Compensation and Rewards Management

Compensation management is a strategic matter.

Compensation would include rewards when you offer
monetary payment such as incentives, various
bonuses and performance bonus. Organisations
reward their staff when they attain the goals or targets
that they have jointly set with the employees.
Rewards can be non-monetary such as a paid
vacation for two.
When we mention about compensation, we would
refer to a salary scale for different levels. Generally,
we would classify the salary scale into non-executive,
executive and managerial before the salary range is
established.
Next, you may ask whether compensation is a
hygiene factor or a motivational factor. We would
consider it a hygiene factor when the salary paid out
on the monthly basis is xed. Here is where you want
to compare or evaluate to determine whether you are
paying ‘competitive’ rates. Thus you may want to
participate in an established salary survey, which may
produce vital information pertaining to reward matters.
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 This is the cash remuneration component. The other
component is the bene t. Bene t management is
another aspect of compensation.
For the compensation to be considered as
motivational factor, it needs to be variable. It varies
proportional to the result, target or goals that are
mutually established. This payment is usually termed
as incentive. That’s why you would hear the term
“incentivise” your employees to raise productivity.
Incentives become a variable cost to your business or
operations cost and it varies directly to your
operations output or your service level. Your business
would be able to absorb such variable cost as it is not
a xed manpower cost.
Thus we consider compensation as a strategic matter.
You need to design and develop compensation &
reward system to attract the right people for the right
job. Next you would need to implement the system
effectively so that it ensures retention. Last but not
least, is for talent managing. Compensation is one of
the techniques for talent attraction and retention.
However, you still need other talent management tools
such as to measure or talent mapping for high
potential, high professional & technical employees.
You would also develop your compensation to
motivate employees as team player, creative people
and productive workforce.
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Likewise you need to design and develop the rewards
based on the pro le of your employees and the nature
of work. Rewards need to be signi cant and
meaningful to the recipients. An example is the
recipient has a choice to choose from a range of
rewards. This would make them feel the reward is
personalised to them as they produce their effort to
achieve the goals. An example of a recent reward item
is the iPhone or even the iPad, as these items catches
current attention. Does everyone like to own one? You
have the answer.
How do you get started?
To begin, you need to determine whether you are
paying a premium to get the top performers or at 60
percentile or 50 percentile salary rate. This would
depend on the numbers of employees and the
affordable manpower rate in relations to your business
cost.
Next, you need to do the job analysis, job description
prior to do job evaluation.
Some companies do job re-design after the job
analysis or using technology to upgrade the work
process resulting the change in job description.
From the job analysis and job description, you will
determine
(1) Skill-based compensation; or
(2) Competency-based compensation, or
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 (3) Time-based compensation.
Most companies will like to opt for pay for
performance. Nonetheless, these companies used the
time-based and also in ation / cost of living as an
indicator for salary increment. They have recently
shifted from annual increment to performance
increment. Performance indicators would be the
performance of the business (pro t or cost
determinant), performance of the department and
nally assessment of performance of individuals.
Salary range – minimum and maximum
After you have completed the job evaluation, you
would have to determine the salary range for each
class and grade.
What would you do when you note that some
employees have hit the maximum of the salary range?
You can either treat the performance increment
multiply by 12 months and pay out quarterly or half
yearly or be the monthly performance allowance per
month valid for 12 months. This would be a catalyst to
help your employees be motivated and retain
experience workforce. Next you can upgrade them by
encouraging them to take up learning initiatives under
Workfare package, Work Skills Quali cation (WSQ)
and rewarding them upon achieving the statement of
attainment.
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You need to get them to go back to a learning mode to
acquire new skills or enhanced skills. Communication
of the achievement is the recognition of their learning
and effort. With the newly acquired skills, they shall be
assigned to take up expanded roles and thus move up
the salary grade. You shall review your salary range
every two-years to stay competitive.
When you initiate the learning journey for those who
reach the maximum, you may create additional grade
to bridge the knowledge gap. At the same time review
the job description to see whether you can download
some of the higher job grades to bridge the skills gap.