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5HR03 Reward for performance and contribution

Level 5

Associate Diploma in People Management

5HR03 – Reward for performance and contribution

This unit focuses on the business factors that influence reward policies, as well as the financial drivers of the organisation and the impact of reward costs. It explores the role of people practice, and how it can help managers make professional reward judgements. It also looks at the impact of rewarding performance.

CIPD Insight factsheets:

• The CIPD factsheet on strategic reward and total rewardprovides an overview of the various aspects that can be explored in terms of designing and developing a reward strategy.
• The CIPD factsheet ‘reward – an introduction’ provides an overview on the options organisations can use to reward people and recognise their contributions.

CIPD reports:

• The CIPD reward management strategy report includes a survey which focusses on the impact of COVID-19 and reward practices in the UK.

CIPD Podcasts

• The CIPD changing landscape of reward podcast provides an overview of the role reward strategies play in attracting the best talent. It also looks at the innovative strategies organisations are developing to recognise their employees.

• The CIPD executive pay and the psychology of motivation podcast looks at the pay gap and whether reward packages are much of a motivator.

Case Study

Home International is a furniture manufacturer and online retailer. The organisation is a family-owned business that was started over 30 years ago, and currently employs 175 people on full-time or part-time contracts in the UK. They have offices based in Oxford, Munich, Santa Cruz, Suez, and Kuala Lumpur.  The organisation is growing and reaching a wider market due to the growth of online furniture shopping.

The organisation has grown during the pandemic, as clients have decided to invest in their homes. More and more people are changing their habits and purchasing sustainable products, which is seen as a positive, because Home International specialise in this area.

However, the business is currently in the process of reviewing all its policies, as Brexit means there have been several changes to rules regarding importing and exporting. This review includes people management processes in areas such as performance and reward. The objective is to cut costs, improve profits and reduce turnover. 1.1 Evaluate the principles of reward and its importance to organisational culture and performance management. 

Each office has a factory where the furniture is made and distributed on a global scale. Recently, the organisation has seen a higher turnover among the factory operatives who are aged 18 – 32 years old, whereas the office employees stick around for longer, and have an age range from 48 to 68 years old.

You have been tasked to provide the following:

• Task One: A presentation on ‘Understanding the impact of reward approaches and packages. Also, the role of people professionals in supporting line managers to make reward decisions’

• Task Two: A briefing paper on, ‘Benchmarking data to inform reward approaches’

Preparation for Tasks: 5HR03 – Reward for performance and contribution

• Plan your assessment work with your assessor at the start of the assignment. Where appropriate, agree milestones so they can help you monitor your progress
• Refer to the indicative content in the unit guide and support your evidence
• Pay attention to how your evidence is presented. Remember you are working in the People Development Team for this task
• Ensure that the evidence generated for this assessment remains your own work

You will also benefit from:

• Acting on formative feedback from your assessor
• Reflecting on your own experiences of learning opportunities, training and continuing professional development
• Taking advantage of the CIPD Factsheets, Reports and Podcasts, and any other online material on these topics

Task One:  Presentation to key stakeholders

The HR director has asked you to create a presentation which will be delivered to the key stakeholders in the business. This presentation will focus on the approaches to reward and the role people professionals play in supporting line managers when developing reward packages. This presentation will also link in methods of performance management to support line management decisions. You will need to include research around the area of reward and performance management and link in business examples to support your research and show further depth.

This presentation will need to be created in PowerPoint and have accompanying notes pages to expand on ideas and concepts.

Your presentation notes pages must include:

• An evaluation of two of the principles of reward (intrinsic and extrinsic reward and integrating reward with business objectives) (1.1).
• An evaluation as to why organisational culture and performance management are important to the principles of reward (1.1).
• An explanation of how Home International can implement new policy initiatives and practices in relation to rewards across the organisation (1.2).
• An explanation of how both people and organisational performance within Home International can impact its approach to rewards both positively and negatively (1.3).
• Using Home International and a second business example, produce a comparison of performance-related pay and intrinsic rewards as examples of benefits offered by each different organisation (1.4).
• An assessment of the benefits and drawbacks of how extrinsic and intrinsic rewards contribute to improved employee contribution and sustained organisational performance (1.5).
• An assessment of the effectiveness of performance review meetings and 360 degree feedback as approaches to performance management, including a review of the role that the people practice professionals within Home International can take to support you as a line manager, to ensure consistent and appropriate reward judgements are made (3.1).
• An explanation as to how line managers can make reward judgements based on organisational approaches to reward (3.3).
• A review of how people practice professionals can support line managers to make consistent and appropriate reward judgements.  The CIPD have provided a document called ‘The People Profession: now and for the future’, which can help you with this. (3.2)

Task Two: Briefing paper to inform future reward approaches at home international

For this task you are required to create a briefing paper which will be used to inform future decisions around Home International’s approaches to rewards. This document must summarise the research you have carried out around rewards, which will then allow you to create your own reward policy for the organisation.

You will need to gather research for this task which will provide the context for the different environments for reward, what should be included in a reward policy, and the legal requirements, these will help you create and develop your own package.

Your briefing paper must include:

• An assessment of industrial trends and sector profiles linked to common reward packages and levels of business activity relating to the context of reward environment within Home International (2.1).
• An evaluation of how unemployment and payroll data can be used by Home International to develop insight into benchmarking reward data (2.2).
• An example of a reward package that you have createdfor Home International. This should include:
• An appropriate reward package supported with benchmarking data
• A job evaluation scheme
• The market rates relevant to the roles within Home International (2.3).
• An explanation as to the legal requirements in relation to minimum pay and working hours that might impact Home International’s reward practice (2.4)
• 1.1 Evaluate the principles of reward and its importance to organisational culture and performance management. 

Assessment criteria evidence checklist

Use this as a checklist to make sure that you have included the required evidence to meet the task. Please enter the evidence title and where it can be referred to. An example has been provided for you.

Evaluate the principles of reward and its importance to organisational culture and performance management.

General asnwer for your assistance:

Reward principles play a crucial role in shaping an organization`s culture and are integral to effective performance management. Let`s evaluate these principles and their significance:

1. Equity and Fairness:

   • Principle: Rewards should be distributed fairly and equitably based on individual and group contributions.
   • Importance: Fairness promotes a positive organisational culture by building trust among employees. When employees perceive rewards as fair, they are more motivated and engaged. Inequitable rewards can lead to resentment, demotivation, and a toxic work environment.

2. Transparency and Communication:

   • Principle: The reward system should be transparent and well-communicated to all employees.
   • Importance: Transparency ensures that employees understand how rewards are determined and what they need to do to achieve them. Effective communication fosters clarity, aligns employee efforts with organisational goals, and reduces misunderstandings.

3. Performance Alignment:

   • Principle: Rewards should be directly linked to performance and contribution to organisational objectives.
   • Importance: When rewards are tied to performance, employees are motivated to excel, which ultimately benefits the organisation. It reinforces a culture of accountability and drives results.

4. Differentiation:

   • Principle: Different employees may receive different rewards based on their performance and contributions.
   • Importance: Recognising and rewarding top performers encourages excellence and provides an incentive for others to improve. It also reinforces the idea that hard work and dedication are valued and recognised.

5. Inclusivity and Diversity:

   • Principle: Reward systems should consider diversity and inclusivity factors to avoid bias and discrimination.
   • Importance: An inclusive reward system ensures that all employees, regardless of their background, have equal opportunities to be rewarded for their contributions. This promotes a diverse and inclusive organisational culture.

6. Continuous Improvement:

   • Principle: Reward systems should be periodically reviewed and adapted to changing organisational goals and market conditions.
   • Importance: A flexible and adaptive reward system helps an organisation stay competitive and ensures that rewards continue to motivate and retain employees effectively.

7. Total Rewards Approach:

   • Principle: Rewards should encompass more than just monetary compensation and include non-monetary elements such as recognition, career development, and work-life balance.
   • Importance: A holistic approach to rewards addresses employees` diverse needs and preferences. It contributes to a positive organisational culture by showing that the organisation cares about the overall well-being and growth of its employees.

8. Performance Feedback:

   • Principle: Regular performance feedback should accompany the reward system to help employees understand their strengths and areas for improvement.
   • Importance: Feedback fosters a culture of continuous learning and development. When employees receive constructive feedback along with rewards, it helps them grow and align their efforts with organisational goals.

In summary, the principles of reward are vital for shaping organisational culture and driving performance management. When implemented effectively, they create a culture of fairness, motivation, and accountability, leading to improved employee engagement, retention, and overall organisational success. However, it`s essential to remember that reward systems must be aligned with an organisation`s values and objectives to be truly effective

Assessment criteria marking descriptors: 5HR03 – Reward for performance and contribution

Assessors will mark in line with the following assessment criteria (AC) marking descriptors, and will indicate where the learner sits within the marking band range for each AC.

Assessors must provide a mark from 1 to 4 for each assessment criteria within the unit. Assessors should use the mark descriptor grid as guidance so they can provide comprehensive feedback that is developmental to leaners. Please be aware that not all mark descriptors will be present in every assessment criterion, so the assessor must use their discretion when grading.

The grid below shows the range for each unit assessment results based on total number of marks awarded across all assessment criteria.

To pass the unit assessment learners must achieve a 2 (Low Pass) or above for each of the assessment criteria.

The overall result achieved will dictate the outcome the learner receives for the unit, provided NONE of the assessment criteria have been failed or referred.

Please note that learners will receive a Pass or Fail result from the CIPD at unit level. Referral grades can be used internally by the centre

Marking descriptors

Example Answer to First Learning Outcome AC1.1

AC 1.1 Explain two principles of reward and why reward is important to culture and performance management.

Subject: Reward Principles and Their Impact on Culture and Performance Management

Dear Stakeholders,

In light of recent discussions on enhancing our reward strategy, I would like to outline two fundamental principles of reward and their significance to our organisational culture and performance management.

1. Fairness and Equity

Principle: Fairness and equity in reward systems are crucial to ensuring that employees perceive their compensation as just and commensurate with their contributions. This principle involves aligning rewards with the value of the role and the individual`s performance, while also ensuring that similar roles and achievements receive comparable rewards.

Importance to Culture and Performance Management:

• Culture: A fair and equitable reward system fosters a positive organisational culture by promoting trust and transparency. Employees are more likely to feel valued and motivated when they believe their efforts are recognised appropriately and compared fairly with their peers. This, in turn, can enhance job satisfaction and reduce turnover.
• Performance Management: When rewards are aligned with performance, it encourages a high-performance culture. Employees are motivated to set and achieve high goals knowing that their rewards will reflect their performance. This alignment helps in driving performance, as individuals see a direct link between their efforts and their rewards.

Business Example: Companies like Google are renowned for their commitment to fairness in compensation. Google’s extensive use of data analytics ensures that pay is equitable across the organisation. They regularly review compensation practices and use peer feedback to maintain fairness, which supports a culture of inclusivity and high performance.

2. Alignment with Organisational Goals

Principle: Reward systems should be designed to align with the broader goals and strategic objectives of the organisation. This means structuring rewards to incentivise behaviors and achievements that directly contribute to the company’s mission and long-term goals.

Importance to Culture and Performance Management:

• Culture: Aligning rewards with organisational goals helps to create a unified direction and purpose within the company. Employees understand how their individual contributions impact the overall success of the organisation, which reinforces a shared vision and commitment to organisational success.
• Performance Management: By linking rewards to organisational goals, companies can drive performance in a targeted manner. Employees are encouraged to focus their efforts on activities that advance the company’s strategic objectives, which enhances overall productivity and achievement.

Business Example: Starbucks is a prime example of this principle in action. Their reward system incorporates performance bonuses tied to company-wide goals such as customer satisfaction and financial performance. This approach aligns individual performance with Starbucks` strategic objectives, promoting a sense of shared purpose and driving high levels of performance.