bashir Ahmed BhuyianBhuyianBhuyianBhuyian for giving us the
opportunity to study in this subject. We would like to express our
thanks to the librarian of Leading University for all his help that we
have received.
Our respected parents who gave us mental support and
inspiration for our assignment, there is a special thanks for them.
We also would like to give a lot of thanks to our honourable
course teacher, Md. Awal HossenMd. Awal HossenMd. Awal HossenMd. Awal Hossen for giving us a wonderful
opportunity to make such an interesting and valuable assignment and
giving us a clear concept about the assignment.
At last but not the least, without the help of our friends and
classmates it was quite impossible to prepare such kind of
assignment. They give us some necessary information about this topic
which is unknown to us. So, we would like to give thanks to all of
them.

3. 3
Abstract
Workforce today is more articulate about their needs. Employees desire the best of
everything – competitive salaries, comfortable & inspirational lifestyles, job security,
career enhancement options, work-life balance, and so on. Competition for talent is
ever increasing and organizations need to have well-defined philosophies and
strategies to help them develop innovative ways of tapping intrinsic motivation of
employees by engaging their hearts and minds. While many organisations are
struggling to make sufficient progress in this direction, there are organizations that
have institutionalized robust practices and effective processes in different people
practice areas that go a long way in positively impacting employee perception. In this
regard, two types of reward are identified, and they are intrinsic reward and extrinsic
reward. Extant research showed that reward can affect job satisfaction and thereby
employee performance, so this study proposes a new framework based on mediating
role of job satisfaction. India’s Best Companies for Rewards and Recognition was
conceptualized to recognize companies who are leading the way in the area of
Rewards and Recognition for us learns from. Human resources are the most important
among all the resources an organization owns. To retain efficient and experienced
workforce in an organization is very crucial in overall performance of an
organization. Motivated employees can help make an organization competitively
more value added and profitable. The present study is an attempt to find out the major
factors that motivate employees and it tells what is the relationship among reward,
recognition and motivation while working within an organization. The data were
collected from employees of diverse type of organizations to gain wide representation
of sectoral composition. The participation in survey was voluntary and confidentiality
of responses was ensured. The statistical analysis showed that different dimensions of
work motivation and satisfaction are significantly correlated and reward and
recognition have great impact on motivation of the employees. Implications of the
study for managers and policy makers in the context of human resource practices have
been discussed. Limitations and guidelines for future research are also provided. A
meta-analytic review of all adequately designed field and laboratory research on the
use of incentives to motivate performance is reported. Team-directed incentives had a
markedly superior effect on performance compared to individually- directed
incentives. This effect was not influenced by the location of the study (business,
government, or school), the competitive structure of the incentive system (programs
where only the highest performers get incentives versus programs where everyone
who increased performance receives incentives), the type of study (whether the study
was a laboratory experiment or a field study), or the performance outcome (quality,
quantity, or both). In these studies, money was found to result in higher performance
gains than non-monetary, tangible incentives (gifts travel). More research is needed
on the relative cost-benefit of cash and gift incentives, and the way different types of
tangible incentives are selected. Long-term programs led to greater performance gains
than shorter-term programs did, and somewhat greater performance gains were
realized for manual than for cognitive work. Explanations based on cognitive
psychological principles accompany each of the analyses.

4. 4
Contents
Subjects pages
1. Introduction 5
2. Literature Review 7
3. Types of Incentives 7
4. Other forms 8
5. Importance of incentives 8
6. What is reward? 9
7. Types of rewards 9
8. Other kinds of tangible rewards 10
9. Schedule of rewards 11
10. Length of reward program 12
11. Effect of reward’s on stages of work 13
12. Goals/Importance of a Reward System 13
13. Motivational Theories 14
14. What is Benefit? 15
15. Types of Benefits 15
16. Equity-based compensation 16
17. Relationship of Incentives, Rewards and Benefits with Organization 18
18. Conclusion 21
19. References 22

5. 5
Introduction
Human resources are the most important among all the resources an
organization owns. To retain efficient and experienced workforce in an organization is
very crucial in overall performance of an organization. Motivated employees can help
make an organization competitively more value added and profitable. The present
study is an attempt to find out the major factors that motivate employees and it tells
what is the relationship among reward, recognition and motivation while working
within an organization. The data were collected from employees of diverse type of
organizations to gain wide representation of sectoral composition. In all, 250 self
administered questionnaires were distributed among the employees of different
sectors and they returned 220 completed useable questionnaires for response rate of
88%. The participation in survey was voluntary and confidentiality of responses was
ensured. The statistical analysis showed that different dimensions of work motivation
and satisfaction are significantly correlated and reward and recognition have great
impact on motivation of the employees. Implications of the study for managers and
policy makers in the context of human resource practices have been discussed.
Limitations and guidelines for future research are also provided.
As competitive pressures mount, organizations are compelled to consider
strategies that will help them become more innovative, productive, and efficient. It is
essential that organizations maximize all resources to optimize the effectiveness of
their operations. While many factors impinge upon this effectiveness, labor is an
important resource that often represents a significant portion of expenses incurred by
organizations. Considering the need to remain competitive, innovative compensation
strategies such as incentive programs are often developed in an attempt to align
individual motivation and goals with the objectives of the organization. Considerable
research exists on psychological theories explaining how and why incentive pay
motivates performance. Likewise, there is considerable research on typologies of
incentive pay. Since the research in these areas is rather mature and quite voluminous
a complete review of such research is outside the scope of this article. Research
related to incentive programs in unionized organizations will also be avoided since
these programs are usually a function of labor negotiations and not a result of the
organization’s desire to tie compensation to organizational performance. As stated
previously, competitive pressures in the domestic and global market are placing
demands on organizations to be more productive and efficient than ever. This
competitive pressure is evident in human resource strategies utilized by corporations.
To some degree, the risk faced by corporations is now being shared with the workers.
Tully (1995) pointed out that employees are sensing an increased level of anxiety,
since they might not know from one year to the next whether they will receive
compensation increases or even have a job. Tully points out that this collective risk is
being operationalized in incentive programs that often impact as much as 30% of a
manager’s income.

6. 6
Objective of the Study
Primary Objective
The first and most important objective of the assignment is to gather
knowledge about Reward, Incentive and Benefit System and effect of different classes
of Rewards, Incentives and Benefits in an Organization. Moreover we will know
deeply about the implementation of it, Application, Importance and Limitation of it in
an Organization.
Secondary Objective
1. Help students to acquire knowledge and skills about Different
Motivational Theories for the Organization.
2. To help students for increasing their Motivational Skills.
3. Gather information and ideas.
4. Apply questions to decision-making situations in Organization.
5. Increasing the vocabulary of students.
6. To identify the impotence of Applying Rewards, Incentives and
Benefits in the Organization.
7. Help students to use skills in Applying Motivational Theories in
Organization.
Limitation of the Study
i. Time Limitation: All of we know that Muslim’s One of the biggest
religious festival has gone that is Eid-ul-fitr. As our submission date of
assignment is After the Eid and we were all busy to perform the
religious activity so we couldn’t get enough time to collect necessary
data for enriching the assignment.
ii. Budgetary Limitation: we are living in developing country & we are
also student that’s why we don’t have sufficient money to spend for
betterment of the assignment.
iii. Internet Limitation: In our country the internet service is too slow
that’s why we can’t access to internet so easily and find the necessary
information regarding the assignment. Besides Our internet facility is
so costly and that’s why the entire student can’t use the facility.
iv. Shortage of necessary books: There is shortage of sufficient books in
our campus library about this topic. As well as we searched the
different books related to this topic but we can’t get or collect enough
and needed information to make the assignment.

7. 7
Literature Review
Incentives
An incentive is something that motivates an individual to perform an action.
The study of incentive structures is central to the study of all economic activities (both
in terms of individual decision-making and in terms of co-
operation and competition within a larger institutional structure). Economic analysis,
then, of the differences between societies (and between different organizations within
a society) largely amounts to characterizing the differences in incentive
structures faced by individuals involved in these collective efforts. Ultimately,
incentives aim to provide value for money and contribute to organizational success.
Something that incites or has a tendency to incite to determination or action
--- Business Dictionary
Types of Incentives
Incentives can be too classified according to the different ways in which they motivate
agents to take a particular course of action. One common and useful taxonomy divides
incentives into four broad classes:
Class Definition
Remunerative
incentives Are said to exist where an agent can expect some form of material
reward – especially money – in exchange for acting in a particular
way.Financial
incentives
Moral
incentives
Are said to exist where a particular choice is widely regarded as
the right thing to do, or as particularly admirable, or where the
failure to act in a certain way is condemned as indecent. A person
acting on a moral incentive can expect a sense of self-esteem, and
approval or even admiration from his community; a person acting
against a moral incentive can expect a sense of guilt, and
condemnation or even ostracism from the community.
Coercive
incentives
Are said to exist where a person can expect that the failure to act in
a particular way will result in physical force being used against
them (or their loved ones) by others in the community – for
example, by inflicting pain in punishment, or by imprisonment, or

8. 8
by confiscating or destroying their possessions.
Natural
Incentives
such as curiosity, mental or physical exercise, admiration, fear,
anger, pain, joy, or the pursuit of truth, or the control over things in
the world or people or oneself.
Other forms
These categories do not, by any means, exhaust every possible form of
incentive that an individual person may have. In particular, they do not encompass the
many other forms of incentive – which may be roughly grouped together under the
heading of personal incentives – which motivate an individual person through their
tastes, desires, sense of duty, pride, personal drives to artistic creation or to achieve
remarkable feats, and so on. The reason for setting these sorts of incentives to one
side is not that they are less important to understanding human action – after
all, social incentive structures can only exist in virtue of the effect that social
arrangements have on the motives and actions of individual people. Rather, personal
incentives are set apart from these other forms of incentive because the distinction
above was made for the purpose of understanding and contrasting the social incentive
structures established by different forms of social interaction. Personal incentives are
essential to understanding why a specific person acts the way they do, but social
analysis has to take into account the situation faced by any individual in a given
position within a given society – which means mainly examining the practices, rules,
and norms established at a social, rather than a personal, level.
Importance of incentives
Are your employees singing the blues? Are they seemingly unmotivated? Are you
having a tough time getting them fired up about safety?
If so, then you might be thinking about starting an incentive program. And if that's the
case, then a new study, "Incentives, Motivation and Workplace Performance:
Research and Best Practices," contains some interesting information. For example, the
study found that team-based incentives work best, and incentives can have a positive
impact on the negative attitudes that adversely affect achievement of work goals.
The study is the most comprehensive ever done on the effectiveness of the $27
billion incentive industry and its usefulness to employers in determining the
relationship between incentives, motivation and performance in the workplace.
"This definitive study shows that tangible incentives dramatically increase
work performance by an average of 22 percent," says Mike Hadlow, president of the
SITE Foundation, which released the study today. "No CEO in the world can afford to
ignore this compelling finding. Incentive programs may be the single most important
performance-improvement tool available to executives today."
Incentives provide a spur or zeal in the employees for better performance. It is
a natural thing that nobody acts without a purpose behind. Therefore, a hope for a
reward is a powerful incentive to motivate employees. Besides monetary incentive,

9. 9
there are some other stimuli which can drive a person to better. This will include job
satisfaction, job security, job promotion, and pride for accomplishment. Therefore,
incentives really can sometimes work to accomplish the goals of a concern. The need
of incentives can be many:-
1. To increase productivity,
2. To drive or arouse a stimulus work,
3. To enhance commitment in work performance,
4. To psychologically satisfy a person which leads to job satisfaction,
5. To shape the behavior or outlook of subordinate towards work,
6. To inculcate zeal and enthusiasm towards work,
To get the maximum of their capabilities so that they are exploited and utilized
maximally.
What is Reward?
Like a child being given a chocolate cupcake and a big hug after cleaning her
room, rewards and recognition can be powerful tools for employee motivation and
performance improvement. Many types of rewards and recognition have direct costs
associated with them, such as cash bonuses and stock awards, and a wide variety of
company-paid perks, like car allowances, paid parking, and gift certificates. Other
types of rewards and recognition may be less tangible, but still very effective. These
"non-monetary" rewards include formal and informal acknowledgement, assignment
of more enjoyable job duties, opportunities for training, and an increased role in
decision-making. This paper focuses on non-monetary rewards, and as we will see,
these types of rewards can be very meaningful to employees and so, very motivating
for performance improvement.
Money or another kind of payment that is given or received for something that
has been done or that is offered for something that might be done
--- Business Dictionary
Types of Reward
Rewards serve many purposes in organizations. They serve to build a better
employment deal, hold on to good employees and to reduce turnover. The principal
goal is to increase people's willingness to work in one’s company, to enhance their
productivity.
Most people assimilate "rewards", with salary raise or bonuses, but this is only
one kind of reward, extrinsic reward. Studies proves that salespeople prefer pay raises
because they feel frustrated by their inability to obtain other rewards, but this behavior
can be modified by applying a complete reward strategy.
There are two kinds of rewards:
Extrinsic rewards: Concrete rewards that employee receive.

10. 10
Bonuses: Usually annually, Bonuses motivates the employee to put in all
Endeavours’ and efforts during the year to achieve more than a
satisfactory appraisal that increases the chance of earning several salaries
as lump sum. The scheme of bonuses varies within organizations; some
organizations ensure fixed bonuses which eliminate the element of
asymmetric information, conversely, other organizations deal with
bonuses in terms of performance which is subjective and may develop
some sort of bias which may discourage employees and create setback.
Therefore, managers must be extra cautious and unbiased.
Salary raise: Is achieved after hard work and effort of employees,
attaining and acquiring new skills or academic certificates and as
appreciation for employees duty (yearly increments) in an organization.
This type of reward is beneficial for the reason that it motivates
employees in developing their skills and competence which is also an
investment for the organization due to increased productivity and
performance. This type of reward offers long-term satisfaction to
employees. Nevertheless, managers must also be fair and equal with
employees serving the organization and eliminate the possibility of
adverse selection where some employees can be treated superior or
inferior to others.
Gifts: Are considered short-term. Mainly presented as a token of
appreciation for an achievement or obtaining an organizations desired
goal. Any employee would appreciate a tangible matter that boosts their
self-esteem for the reason of recognition and appreciation from the
management. This type of reward basically provides a clear vision of the
employee’s correct path and motivates employee into stabilizing or
increasing their efforts to achieve higher returns and attainments.
Promotion: Quite similar to the former type of reward. Promotions tend
to effect the long-term satisfaction of employees. This can be done by
elevating the employee to a higher stage and offering a title with
increased accountability and responsibility due to employee efforts,
behaviour and period serving a specific organization. This type of reward
is vital for the main reason of redundancy and routine. The employee is
motivated in this type of reward to contribute all his efforts in order to
gain managements trust and acquire their delegation and responsibility.
The issue revolved around promotion is adverse selection and managers
must be fair and reasonable in promoting their employees.
Other kinds of Tangible Rewards
1. Intrinsic rewards: Tend to give personal satisfaction to individual
i. Information / feedback: Also a significant type of reward that successful
and effective managers never neglect. This type of rewards offers guidance
to employees whether positive (remain on track) or negative (guidance to the

11. 11
correct path). This also creates a bond and adds value to the relationship of
managers and employees.
ii. Recognition: Recognition: Is recognizing an employee’s performance by
verbal appreciation. This type of reward may take the presence of being
formal for example meeting or informal such as a “pat on the back” to boost
employees self-esteem and happiness which will result into additional
contributing efforts.
iii. Trust/Empowerment: in any society or organization, trust is a vital
aspect between living individuals in order to add value to any relationship.
This form of reliance is essential in order to complete tasks successfully.
Also, takes place in empowerment when managers delegate tasks to
employees. This adds importance to an employee where his decisions and
actions are reflected. Therefore, this reward may benefit organizations for
the idea of two minds better than one.
Intrinsic rewards makes the employee feel better in the organization, while
Extrinsic rewards focus on the performance and activities of the employee in order to
attain a certain outcome. The principal difficulty is to find a balance between
employees' performance (extrinsic) and happiness (intrinsic).
The reward also needs to be according to the employee’s personality. For
instance, a sports fan will be really happy to get some tickets for the next big match.
However a mother who passes all her time with her children, may not use them and
therefore they will be wasted.
When rewarding one, the manager needs to choose if he wants to rewards an
Individual, a Team or a whole Organization. One will choose the reward scope in
harmony with the work that has been achieved.
a. Individual
• Base pay, incentives, benefits
• Rewards attendance, performance, competence
b. Team: team bonus, rewards group cooperation
c. Organization: profit-sharing, shares, gain-sharing
Schedules of Rewards
Considering when to reward an employee is critical in ensuring the reward
system has the largest possible impact on behavioral change. In many cases, the
schedule of reinforcement can actually be more influential on behavioral change than
the magnitude of the reinforcement.
There are two types of reinforcement schedules:
1. Continuous reinforcement
Continuous reinforcement is when every target behavior is rewarded. An
example of this is paying a bonus every time an employee reaches a performance

12. 12
target. This type of reinforcement schedule is very effective in quickly shaping
employee behavior when starting an unfamiliar task.
2. Intermittent reinforcement
Intermittent reinforcement is when the reward does not follow every target
behavior response. This type of reinforcement will result in higher frequencies of the
desired behavior. It is effective in maintaining the desired behavior after it has
become a habit.
There are 4 types of intermittent reinforcement schedules and each has a different
impact on employee behavior:
a. Fixed ratio
This type of reinforcement schedule is when a fixed number of behavioral
responses occur before giving the reward. An example of this is a bonus that is
tied to a fixed number of units sold. This reinforcement schedule will increase
performance.
b. Variable ratio
This type of reinforcement schedule is when a random number of behavioral
responses occur before the reward is given. An example of this is gift cards
given randomly to employees. This type of reinforcement will result in an
increase in desired behavior and the behavior will be more resistant to
extinction (weakening).
c. Fixed interval
This type of reinforcement schedule is when the first behavioral response after
a specific period of time has elapsed is followed with a reward. An example of
this is a salary paid on a regular basis. This type of reinforcement will produce
an inconsistent performance pattern amongst employees.
d. Variable interval
This type of reinforcement schedule is when the first behavioral response after
random periods of time have elapsed is rewarded. An example of this is a
supervisor who gives praise randomly to excellent employees. This type of
reinforcement schedule will result in an increase in desired behavior and is
resistant to extinction (weakening).
Continuous reinforcement is very effective in quickly shaping employee
behavior until it becomes a habit. Once the behavior has become a habit, variable ratio
and variable interval schedules of reinforcement are the most effective schedules of
reinforcement. Using these schedules of reinforcement results in the most significant
behavior change in employees and this change is most resistant to weakening.
Length of Reward Program
The length of the employee rewards program has an impact on employees’
subsequent performance. A recent meta-analysis found that, in general, the longer the
implementation of an incentive program, the greater the performance gains:
• Long-term incentive programs (last longer than 6 months) increased
employee performance by 44%

13. 13
• Intermediate length incentive programs (last 1-6 months) increased
employee performance by 30%
• Short-term incentive programs (last less than 1 month) increased employee
performance by 20%
The effect of long term incentive programs may be so robust because they act
to continually shape employee behavior in order to make it a better fit for the
organizational culture and preferences. This results in work performance that is more
in line with company standards and as a result, contributes more value to the
company. Thus, when deciding on the length of an employee rewards program,
managers should consider making it long term (last longer than 6 months) in order to
gain the most desired results.
Effect of reward’s on stages of work
Rewards have a different impact on the employee’s motivation and subsequent
performance during each stage of their work. Rewards can act to motivate the
employee to:
• Start a new task. In this initial stage of work, rewards serve to promote
“buy in” to start a new task. Rewards increase an employee’s motivation to
start a new task by 15%.
• Persist. In this middle stage of a task, rewards serve as motivational
maintenance. They will contribute to an employee persevering in the face of
distractions, challenges and competing work tasks. Rewards increase
employees’ motivation to persist on a task by 27%.
• Work smarter. In this stage of a task, rewards serve to increase the quality
of the performance on the task. They will contribute to the employee
investing more mental effort, thinking of creative approaches to solve
problems and strategies to be more effective and efficient. Rewards increased
working smarter by 26% in employees.
In sum, rewards have significantly less of an impact on an employee starting a
new task (15% increase in performance), than they do in motivating them to persist at
the task (27% increase in performance) and to work smarter on the task (26% increase
in performance).
Goals/Importance of a Reward System
Identifying the desired outcome of rewards is essential in developing the most
effective rewards program in a company. The goals of a good rewards system should
be multifaceted. It should be designed to:
• Attract talented employees. Rewards should be used to entice talented
employees to the company or position. Companies should allocate a certain
amount of funds to the recruitment and hiring of high caliber employees.

14. 14
• Motivate employees to perform optimally. Most programs focus on the
motivational component of rewards. They use rewards to shape employee
behavior in the most desired direction. This outcome should be carefully
considered when designing a rewards program.
• Foster personal growth and development. Rewards should be used to
encourage and promote personal growth and professional development. When
rewards are used to encourage employees to engage in behavior that will
increase their work performance, the company ultimately benefits from a more
skilled workforce.
• Increase employee satisfaction with their work. Rewards can promote
engagement with work, resulting in increased workplace satisfaction. They
can motivate an employee to persist in the face of challenges, come up with
creative solutions to tackling tasks and encourage them to derive more
pleasure with their work.
• Keep talented employees from leaving. When employees love what they do
and are rewarded for their performance, they are less likely to leave their
company. Keeping talented employees on board should be a priority of any
company. Thus, companies should devote resources necessary to ensure that
their rewards program meet the needs of their most talented employees.
Managers seeking to create an effective rewards program should ensure that
the program’s objectives are multifaceted. Including each of these 5 goals is critical to
the success of any rewards program.
It is critical that managers seeking to develop or enhance an employee rewards
program must first understand the components required for success. Doing so could
mean the difference between implementing an ineffective program and a successful
one. Implementing a successful employee rewards program will result in increased
profits, increased employee satisfaction and a larger ROI.
Motivational Theories
Motivational theories are split into two groups
as process and content theories. Content theories
endeavor to name and analyze the factors which
motivate people to perform better and more efficiently
while process theories concentrate on how different
types of personal traits interfere and impact the human
behavior. Content theories are highly related with
extrinsic rewards, things that are concrete like bonuses
and will help improve employees' physiological
circumstances whereas process theories are concerned with intrinsic rewards, such as
recognition and respect, which will help boost employees confidence in the work
place and improve job satisfaction.

15. 15
A famous content theory would be Maslow's Hierarchy of Needs, and a
famous process theory would be the equity theory.
Theories of motivation provide a theoretical basis for reward management
though some of the best known ones have emerged from the psychology discipline.
Perhaps the first and best known of these comes from the work of Abraham
Maslow. Maslow’s Hierarchy of Needs describes a pyramid comprising a series of
layers from at the base the most fundamental physiological needs such as food, water,
shelter and sex, rising to the apex where self-actualization needs included morality
and creativity. Maslow saw these levels of needs being fulfilled one at a time in
sequence from bottom to top. Employment and the resources it brings are classed
under ‘safety needs’ (level 2) while the workplace may also contribute to a sense of
‘belonging’ (level 3) and recognition at work can satisfy the need for ‘self-esteem’
(level 4).
Frederick Herzberg’s motivator-hygiene theory, first published in 1959, argues
that an employee’s job satisfaction or dissatisfaction is influenced by two distinct sets
of factors and also that satisfaction and dissatisfaction were not at opposite ends of the
same continuum but instead needed to be measured separately. The two sets of factors
are motivator factors and hygiene factors. According to Herzberg, real motivation
comes from the work itself, from completing tasks, while the role of reward is to
prevent dissatisfaction arising.
Expectancy Theory is the theory which posits that we select our behavior
based on the desirability of expected outcomes of the action. It was most prominently
used in a work context by Victor Vroom who sought to establish the relationship
between performance, motivation and ability and expressed it as a multiplicative one
– where performance equals motivation x ability. There are a lot of attractions for this
kind of approach, particularly for employers who can target their motivation effort
and anticipate a definable mathematical return for them. As this is a cognitive process
theory it relies on the way employees perceive rewards these three theories plus
variants of them have been used in countless research studies and continue to inform
the practice of reward management up to the present day.
What is Benefit?
An employer-sponsored retirement plan where employee benefits are sorted out based
on a formula using factors such as salary history and duration of employment.
Investment risk and portfolio management are entirely under the control of the
company. There are also restrictions on when and how you can withdraw these funds
without penalties. This fund is different from many pension funds where payouts are
somewhat dependent on the return of the invested funds. Therefore, employers will
need to dip into the company’s earnings in the event that the returns from the
investments devoted to funding the employee's retirement result in a funding shortfall.
The payouts made to retiring employees participating in defined-benefit plans are
determined by more personalized factors, like length of employment.

16. 16
A payment or gift as one made to help someone or given by a benefit society,
insurance company or public agency. The company offers its employees a pension
plan , free health insurance and other benefits.
--- Business Dictionary
Types of Benefits
1. Guaranteed Pay
Guaranteed pay is a fixed monetary (cash) reward. The basic element of
guaranteed pay is base salary which is paid on an hourly, daily, weekly, bi-weekly or
monthly rate. Base salary is typically used by employees for ongoing consumption.
Many countries dictate the minimum base salary defining a minimum wage.
Employees' individual skills and level of experience leave room for differentiating
income levels within a job-based pay structure. In addition to base salary, there is
other pay elements which are paid based solely on employee/employer relations, such
as salary and seniority allowance.
2. Variable Pay
Variable pay is a non-fixed monetary (cash) reward that is contingent on
discretion, performance, or results achieved. There are different types of variable pay
plans, such as bonus schemes, sales incentives (commission), overtime pay, and more.
An example where this type of plan is prevalent is how the real estate industry
compensates real estate agents. A common variable pay plan might be the sales
person receives 50% of every dollar they bring in up to a level of revenue at which
they then bump up to 85% for every dollar they bring in going forward. Typically,
this type of plan is based on an annual period of time requiring a "resetting" each year
back to the starting point of 50%. Sometimes this type of plan is administered so the
sales person never resets or falls down to a lower level. It also includes Performance
Linked Incentive which is variable and may range from 130% to 0% as per
performance of the individual as per his KRA.
Benefits
There is a wide variety of benefits offered to employees such as Paid Time-
Off (PTO), various types of insurance (such as life, medical, dental, and disability),
participation in a retirement plan (such as pension or 401(k)), or access to a company
car, among others. Some benefits are mandatory which are regulated by the
government while others are voluntarily offered to fulfill the need of a specific
employee population. Benefit plans are typically not provided in cash but form the
basis of an employees' pay package along with base salary and bonus. In the United
States, "qualified" employee benefit plans must be offered to all employees, while
"non-qualified" benefit plans may be offered to a select group such as executives or
other highly-paid employees. When implementing a benefit plan, HR Departments
must ensure compliance with federal and state regulations. Many states and countries
dictate different minimum benefits such as minimum paid time-off, employer’s
pension contribution, sick pay, among others.
Equity-based compensation

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Equity based compensation is an employer compensation plan using the
employer’s shares as employee compensation. The most common form is stock
options, yet employers use additional vehicles such as restricted stock, restricted stock
units (RSU), employee stock purchase plan (ESPP), and stock appreciation
rights (SAR).
i. External equity
External equity refers to the similarity of the practices of other organization of the
same sector. If perceived like this, it can be said that the program is considered
competitive or externally equitable. Usually, these comparisons are done in external
labor markets where the wages vary. There are various factors that contribute to create
these differences, for example, geographical location, and education and work
experience.
ii. Internal equity
Internal equity is employees' perception of their duties, compensation, and work
conditions as compared with those of other employees in similar positions in the same
organization. As this comparison is always made within the company, problems with
internal equity can result in conflict among employees, mistrust, low morale, anger
and even the adoption of legal actions. Workers can make the evaluation of internal
equity regarding two main points. On the one hand, procedural justice is the person’s
perceived fairness of the process (assigned tasks) and procedures used to make
decisions about him/her. On the other hand, distributive justice refers to the perceived
fairness in the distribution of outcomes (salaries). The classic objectives of equity
based compensation plans are retention, attraction of new hires and aligning
employees’ and shareholders’ interests with the long-term success of the company.
Organizational place
In most companies, compensation & benefits (C&B) design and
administration falls under the umbrella of human-resources. HR organizations in large
companies are typically divided into three sub-divisions: HR business partners
(HRBPs), HR centers of excellence, and HR shared services. C&B is an HR center of
excellence, like staffing and organizational development (OD).
Main influencers
Employee compensation and benefits main influencers can be divided into
two: internal (company) and external influencers. The most
important internal influencers are the business objectives, labor unions, internal equity
(the idea of compensating employees in similar jobs and similar performance in a
similar way), organizational culture and organizational structure. The most
important external influencers are the state of
the economy, inflation, unemployment rate, the relevant labor market, labor law, tax
law, and the relevant industry habits and trends.
Bonus plans

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The concept saying bonus plans can improve employee performance is based
on the work of Frederic Skinner, perhaps the most influential psychologist of the 20th
century. Using the concept of Operant Conditioning, Skinner claimed that an
organism (animal, human being) is shaping his/her voluntary behavior based on its
extrinsic environmental consequences – i.e. reinforcement or punishment. This
concept captured the heart of many, and indeed most bonus plans nowadays are
designed according to it, yet since the late 1940s a growing body of empirical
evidence suggested that these if-then rewards do not work in a variety of settings
common to the modern workplace. Research even suggested that these types of bonus
plans have the potential of damaging employee performance.
Bonus plans are variable pay plans. They have three classic objectives:-
i. Adjust Labor Cost to Financial Results : The basic idea is to create a bonus plan
where the company is paying more bonuses in ‘good times’ and less (or no) bonuses
in ‘bad times’. By having bonus plan budget adjusted according to financial results,
the company’s labor cost is automatically reduced when the company isn’t doing so
well, while good company performance drives higher bonuses to employees.
ii. Drive Employee Performance : The basic idea is that if an employee knows that
his/her bonus depend on the occurrence of a specific event (or paid according to
performance, or if a certain goal is achieved), then the employee will do whatever
he/she can to secure this event (or improve their performance, or achieve the desired
goal). In other words, the bonus is creating an incentive to improve business
performance (as defined through the bonus plan).
iii. Employee Retention: Retention is not a primary objective of bonus plans, yet
bonuses are thought to bring value with employee retention as well, for three reasons:
a) A well designed bonus plan is paying more money to better performers; a
competitor offering a competing job-offer to these top performers is likely to face a
higher hurdle, given that these employees are already paid higher due to the bonus
plan.
b) If the bonus is paid annually, employee is less inclined to leave the company before
bonus payout; often the reason for leaving (e.g. dispute with the manager, competing
job offer) 'goes away' by the time the bonus is paid. The bonus plan 'buy' more time
for the company to retain the employee.
c) Employees paid more are more satisfied with their job (all other things being equal)
thus less inclined to leave their employer.
Relationship of Incentives, Rewards and Benefits with Organization
Reward Systems and Organizational Change
In many major organizational changes it is difficult to change all the systems in an
organization simultaneously. Typically, one or one set of changes leads to another set
of changes. Reward systems change may either be a lead change or a lag change in
the overall change process.
Reward as a Lead

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There are a number of examples of pay being a lead change. Perhaps the most
frequently discussed of these is the use of the Scanlon plan or some other forms of
gain sharing to improve plant productivity (Moore and Ross, 1978; Lawler, 1981). In
these situations, the initial change effort is focused on the development and
installation of a gain sharing plan that pays bonuses based on improvements in
productivity (Graham-Moore and Ross, 1983). In the case of the Scanlon Plan
emphasis is also placed on building participative problem solving groups into the
organization but the clear emphasis is on the gain sharing formula and the financial
benefits of improved productivity. The participate management structure is put in for
the purpose of supporting and making possible productivity improvement which in
turn will result in gains to be shared. Not surprisingly, once gain sharing starts and
inhibitors to productivity is identified, the result is other changes. Typical of these are
improvements in the organizations structure, the design of jobs and work, and training
programs. Often these are dealt with rather swiftly and effectively because the gain
sharing plan itself provides a strong motivation to deal with them.
There are other reward system changes that also can key broader
organizational change efforts. For example, the introduction of skill based pay can
potentially key a broad movement to participation because among other things, it
provides people with the sills and knowledge they need to participate. In somewhat
different vein a dramatic change in the pay for performance system can be very
effective in altering the kind of strategic directions that an organization takes. For
example, installing bonus systems which pay off on previously unmeasured or
unfocused upon performance indicators can dramatically shift the direction of an
organization. Similarly, installing a long term bonus plan for executives can cause
them to change their time horizons and their decision making practices in important
ways.
Reward as a Lag
In the majority of major organization change efforts pay ends up as a lag
factor. This certainly is true in most change efforts that involve movement toward
participative management. The initial thrust often is on team building, job redesign,
quality circles, or some other area. It is only after these other practices have been put
in place for a while that the organization tends to deal with the reward system changes
which are needed to support these new practices. Often, there is surprise that these
other important changes lead to a need for revision in the reward system. The
connectedness nature of organizations makes it almost inevitable that when major
changes are made in an organization's strategic direction or management style and
practices, changes will also have to be made in the reward system.
New participative plants represents an interesting example of where participative
reward systems changes are put in at the same time as are other participative practices
(Lawler, 1981, 1992). Indeed, one reason for their success probably is their ability to
start with all their systems operating in a participative manner.
Rewards as a Motivator of Change

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Finally, it is important to consider the use of rewards systems in producing
organizational change. Major organizational changes are often difficult to accomplish.
The forces of equilibrium tend to work to cancel out many changes. To the extent that
changing one component of an organizational system reduces its congruence with
other components, energy will develop to limit, encapsulate, or reverse the change. In
addition, to the extent that management needs to give time and attention to directing a
change, it may become diverted from other ongoing management tasks.
Management is therefore faced with two key tasks if change is to be brought
about. The first task is motivating change, or overcoming the natural resistance to
change that emerges and getting individuals motivated to behave in ways that are
consistent with the immediate change goals and still consistent with long-range
corporate strategy. The second major task is managing change. We can think of many
organizational changes in terms of transitions (Beckhard and Harris, 1977). The
organizational exists in a current state (C). An image has been developed of a future
state of the organization (B). The period between A & B can be thought of as the
transition period (T). The question is how to manage the transition.
The transition state frequently is overlooked. People become fixated with the
future state and assume that all that is needed is to design the best possible future.
They think of change as simply a mechanical or procedural detail. The problems
created by the lack of concern for the transition state are compounded by the inherent
uniqueness of it. In most situations, the management systems and structures
developed to manage either C or B are simply not appropriate or adequate for the
management of T. They are steady state management systems, designed to run
organizations already in place rather than transition management systems. This
suggests the need for temporary reward systems that are designed to operate during
the transition period. One reason many change efforts are resisted by individuals is
that they are often perceived to be a threat to their pay level. Particularly when the
present system is highly job based and ties to objective measures, such as the number
of subordinates, the vagaries of reorganization or other type of change may lead
people to resist the change because of its unclear and potentially negative impact on
their pay rate.
In the real world, it is very important to reward high performance levels
because this motivates and controls the performance. Indeed, reward strategies
confirm the level and the merge of non-financial and financial rewards required to
attract, maintain and inspire skillful competent, and capable employees to make the
organization prosperous. Although some of these benefits are financial forms, such as
options for salary sacrificing and competitive pay, there are a lot of non-financial
benefits which firms can provide its employees. They are, in fact, some factors that
may motivate the staff. Therefore, for a manager, it is necessary to know what really
inspires employees and perhaps they are not the same things that stimulate other
employees.
Furthermore, Egwuridi (1981) did a research on the motivation of Nigerian
workers and applied a sample of workers at both low and high occupational levels. At
the end of the study, the hypothesis was not completed and verified which tested if
low-income workers would be intrinsically motivated, and also there was not any

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proof to verify the hypothesis that higher-paid workers would place a greater value on
intrinsic job-motivators than low-paid employees. This study obviously confirms the
amount of worth placed on extrinsic job factors. In this case, the poor compensation
depends on the profits made by firms (Akerele, 1991). On the other hand, wage and
salary difference between low and high income earners can affect cause a low morale,
low productivity, and lack of commitment (Nwachukwu, 1994). For example, the
efficiency of Nigerian employees on several elements has shown to be up to the
employer’s mismanagement to provide appropriate compensating ways for hard-
workings of an honored group; and this is very discomforting to working layer and
will decrease their efficiency levels. Based on all the current studies and by
considering the relationships between all of the findings, one can normally find out
that a valid compensation package, which includes financial rewards, causes higher
efficiency and performance for the organization. This compensation package includes
both intrinsic and extrinsic rewards. Extrinsic rewards consists of external and
tangible rewards to the performed efforts and employees tasks, it can be in terms of
promotions, salary/pay, bonuses, incentives, job security, etc. Overall, the highly-
involved employees who are necessarily more oriented to their jobs depend more on
intrinsic rewards than extrinsic ones (Wood, 1974).
Conclusion
In the current competitive business environment, the organizations are facing a lot of
challenges and among these issues, getting the right employees and retaining them is
one of the most important ones. In addition, today, the benefit of human resource is
measured to be one of the most important advantages of any organization; and in
order to acquire the results with the highest efficiency and effectiveness from human
resource, motivation of employee is very essential. In fact, employees will do their
highest when they feel or hope that their hard work are to be rewarded by their
managers. In this regard, many factors are available that change employees‗
performance such as worker and employer relationship, working conditions, job
security, training and opportunity of development, and overall rewarding policies of
the company. In addition, among the factors which impact employee performance,
motivation, as a result of rewards, is the most important aspect. Motivation is defined
as the growth of different processes which express and control people’s behavior to
achieve some specific goals (Baron, 1983). Therefore, understanding its importance is

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very necessary for all organizations managers. The maximum level of workers
performance happens when they feel their endeavor is rewarded and compensated
completely. Some other successful elements on employee’s performance include work
conditions, the connection between employee and employer, process of training and
improvement opportunities, job security and complete policies of firm rewarding. In
addition, motivation, as the result of rewarding, affects the staff’s behavior and their
performance directly. Actually, among all effective elements on employees
performance, motivation, which is the consequence of rewarding, is the most
important and essential element. This concept consists of different processes which
affect employee’s behavior to achieve some definite goals (Baron, 1983). Extant
research emphasized on relationships between job satisfaction with reward and
employee performance, so this research tried to highlight the mediating role of job
satisfaction in the relationship between reward and employee performance. Future
study can be concentrated on testing the proposed framework of this study in different
scopes and industries.
There is scope to find the right balance between encouraging and rewarding
individual excellence and encouraging and rewarding team performance. There is
scope to ensure that “the means (actions and behaviours) and the ends (desired
outcomes)” always run hand in hand and one of them is not sacrificed. There is scope
to reward the short term performance as well as the long term contribution. There is
scope to better recognize, appreciate and reinforce actions and behaviours that lead to
the desired outcomes and not just focus on rewarding and recognizing results. There is
scope to fine tune “differentiation” between the outstanding performers and solid
performers (who constitute a large percentage of the employee population) so that
while the outstanding performers feel highly appreciated, motivated and remain loyal,
bulk of the population made up of solid performers don’t feel neglected or devalued,
and thus, get alienated.
To sum up, rewards and recognition programmes must connect to the emerging needs
and expectations of the workforce and link them with the company’s overall goals and
strategies to be successful. There needs to be more research on the impact of different
types of Rewards and Recognition Programmes on diverse employee categories to be
able to “provide different strokes to different folks,” without sacrificing the all
important sense of fairness and equity.
References
1. Human Resource Management, Garry Dessler, Global Edition 2014-2015.
2. http://www.ccsenet.org/ijbm
3. www.theirf.org
4. http://www.salary.com/hr
5. http://www.marshall.usc.edu/ceo
6. http://theirf.org/research/content/6083519/incentiveresearch- foundation-survey-
says-economy-impactingincentive- trends/