The degree to which one is satisfied with the reward system is related to the following: –

  1. Fairness
  2. Expectation and value
  3. Internal comparisons
  4. External comparisons
  5. Self evaluation
  6. Total reward package

a) Fairness

Is concerned with the extent to which the employees think the system is fair. This fairness can be seen, in that; rewards are commensurate with ability, contribution and effort. To be fair, pay must be felt to match the level of work and the capacity of the individual to do the work

b) Expectation and value

Satisfaction is high when rewards meet expectations as to their value and the value of the reward is commensurate with the effort and skills to obtain it.

c) Internal comparison

Employees are more likely to be satisfied if they feel they are being paid correctly in relation to what others gain for similar jobs in that organization. Dissatisfaction may arise due to perceived inequities in pay levels

d) External comparison

Unclear prediction of the levels of reward is likely to cause anxiety among employees – consequently, employee commitment and satisfaction may be eroded.

e) Self evaluation

People always attach a level of value to what they believe they are worth. Satisfaction with rewards will result if the rewards are in line with what people believe they are worth. Self-evaluation should be considered with great caution because people have a tendency to over rate their own valuation

f) Total reward package

Overall satisfaction depends on the result of a mix of rewards, rather than a single reward. A HR manager should carefully consider the reward mix. It is important to note that intrinsic benefits and extrinsic benefits are both valuable to employees.


The reward system should fit the corporate culture. The organization structure can influence reward system.

  • A highly structured organization – very bureaucratic, will tend to centralize its activities. A reward system in such a structure will be centralized and controlled from central point.
  • A loose structure – explains how rapidly a company growing, may not wish to put in place overly formalized reward procedures. Such an organization needs flexibility and as such the reward system will be flexible enabling the organization respond quickly to change.

Flexibility may be seen in terms of remuneration mix, benefits available,    and involvement of other managers in pay administration.

  • A flattened structure or delayered structure requires better teamwork among managers. This will call of group rather than individual pay systems especially bonuses and incentives – encouraging teamwork and not individual performance.
  • A highly decentralized structure – where authority is dispersed to lower levels of the organization (employee empowerment) – the various units of the organization are allowed to input to the decision making process concerning rewards. At times heads of departments may determine how much increment his/her employees should get the kind of benefits and the remuneration mix. Their recommendations on reward matters are taken seriously.
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