Employees can feel more encouraged to do their best work if they feel valued by their

team and workplace. A team leader or a manager can considers designing and using a
reward system to help motivate your team members. Understanding this
encouragement method can help to successfully establish one’s organization. In this
paper, we will define employee reward systems, explain what their functions and
benefits are, discuss the four different reward systems and provide tips for implementing
an effective system.

According to Armstrong, & Murlis (2004) an employee reward system is a motivation

tactic organizations use to help their staff feel encouraged to complete high-quality
work. It's different from an incentive program because incentives are goal oriented and
combined with a reward. A reward is for the team members who complete exceptional
work or are a great asset to a team.

Reward systems are incentives given to employees to commend and encourage high
performance in their work (Freeman, 1996). Usually, employers give rewards to
employees once they have reached a goal or completed a specific task. These
incentives can be monetary or non-monetary. For example, the most productive
employee in an organization can get additional leaves or a mobile phone. Companies
offer incentives and rewards as a way to appreciate the efficiency and contribution of
their employees and teams.

In addition to boosting employee morale, rewards and incentives can also promote
healthy competition in the workplace (Argyris, 1960). When colleagues are rewarded for
their outstanding performance, it can motivates everyone to achieve the same. Most
organizations have well-defined rewards policies and programs to ensure objectivity and
fairness.

Companies may often use rewards as extra encouragement by supplementing their

employee's salaries (Bartol, & Locke, 2000). For example, an employee can earn a
bonus at the end of a pay period on top of their base salary. Employees may also earn
other tangible or monetary rewards separate from their paycheck. This can include
additional paid time off, company lunches or gift cards.
Reward systems have its functions and benefits these are: high attendance, better work
quality, greater job satisfaction and faster project completion. Higher attendance: Kao &
Kantor (2004). states that there is a high increase attendance rate when you use a
reward system because it can provide more motivation to show up to work and do their
tasks. It may also encourage employees to stay at the organization longer.

Better work quality: Argyris (1960) reveals that team's work quality may increase
because its members are working toward something else besides their base salary. This
benefits everyone because you receive work of a higher quality and team members get
rewarded for their improvement.

Greater job satisfaction: Employees may experience enhanced job satisfaction with a
reward system because organizations value and appreciate their contribution (Kao &
Kantor, 2004). Because of this show of gratitude, your team members may feel more
loyalty to the company.

Faster project completion: Argyris (1960) believes that if team members are working
productively and doing their job well to earn a type of reward, it can help meet deadlines
for projects early. This can improve the image of your organization because it helps
meeting project deadlines earlier than expected and with quality work.

4 types of employee reward systems

While there are several ways to reward employees, here are four options you can
implement to help boost your team's morale:

1. Monetary: employees can create a reward system based on monetary compensation,

like a bonus. A bonus can give your team members something to look forward to and to
work efficiently to earn (Bartol, & Locke, 2000). Bonuses can be given either at the end
of the year or every six months. This type of reward system works best with employees
motivated by money. It can also help create bonds within your team if you make earning
the bonus a friendly competition. Besides bonuses, here are other monetary rewards
you can use in your program: Profit-sharing plans, Stock options, Additional paid time
off and Tuition reimbursement.
Profit-sharing is a system in which all the people that work in a company, team, or
project share the profits according to a pre-set formula (Kao & Kantor, 2004). Kao &
Kantor (2004) furthar adds that the most common profit-sharing formula is the comp-to-
comp method. The idea of this profit-sharing system is to encourage employees to
maximize profits since they know they are going to get a share of the same. Profit-
sharing can help enforce the spirit of teamwork in achieving the organization's goal.

Stock options: Start-up companies usually reward employees with company shares and
ownership. Employees who exercise the company's stock option can benefit from the
company's capital generation. According to Bartol, & Locke (2000) employee stock
option is a contract that provides compensation for the contributions of employees. Like
profit-sharing, the stock options approach is a way of appreciating long-serving efficient
employees for their loyalty.

Merit pay is a monetary reward system that employers use to compensate employees
who have high performance (Freeman, 1996). At the end of a performance assessment
cycle, usually a quarter or year, employers conduct reviews to determine employees
who meet the specific targets. They give this reward when an employee meets or
exceeds certain performance parameters. Merit pay is different from other types of
bonuses or financial incentives, as it is usually recurring and results in a permanent
increase in the base remuneration.

2. Non-monetary: For teams that prefer perks other than bonuses, a non-monetary
rewards system may help motivate them (Kao & Kantor, 2004). This kind of system
offers them something. For example, a small prize or fringe can be presented to them
for their own benefit if they were the top performer in their department. This can
encourage other team members to work more productively, which can help projects
reach their deadlines on time or early. Argyris (1960) Fringe benefits believes that when
an employer is happy with the service you render in the company, you can get
additional benefits outside the financial obligation. These benefits are fringe benefits,
and they can include:

All-expense-paid wellness program: other non-monetary rewards you can use to

encourage the company's employees include: catered lunches or dinner, opportunities
to leave work early, remote work if possible and flexible work schedule, memberships
for gyms and wellness centres, gift cards or discount vouchers. cinema tickets, health
insurance, company car, commuter benefits, paid vacation.

Paid leaves: After completing a large or challenging project, employers may offer their
outstanding employees some time to take a short break while still receiving their regular
salary (Freeman, 1996). Employees can use this time to embark on vacations or spend
more time with their loved ones. This time is necessary to prevent employee burnout
and sustain motivation levels. This time-off is outside of the annual leave every
employee enjoys.

Professional development training: Employers can sponsor outstanding employees

for professional development training or higher education to learn new skills to improve
their careers. This training includes programs and courses that an employee requires to
succeed in the career. This reward can help ensure your retention, build your
confidence, and improve your efficiency as an employee (Armstrong, & Murlis, 2004).

3. Assistance: An assistance system is when companies support employees in

maintaining a healthy work-life balance by providing services that benefit their physical
and mental health (Freeman, 1996). This program type may help employees have
clearer minds and healthier bodies, which can improve their work performance. While
not a traditional reward, assistance programs can help employees feel valued and
supported. Armstrong, & Murlis (2004) adds some benefits that can be offered under an
assistance program which includes: discounts to local health services, like gym
memberships or spa treatments, on-site visits from mental health professionals and
instructional sessions on techniques to manage stress, grief or other challenges

4. Recognition: A recognition rewards system is about sharing an employee's

accomplishments with the rest of an organization (Armstrong, 2000). This can look like
having an employee of the month celebration or an end-of-year awards ceremony
where several employees' work-related victories can be talked about. By doing this,
team members are encouraged to work harder to receive this level of acknowledgment
(Argyris, 1960). Recognition can be as simple as offering verbal praise to your team
members daily, weekly or monthly. You may also write them a note detailing how much
you appreciate them and their dedication to their role. This is another way to help create
a positive working environment for everyone.

Benefits of reward systems

Rewards are the incentives and perquisites employees receive in addition to their
regular salary or wages. Integrating a reward framework into the workplace can help
motivate employees and teams to work efficiently and improve productivity.
Understanding the concept of rewards as an employee can help you work efficiently and
achieve progress in your career (Bartol, & Locke, 2000).

Increases employee motivation: Rewards serve as a motivation for employees. When

employees work knowing that they can receive an incentive if they perform well, they
may become more dedicated to their role. When an employer establishes a fixed reward
system, employees strive to perform assigned tasks efficiently, impress their managers,
and achieve rewards (Freeman, 1996).

Enhances productivity

When an employer rewards an outstanding employee after a productive year or project,

it also motivates other employees to work harder to achieve the reward or incentive.
This can have a positive influence on the productivity of the company. Efficient
employees strive to attain and even surpass the goal set. Therefore, whether the reward
is monetary or non-monetary, it inspires employees to be more productive (Armstrong,
& Murlis, 2004).

Promotes friendly competition: Reward system promotes

a healthy friendship and competition among team members of the organization. They
can give incentives based on team performance, individual performance, or both.
Competition is usually a significant driver of performance, productivity, and
improvement. By cultivating a healthy spirit of competition, employers can also promote
innovation and creativity (Bartol, & Locke, 2000).

Encourages teamwork: According to Armstrong (2000) , when employers give rewards

to outstanding teams of employees, they encourage all team members to collaborate
and work as a unit towards for a common set of goals. Employers expect employees to
contribute, brainstorm, and work together to achieve the team's goal. Employers want
employees to work in unity and learn from each other to achieve the team's goal and
receive the expected ince
entives.

Increases employee loyalty: Giving rewards to employees who have performed well in
achieving the company's goals can make them feel appreciated and happy (Kao &
Kantor, 2004). When an employer rewards or recognizes the effort of a hardworking
employee, it can inculcate a stronger employee-employer relationship. Rewards and
incentives assure the employees of their importance to the company, and in return, can
improve their loyalty. Loyal employees usually work harder for the growth and
expansion of the organization.

Establishes the culture of accountability: Armstrong (2000), states that employers

can introduce and promote the culture of accountability in the company through rewards
and incentives. The concept of accountability ensures that the company evaluates you
or your team based on your performance (Argyris, 1960). You can hold yourself and
team members accountable when you know that employers base your team's reward on
your performance at the end of the project.

In conclusion, this paper has discussed a reward system in the context of performance
management as an integrated system that ensures equitable avenues to employees for
the fulfillment of their financial and non-financial needs and recognition urge. It has also
outlined its types and also given the benefits of reward systems to the employers by
employees in a company.
References

Argyris, C. (1960), Understanding Organizational Behaviour, Dorsey Press, Homewood,

IL.

Armstrong, M. (2000), Performance Management, 2nd edn, Kogan Page, London.

Armstrong, M. & Murlis, H. (2004), Reward Management: A Handbook of Remuneration

Strategy and Practice, 5th edn, Kogan Page, London

Bartol, K. M. & Locke, E. A. (2000), ‘Incentives and motivation’, in Rynes, S. L. &

Gerhart, B. (eds), Compensation in Organizations: Current Research and Practice,
Jossey-Bass, San Francisco, pp. 104–50

Freeman, J. (1996), ‘Rewarding workers: Why it pays to nurture staff’, The Australian,
14 September.

Kao, T. & Kantor, R. (2004), ‘Total rewards: From clarity to action’, WorldatWork
Journal, 13(4): 32–40