An effective reward system is one of the most important aspects in
an organization which motivates employees to contribute their maximum efforts
to achieve organizational objectives. Different kind of reward systems can be
used by the organizations, in general the reward system can be classified in
three main categories which are:
Intrinsic versus extrinsic rewards
Financial versus non-financial
Performance-based versus membership
Each of these
reward system are discussed in more detail next:
Intrinsic versus extrinsic rewards:
reward refers to the inner feeling that the employee gets from the job itself.
It refers to the satisfaction of the job such as the feeling of career growth,
pride, feeling of accomplishment and more. Whereas, extrinsic reward refers to
the values that are not generated internally by someone’s feeling, rather it is
external to the job and comes from an outside source, such as promotions,
fringe benefits, bonus and more.
versus non-Financial rewards:
As indicated by the terms, some rewards play a role in enhancing
the financial position of the employees. This kind of rewards can be directed
through bonuses, wages, pension plans, paid sick leaves, paid vocations, profit
sharing and more. On the other hand, non
financial rewards do not contribute in the financial well-being of the
employees; rather they are at the disposal of the organization. This kind of
reward system makes the life of the employees more attractive on the job rather
than off the job which includes; recognition, promotion and more.
versus membership based rewards:
Performance based rewards are those
rewards that are paid based on the excellent performance demonstrated by the
employees by the use of merit pay plans,
like; piecework pay plans, group bonuses, or more . Whereas, membership based
rewards are those kinds of rewards that, are given based on the membership on a
particular team. This kind of rewards includes profit sharing, benefits cost of
living increases, salary
increases according to labor market conditions and more.
Like most of the other organizations, AIB’s
reward system plays also a significant role in achieving its objectives.