A policy is a guideline that helps managers make day-to-day decisions. Reward policy is an organizations’ statement on the implementation of reward management and strategies required, to achieve the reward policy.

A reward policy is a broad expression on how the organization intends to reward its employees. Such statements usually cover certain aspects: –

  1. Basis of reward
  2. Market rates/internal rates reconciliation
  • Line managers involvement
  1. Level of flexibility


This explains whether is to be based on performance for example, or based on seniority, or on skills etc


This explains the reconciliation of tension between the need to achieve external competitiveness and a reasonable degree of internal equity. Market rates especially competitor’s influence rewards. There is need for a balance between external tension and internal tension.


The policy needs to express the extent to which decisions on pay can be delegated to line managers. Involvement of line managers or no involvement should be defined by the policy. To get involved Line Managers must be adequately trained on techniques of decision-making as concerns reward management


This explains the degree to which a flexible approach can realistically be adopted towards total remuneration. Address the extent to which one can mix basic salary and benefits selectively. An inflexible policy does not take care of all the employees’ interests.


Reward policies are developed on the basis of the organizations reward philosophy. An organization may have either a negative or a positive philosophy on reward.

A positive philosophy is that which is concerned with the level or quality of its remuneration.  Such an organization regularly reviews its package with an aim of attracting, retaining and motivating its workforce – it does not wait for a push or a threat to review its salary policies. Such a company is honest and it objectively remunerates employees – offers them what they deserve and not what it thinks.


A negative philosophy is seen in the form of dishonesty and subjectively in determining remuneration package. Such companies wait for a threat before they act on salary. Reviews are piece-meal with employee contribution to the company taken for granted.

Reward polices should be developed upon the understanding of the following: –

  1. Factors affecting performance and motivation
  2. Those factors affecting reward levels
  3. Factor affecting employee satisfaction with reward system
  4. The influence of corporate culture and organization


i) Performance

For a high performance index to be achieved, the following should be considered: –

  1. Employee empowerment
  2. Employee guidance
  • Employee empowerment – recognizes that the employees have the ability; skill and knowledge that is needed to achieve the level of competence required. Employees must be empowered to achieve full potential of their ability, skills and knowledge. Empowerment is done through, delegation of work and authority, but retaining responsibility, participatory management or participatory decision making process, allow for innovation and initiative, learn to accept errors as human.
  • Guidance – this dictates that a supervisor or manager must be available when needed by the subordinate or staff. Absence may lead to frustration, reduced performance etc. it may lead to loss of many hours if not readily available.
  • Employee should be enable to perform through guidance and support provided to them. Guidance is through quality of leadership and autonomy they are given to decide, act and exercise control over their work.

ii) Motivation

This is an important factor in the development of rewards system. It is important to consider motivational factors before a decision is made on reward systems. Motivation may be based on various motivational theories, the most common being Influence of expectation theory

Expectancy Theory

Employees are likely to work harder based on their anticipation, that they can get the reward desired. This can only work under certain variables when the employee has skill is competent and that the target is attainable then this expectation theory can function.

Financial rewards work or act as incentives only if people’s expectations that they can earn the money is high. Money may not guarantee the employee’s improved performance.


  • Individual worth – is concerned with the value of contribution made by individuals to the achievement of organizational goals. Such contribution must be quantifiable.
  • External relativities – concerned with consideration for the values of the service to the buyer and seller the employer and the employee respectively.
  • Internal relativities – this is concerned with the value of the job within the organization. Within an organization pay levels are affected by real or perceived differences between the value of the jobs and the individual contributions made by the jobholders.
  • Trade union pressure – this is done through the CBA’s. They use numerical strength to influence pay decisions – e.g. KNUT’s achievement of better pay for its members
(Visited 93 times, 1 visits today)
Share this:

Written by