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Examine the internal and external factors that influence the pay and reward system in an organisation

Mariam Peyton
Latest posts by Mariam Peyton (see all)

    The aim of the research was to examine the internal and external factors that influence the design of the pay and reward system in an organization. Reward system refers to the monetary and non-monetary payments given to employees in exchange for their services in an organization. What is the framework for reward strategy? In any organization, it is very critical that the management hires or invokes the right pay structure and a reward system in order to cater to employee satisfaction and attract potential customers. The framework for the reward system is influenced by a number of factors that determine whether one is to work for an organization namely; salary, benefits, and intangible rewards. This system clearly gives emphasis to an employment connection, which establishes an economic exchange between its employer and employee. For instance, a worker may get an additional benefit in addition to their monthly salary. 
    What are the internal factors influencing the design of reward strategy and policy? It is vital for an organization to come up with a good reward structure and the internal factors that can be taken into account include; available financial resources, human resources, the structure of the organization, whether it is flat, matrix, hierarchical, or decentralized, and many others which will be discussed in the following sections of this paper. 

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    Examine the internal and external factors that influence the pay and reward system in an organization a Case Study


    Key Learning Outcomes

    By the end of the case, students should be able to:

    • Understand what a pay and reward system is in an organization
    • Understand the internal and external factors that influence the pay and reward system in an organization
    • Learn how to apply the pay and reward system to real-life organizations

     

    1.0 INTRODUCTION


    According to the human resource management model developed by Fombrun et al., (1984), human resource policies comprise four key elements namely; selection, appraisal, development, and rewards. Similarly, Beer et al. (1984) provided for the human resource policies affected and they include human resource flow, reward system, employee influence, and work system. Also in Storey's model of Human Resource Management, reward is acknowledged as a key lever. For that reason, organizations are required to develop a pay and reward system for employees in an organization. This essay is going to examine the internal and external factors that influence the pay and reward system in an organization.

    Pay and reward refer to all welfare that an employer gives its employees, such as financial benefits like salaries, allowances, paid leave, and sick pay; and non-pay benefits such as reviews, flexible working conditions, and opportunities for development. What are the factors influencing reward strategy? Some of the factors that influence the reward system include government rules, economic conditions in the country, and competition in the industry among others which generally determine how much is to be given to the employees as rewards and how often.  Examine the key factors influencing the design of reward strategy and policy frameworks. Such factors include the analysis and evaluation of the job, the design of pay structures, and arrangements for pay progression. 

    What are the internal factors influencing the design of reward strategy and policy? It is vital for an organization to come up with a good reward structure and the internal factors that can be taken into account include; available financial resources, human resources, the structure of the organization, whether it is flat, matrix, hierarchical, or decentralized, and many others which will be discussed in the following sections of this paper. What are the external factors influencing the design of reward strategy and policy? These external factors include the national economic environment, the level of competitive pressure within the industry, increasing forces of globalization, and demographic changes within the country among so many others which are to be expounded on more in the essay. 

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