CIMA E1 Syllabus E3. Human resources - Reward - Notes ^{8 / 9}

A reward system is designed to pay an employee for the work that he/she has done for the organisation.

It is not just monetary payments but also non monetary and psychological payments.

Benefits of a good reward system:

1. It supports company strategy

2. To meet the expectation of the psychological contract

3. necessary for effective recruitment and retention

4. must meet legal requirements

5. must be cost beneficial to the business

6. must be consistently applied to prevent unrest and dissatisfaction

Types of rewards:

1. Basic pay - minimum pay awarded.

2. Performance related pay (Individually / Group) - Here there is a basic element plus pay related to the performance of an individual or group. 

   The main weakness of performance related pay is that if targets are not met, then employees will become demotivated.

3. Profit related pay - this relates an individual’s pay to the organisational profit

4. Benefits in kind - for example, health care, car allowances etc.