Introduction to 5HR03
5HR03 unit provides information on the strategies that influence reward within the organisation. People professionals support managers in making the right reward decisions. The unit examines the principles of reward, how performance affects different types of rewards and benefits, the need to gather data for benchmarking, and legislations influencing reward practices.
By the end of the unit, students should:
- Understand reward packages and approaches
- Understand how benchmarking informs reward practices
- Be aware of people professionals’ roles in supporting managers make appropriate reward decisions
Students learn how the internal and external factors in an organisation influence reward strategies and reward decision-making policies and processes. 5HR03 requires students to complete the assessment by referring to the Leia technologies case study. Leia Technologies after launching its app to provide saving and investment has been focusing on reward strategies and policies to enhance organisation growth. However, there are knowledge gaps in reward that require people professionals to examine reward approaches. In order to understanding reward issues and bridge the gap, students should provide a guidance document to managers that covers the following assessment criteria.
Section 1 – The impact of reward approaches and packages
AC 1.1 Evaluate the principles of reward and its importance to organisational culture and performance management
Students explain the principles of reward, which include but are not limited to:-
- Intrinsic and extrinsic rewards
- Fairness, consistency and fairness in reward
- People professionals’ ability to integrate the reward approaches to the organisation objectives
- Reward policies and practices implementation within the organisation
- Reward in good work
- Application of legislations relating to reward.
Students further explain the importance of organisational culture and performance management by evaluating factors such as:-
- Recognising reward for performance
- Rewarding for value to stimulate employee performance
- Enhancing employee engagement to drive performance
AC 1.2 Explain how policy initiatives and practices are implemented
Reward policies and practices support organisation’s ability to achieve goals and objectives. The reward policies enhance delivery of motivated workforce, which is achieved by incorporating the following concepts:-
- Felt-fair principles
- Challenges related to external reward competitiveness vs. the internal equality in pay and rewards given to organisation employees.
- Protection policies
- Collaboration and involvement while implementing reward policies and practices.
AC 1.3 Explain how people and organisational performance can impact on the approach to reward
Students will first define performance measurement, and then explain the effectiveness of performance to the employees and to organisation. Performance issues that influence the approach to reward are:-
- External pressures and competition on reward approaches implemented within the organisation
- Historical expectations from employees and other organisation stakeholders
- Legislations relating to reward fairness and equality
- Reward on basis of working hours and employees’ achievements.
AC 1.4 Compare the different types of benefits offered by organisations and the merits of each
Students explain the different types of organisational benefits, which include-
- Performance-related pay
- Payment for results
- Share ownership
- Provision of bonus schemes to the employees such as commission, pension, healthcare benefits, sick pay, insurance cover, redundancy pay, company cars and loans, statutory maternity, paternity and adoption leave and pay, and childcare among others.
- Recommendations for changes in budgets and resources
- Aspects relating to differences on the individual considerations of what they consider significant in reward strategies implemented.
Students explain the merits that include:
- Increased employee engagement
- Employee motivation and commitment
- Considerations to attract employees to the organisation
AC 1.5 Assess the contribution of extrinsic and intrinsic rewards to improving employee contribution and sustained organisational performance
Extrinsic rewards are tangible rewards, which are in most cases financial. Examples include employee wages, pay rise, provision of bonuses and other financial benefits that employers provide to the employees. Intrinsic rewards are incentives that are mostly non-tangible and psychological. Intrinsic rewards originate from the person as opposed from extrinsic rewards that the employers give to the employees.
Extrinsic and intrinsic rewards contribute to employee contribution and sustainability on measures of-
- Support from senior management
- Motivation and engagement
- Linking behaviours to achievements
Section 2 – Benchmarking data to inform reward approaches
AC 2.1 Assess the business context of the reward environment
Students start by explaining the context of reward environment, which analyses factors such as the levels of business activity and confidence. Students further explain the economy outlook that determine the reward environment in the organisation. Other factors influencing the business environment are the reward packages, legislations relating to equality in pay, pay reviews and trends, and cultural drivers influencing the reward environment.
Students also assess the internal and external factors that affect the business context of reward environment. Examples include-
- Psychological contract
- Collective bargaining and determination of pay
- Pay regulations and competitiveness
- Labour market and human capital
AC 2.2 Evaluate the most appropriate ways in which benchmarking data can be gathered and measured to develop insight
Benchmarking is the process of comparing organisation data with data from other competing firms. People professionals consider salary benchmarking as appropriate measure to develop insights for better decision-making in regards to employees’ pay and packages.
To effectively benchmark data, professionals should source for intelligence, evaluate whether data is reliable and measurable to enhance decision-making, conduct reward and salary survey, and consider government surveys and statistics to enhance pay decisions.
AC 2.3 Develop organisational reward packages and approaches based on insight
Significant aspects that professionals should consider include-
- Employee pay grades and pay structures
- Job evaluation schemes
- Organisation systems and processes in managing job evaluations
- Levelling job boundaries
- Maintain pay integrity
AC 2.4 Explain the legislative requirements that impact reward practice
The legislations impacting reward practices include-
- Equal pay and reward
- Minimum employee pay
- Working hours, holiday and absence
- Gender pay reporting requirement
- Annual reports