CIPD 5HR03 Assignment Example | The Reward for Performance and Contribution

CIPD 5HR03 Assignment Example | The Reward for Performance and Contribution

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CIPD 5HR03 How does an effective Reward Strategy Impact an Organization

5HR03 assignment example

Discuss the link between organisational culture, performance management and reward. In your answer, you will need to discuss at least 4 key principles of reward. (AC 1.1)

Rewards comprise both the financial and non-financial remuneration arrangements that a firm provides to its personnel. According to CIPD (2021a), rewards may also include fixed pay, which is the guaranteed income or salary paid to employees as recompense for the work they have performed for a set term. Other compensations that includes bonuses, pension, incentives, and overtime that is advanced to the employees, may also constitute the reward. Rewards may also be informed of non- financial compensation including paid leave, flexible working, sick leave among others (CIPD, 2021a).

Several principles of rewards serve as guidelines for the business when establishing strategies for rewarding employees. First, the reward should be designed to produce a favorable experience for both the individual and the business (CIPD 2021a). Employees often respond correctly to the reward scheme based on their preferences. Consequently, it is necessary to examine such remuneration  to ensure that they correspond to the social status of the employee in line with the Maslow hierarchy of needs concept. The second principle is that the reward should be connected with the short-term and long-term company goals to produce a win-win situation for both the employee and the firm.  In this instance, management should guarantee that the reward that they offer to the workers is sustainable and does not inhibit the growth of the organization.

Reward should be viewed as an extension of effort and a motivator for workers to work intelligently and productively. The fundamental purpose of employee compensation is to motivate workers to continue delivering labor to the organization for mutual gain (CIPD 2021a). Consequently, the used incentive plan should assist employees in identifying and comprehending the most essential factors to concentrate on for the achievement of their goals and those of the organization. Regarding this, staff should be informed of a reward system. Financial and non-financial methods should be incorporated into rewards to fulfill the different demands of employees.

It is desirable, as a general rule, to base compensation on the management’s provision of pay commensurate with employees’ demonstrated competence and performance (CIPD 2021a). In addition, the incentive system must adhere to the principle of equity. It is anticipated that the business would develop a consistent and equitable treatment of employees, which will result in improved performance and the achievement of individual and organizational objectives (CIPD 2021a).

The reward strategy of the organization serves several purposes for the organization. First, it contributes to the organization’s success by fostering and encouraging a high-performance culture (CIPD 2021a). Adherence to the incentive principles aids in attracting and retaining the most competent personnel inside an organization, which is crucial to the performance of the organization. Similarly, paying employees motivates them and increases their commitment to their task, resulting to greater production. An organization that rewards its personnel correctly, sticking to the ideal methods and principles, may display its appreciation for them and eventually boost their performance. Ultimately, a motivated staff is more productive, innovative, and may boost the success of an organization.

Consider and discuss how reward policies and practices might be implemented in an organisation, to ensure it enhances performance across the organisation. (AC 1.2)

The reward policies that are developed should be based on careful consideration to ensure that it positively influences performance. To retain talented personnel, a compensation strategy should be competitive and based on a review of the external labor market (Ahmad 2015). Regarding this, the organization should take into account the compensation structure and provide a framework based on the position and the external market. When establishing and executing policy initiatives, it is essential to take pay levels into account, which should be based on work design and the prevailing situation in the labour market (Ahmad 2015). In this regard, the management should formulate policies that ensure that the reward policy is founded on the median and upper quartile ranges. 

Regarding pay increases, budgetary allocation and the development of a performance-based strategy play a significant role in ensuring that compensation is commensurate with the budgeted allocation (Ahmad 2015). The organization should evaluate its capacity to grant the raise, evaluate employee performance, and account for inflation changes and other market-related variables to the labour.

Regarding pay progression, the organization should design a policy based on the evaluation of many aspects. First, the organization should evaluate the performance of each employee relative to the greater market within the same industry (Ahmad 2015). In addition, any policy that defines the rise in salary should be  performance-based commensurate to the individual productivity and organization’s performance in terms of profits. The company may elect to provide monetary bonuses or incentives. Additionally, the policy should correspond to the legal criteria for reimbursement. In light of this, the organization should adhere to the Equality Act of 2010, which outlaws discrimination based on a person’s gender, sex, sexual orientation, age, handicap, race, or ethnicity (CIPD 2021a). In addition, the salary should be commensurate with the government-mandated minimum wage. In the United Kingdom, the minimum wage rate for those aged 18 to 20 varies from £6.56 to £6.83.

Explore how people and organisational performance can impact the approach to reward. These factors can be internal and/or external to the organisation. (AC 1.3)

Several factors may influence the method of reward chosen. The fundamental purpose of competitively compensating employees is to recruit and retain them as they provide optimal service to the business (White 2016). However, the conduct of the individuals might influence the choice of reward strategy (White 2016). In the past, financial incentives were commonly viewed as the most effective means of attracting and maintaining the greatest personnel. In this instance, bonuses, wage raises, and other financial rewards would be the proper kind of compensation. However, this may not be the case for those who value to be recognized and be rewarded by work life balance, necessitating a different approach to compensation.

The nature of the chosen compensation scheme may also be influenced by the prevailing market conditions and the type of the employees (CIPD 2021a).  The labor market evolves with time, which influences the reward strategy employed. In some circumstances, the labor market is defined by a high demand for labor and a limited supply, resulting in the adoption of a variety of strategies to meet the demands of potential workers in a competitive market. In a tight labour market, the compensation rates should be competitive compared to a loose labour market.  In tight labour market, employees may be concerned about job security, increased compensation, and flexible working, necessitating a whole reward approach rather than a basic incentive method (White 2016). During the COVID-19 epidemic, for instance, the United Kingdom experienced a shortage of truck drivers, prompting a number of logistics organizations to use varied ways of compensation that resemble the total reward strategy.

According to the Maslow Hierarchy of needs hypothesis, employees are motivated differently depending on the nature of the workforce (CIPD 2021). A financial-based incentive method may adequate when dealing with personnel in the lower stage (psychological needs), but this may not be effective reward approach for a category of people working in self-actualization phase. From an organizational standpoint, a company’s financial success may affect the strategy employed. Some employers may choose to relate their reward strategy to the organization’s performance to guarantee that the fulfillment of individual goals by employees results in the collective success of the firm’s objectives (White 2016). This is typical throughout a company’s growth or competitive era. In such cases, the company may elect to tie pay increases to performance or issue performance-based incentives.

Discuss the components of a total reward model. In your answer, you should explore the merits of each component, and the importance of offering a diverse range of benefits to the workforce. (AC 1.4)

Total reward model has several components and each plays a role in ensuring that it benefits the workforce and the organisation. Under this approach, the organisation can provide a comprehensive package that covers both financial and non-financial benefits to the employees. The total reward model includes traditional pay and benefits package in addition to the numerous benefits and allowances.

Some of the key components of the total reward model include:

  • Wages and salaries
  • Performance and recognition
  • Work life balance
  • Employment development and career growth opportunities

Wages and Salaries

In the total rewards model, remuneration is examined holistically and includes not only the base income, but also additional forms of incentives that inspire people to perform well. However, there should be a base pay, which includes the salary or the wage that one receives in form of compensation for the labour provided in money value (Sarkar et al., 2021). This is considered to be a key motivator by many employees and hence it has a direct impact on the workers’ motivation.

Work Life Balance

The total reward system is also founded on the need to provide a work life balance to the employees. In doing this, the approach is based on the consideration that employees need to work in a manner that they are allowed time to get rest and have time for their families (Sarkar et al., 2021). This approach could be attained through flexible working, which enables them to choose the working schedule that fits the best. This component fosters better morale on the employees and creates a sense of belonging and value.

Recognizing Good Performance

The total reward is also based on the fact that it recognizes employees for their performance. By recognizing the efforts of the employees and offering reward, such as bonuses, gifts, and incentives the organization motivates them to be more productive (Sarkar et al., 2021). This approach is merited for creating greater motivation and sense of recognition on the employer. It is also merited due to its connection to performance indicating that the organization also benefits from this component.

Career Growth and Development

The total reward approach also encompasses a component that values the workers by offering them opportunities to grow in their career based on their competence and performance. This approach is merited as it fosters loyalty and performance.

Importance of offering total rewards

  • Contributing to staff attraction, retention, and motivation.
  • This approach is also holistic.
  • The approach is satisfying to both personnel requirements and organizational objectives.
  • It improves an organization’s reputation as an employer of choice by valuing the broader non-financial advantages of employment.
  • It assists the company in communicating its employee value offer more effectively (Sarkar et al., 2021).

Other HR03 Assignment Assessment Criteria's

  • Explain how extrinsic and intrinsic rewards can improve employee contribution and
    sustained organisational performance. (AC 1.5)

  • The client has no performance management system in place currently and would like to set
    one up from the next financial. Summarise the main stages of the performance
    management cycle and explore the relationship between performance management and
    reward. (AC 3.1)
  • The client would like to understand how the People Team (HR) can support Line Managers
    to ensure they make consistent and appropriate reward and performance management
    judgements. Explain how the People Team can do so. (AC 3.2)
  • For guidance only, the client would like to understand what internal data Line Managers will
    need to have and refer to when making reward decisions. (AC 3.3

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Ahmad, S., 2015. Green human resource management: Policies and practices. Cogent business & management2(1), p.1030817.

CIPD 2018. Reward Management: Focus on Employee Benefits. Available at <Accessed on 12 Oct 2022>

CIPD 2021. Employee benefits: an introduction. Available at <Accessed on 12 Oct 2022>

CIPD n.d. Performance Management. <Accessed on 12 Oct 2022>

CIPD. 2021. Reward: an introduction. Available at <Accessed on 12 Oct 2022>

Danish, R.Q., Khalid Khan, M., Shahid, A.U., Raza, I. & Humayon, A.A., 2015. Effect of intrinsic rewards on task performance of employees: Mediating role of motivation. International Journal of Organizational Leadership4, pp.33-46.

Rose, M., 2018. Management: Alternatives, Consequences and Contexts, London: CIPD. Rose, M.(2018) Reward Management: A Practical Introduction, 2nd edn, London: Kogan Page. Human Resource Management, p.162.

Russell, Z. A., Steffensen, D. S., Ellen III, B. P., Zhang, L., Bishoff, J. D., & Ferris, G. R. (2018). High performance work practice implementation and employee impressions of line manager leadership. Human Resource Management Review28(3), 258-270.

Sarkar, J., Jena, L. K., & Sahoo, K. (2021). Mediating role of need satisfaction on total reward management towards retention: a conceptual framework. Vilakshan-XIMB Journal of Management.

White, G., 2016. Reward management. In Encyclopedia of human resource management. NY: Edward Elgar Publishing Limited.


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