The purpose of this essay is to critically examine the processes used by Scotia Learning and identify if their rewards are appropriate to those of the market. The report will begin by discussing the background of Scotia Learning and follow on to define reward management highlighting the objective and constraints within the reward strategy. We will then consider the legal framework and examine why there are variations in pay and how job evaluation can ensure equity and fairness is achieved. Finally we will discuss the concept of motivation and the implications of pay for performance within the reward strategy. The report ends with an analysis of the key issues of the topic. Scotia Learning is the case study for this essay and is one of a network of university-based study centres offering preparation for students wishing to study undergraduate and postgraduate degrees for progression into university degree courses. The company has joint venture partnerships with top universities throughout the United Kingdom, Ireland and United States of America.
“Reward management is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organisation” (Armstrong & Murlis, 2007, p3). Research by Redman & Wilkinson (2009) indicates that reward is an enormously complex issue and has to take account of three fundamental principles in determining systems and structures: internal equity, external equity and business strategy. In addition Thorpe & Homan (2000) state that the organisation should identify what objectives and behaviours the payment system should have for example, labour market competitiveness and management skills whilst Perkins & White (2009) highlight the importance of legal regulations that can put constraints on organisations, for example minimum wage (legal), collective bargaining (trade unions), and the external labour markets.
Scotia Learning does not recognise a trade union however it does recognise that collective bargaining has been influential in discussing and setting pay arrangement due to internal and external rates of pay not being equal. Within the employment legislation pay has always been an area of controversy especially when one considers employee’s collective concerns (Brown et al., 2003). The introduction of The Equal Pay Act 1970 outlawing unequal pay for men and women having since evolved into equal pay for equal work and the Equal Pay (Amendment) Regulations 1983 after the UK joined the EU in 1973 (Perkins & White, 2009), now gives employees a certain degree of protection in their employment relationship.
To strengthen current legislation The Equality Act 2010 was introduced highlighting human rights and discriminatory factors, such as equal pay, sex discrimination, race, disability and equality (religion, sexual orientation, and age) (Equality and Human Rights Commission, 2012). In response to this Scotia Learning are aware that they have a ‘duty of care’ to all employees and comply with the Equal Opportunities Policy by ensuring the relevant training is undertaken by managers and employees ensuring everyone understands the importance of and their responsibilities under this Policy. This is also promoted in all recruitment documents, ensuring that wording of job advertisements does not discriminate against any potential applicants.
As part of this legislation, employers are legally required to ensure their pay structures are not discriminatory against men and women in terms of valuing work between them in their employment and in order to defend themselves against equal pay claims, organisations must be able to prove that the jobs within their grading system are valued according to the job rather than the gender of the person doing the job. Failure to adhere to these regulations can result in a tribunal claim and if proven the organisation will have to pay all money accrued which can be backdated six years in England and five years in Scotland. In the case of (Birmingham City Council v Abdulla and others  UKSC 47), the Supreme Court ruled that equal pay claims brought in the High Court more than six months after the end of the claimants’ employment, which would have been out of time in an employment tribunal, should not be struck out under section 2(3) of the Equal Pay Act 1970.
The reasons for a claimant’s failure to bring a timely claim in a tribunal are not relevant in any way to the notion of convenience under section 2(3). (PLC Employment Law Weekly email). Within Scotia Learning pay and benefits are provided on the basis of objective criteria, free from discrimination taking into account the principle of equal pay for equivalent work or work of equal value. In addition we ensure transparency within the reward system is clear to all employees in that they understand how their pay is worked out and what is required from them to achieve this. Job profiles and person specifications for each new vacancy are drawn up in keeping with other jobs of a similar size and responsibility which focus on the skills, experience and qualifications that are directly relevant to the job. Armstrong & Murlis (2007, p115) state that “the payment system is important as it not only conveys a signal to the employees what the organisational priorities are but also acts as a catalyst for wider organisational change” a view reiterated by Armstrong (1996) in which he proposes that the foundations of reward management are to achieve the individual and organisational behaviour that a company needs if the business goals are to be met.
Therefore the term ‘employees are the key to enhanced organisational performance’ becomes relevant with links to Kessler and Purcell (1994) where they emphasise that payment systems are related to recruitment, retention and motivation of staff and that the determination of pay is not only the interaction of market forces but also employers. It is also acknowledged that variations in pay can occur for a variety of reasons and from a legal perspective it is important to understand why (Redman & Wilkinson, 2009). Firstly the power scenario, in that if labour is scarce, employees will have more power and hence may be able to demand higher pay, in contrast with an over-supply of labour employers have the power and hence may be able to hold pay at lower rates (Redman & Wilkinson, 2009). Secondly, it has been acknowledged that ‘the rate for the job’ should be the same for employees doing the same job but considering organisational performance is reliant on the employee’s effort, skills and competencies, it is not logical to assume that effort should be rewarded and pay should vary accordingly.
A view shared by Redman & Wilkinson (2009, p161) who advocate that “variable pay schemes (VPS) are said to hold out the promise towards the creation of internal labour market that is fairer in rewarding people as it is only ‘fair’ that rewards should have a direct link with effort”. The argument with this theory is that ‘risk adverse’ workers will be less willing to ‘gamble’ on pay related performance than a set amount of pay. Thirdly, we should also take into consideration the external market rate of pay and uneven market pressures such as differing regional or occupational rates of pay as Kessler (2007, p167) states “external equity is an organisational imperative as failure to respond the labour market changes will leave organisations at a disadvantage competitively”. Scotia Learning responds to these challenges by regularly benchmarking and studying the market rate of pay within the educational sector. Data collected is beneficial in determining pay to ensure pay scales are in line with and competitive with similar jobs.
For example, when recruiting teaching staff, the use of organisations such as SATEFL and other educational websites are particularly useful, for administration staff we would use S1jobs.com and jobseeker.gov.uk website and with management we would use agencies. However, although the aforesaid strategy is very useful, Scotia Learning is a relatively large organisation with Centres worldwide and other factors have to be taken into consideration, such as location and cost of living. In determining the value of jobs within our organisation, although we consider the external market pay rates, decisions concerning pay are done through a coherent wage and career structure internal to our organisation which ensures consistency and fairness in our reward systems. It has been reported that issues with this reward system have arisen within the banking sector resulting in Government intervention to deal with inequalities of pay setting at senior management/director level and low pay via the national minimum wage.
This is not an area of concern for Scotia Learning as the annual salary increase is a % rate consistent throughout the organisation and our pay structure process involves a job evaluation “a systematic process for establishing the relative worth of jobs within an organisation” Redman & Wilkinson (2009, p141). In addition Scotia Learning is accredited to the British Council and British Accreditation Council and all HR policies and personnel files are properly documented and filed. Our job evaluation comprises of an analytical (i.e., jobs are broken down into individual components) broad-band pay structure with a range of factors such as knowledge and skills, problem solving, decision making and then allocating points to them. It is interesting to note that research by IRS (2007) showed that an average of 86% of organisations use this form of job evaluation. Within this broad-band pay structure we have 6 wide overlapping salary bands made up of management, HR, teaching staff, finance, student services and cleaning staff with a salary range for each bank of at least 75%.
Progression up the bands will be by skills and qualifications, performance and competence enhanced through individual career development thus supplying the motivation for continuous learning. To support this, the annual performance review takes place, however it is not linked to pay or rewards and is based on the objectives of skills and competence which are linked to organisational performance. In terms of equity and fairness the rate of pay for full-time and part-time teaching staff is calculated on the same hourly rate therefore ensuring consistency and fairness within the system. It is interesting to note that research by Redman & Wilkinson (2009, p139) argues that by paying an hourly rate “employers control over pace and performance is reliant on either direct supervision or the willingness of employees to engage with the task” synonymous with the argument surrounding ‘risk adverse’ workers.
This point of view may be viable in organisations such as ‘call centres’ where technology enables the monitoring and regulating of work by measuring output and input and within the customer service industry where we have the ‘secret shopper’, but within the education sector autonomy is part of the job as is their professional code of ethics which includes commitment, motivation and discretionary behaviour which is contradictory to the argument by Thorpe & Homan (2000) who suggest that non-financial aspects are secondary and rarely given the same prominence in the design of payment systems. Managing rewards is largely about managing employee expectations linking to their psychological contract which is concerned with pay, performance and the development of skills (Armstrong & Murlis, 2007).
The argument then becomes, if reactions to rewards depend on the psychological makeup, values and needs of individual, one cannot wholly rely on performance related pay schemes to enhance all employees’ performance as not everyone is motivated by money. Motivation only takes place if rewards are worthwhile to the individual and if the process is seen to be fair, therefore, it would require to be customised for every individual in the organisation (Armstrong & Murlis, 2007). For example, an employee nearing the end of their career may be more interested in job satisfaction (intrinsic reward), whereas a graduate beginning their career may be more interested in training and development (extrinsic reward).
For that reason it can be argued that both intrinsic rewards such as respect, recognition, job satisfaction and responsibility are just as important as extrinsic rewards such as pay rises, bonuses, training and development opportunities and benefits such as annual holidays, company sick pay and company pension. This highlights the importance of implementing an equitable and fair reward strategy in that by incorporating financial and non-financial rewards is that they can be used as a tool to enhance employee motivation resulting in improved organisational performance. Finally the importance of management skills cannot be undermined as they are a fundamental element of human resource management. The management strategy within Scotia Learning is based on autonomy, communication and high levels of trust between management and employees. Evidence to support this is the turnover rate of staff with one employee resigning over the past two years and the annual absence levels within Scotia Learning for all staff inclusive stands at 0.1% of working hours, which is the lowest in the entire organisation.
This objective of the report was to establish the processes that ensure equity and fairness in the reward systems. We have covered the legal aspects, strategies, market awareness, motivation, job evaluation and performance appraisal and it has become evident that Scotia Learning complies with all legal legislation, and displays equity and fairness within the reward systems. However there was an air of negativity surrounding performance and reward as within Scotia Learning the annual appraisal is not yet connected to pay for performance. It is possible that issues could arise if this was implemented, namely, it could seriously affect the dynamics of the office environment between a very closely-nit team of employees, managers and directors in that, how does the manager justify their decision in the event of a low reward without affecting the equilibrium of the office environment and within a unionised organisation all trade unions argue against performance linked to pay.
Schemes relating pay to performance, although generating a tremendous amount of interest have very little in the way of conclusive evidence concerning their effects on performance (Redman & Wilkinson, (2009). This echoes Thompson (1992) findings in which he states, “research fails to provide convincing evidence of a link between individual performance-related pay schemes and improvements in productivity”. The evidence supports that other approaches should be considered in rewarding employees, for example a one-off bonus payment which would not affect the employees’ annual salary.
Armstrong, M. (1996) Employee Reward, London: Kogan Page/IPD Armstrong, M., and Murlis, H. (2007) Reward Management. 5thedn. London: Hay Group Brown, W., Marginson, P., and Walsh, J. (2003) The management of pay as the influence of collective bargaining diminishes. In: P.K. Edwards, Industrial Relations: Theory and Practice, Oxford: Blackwell IRS (2007) Job evaluation is thriving, survey finds: Employment Review, 667 Kessler, I. (2007) Reward Choices: strategy and equity. In: Storey, J. HRM: a critical text 3rd edition, London: Thomson Learning Kessler, I., and Purcell, J. (1994) Performance Related Pay: Objectives and application, Human Resource Management Journal, Vol.2, No.3 Perkins, S. J., and White, G. (2009) Employee Reward: Alternatives, consequences and contexts, 2nd edn. London: Chartered Institute Of Personnel and Development, Redman, T., and Wilkinson, A. (2009) Contemporary Human Resource Management: Text & Cases, 3rd edn. London: Prentice Hall, Thompson, M. (1992) Pay for Performance: The employers experience, Brighton, Institute of Manpower Studies Thorpe, R., and Homan, G (2000) Strategic Reward Systems, Harlow: Financial Times Williams, S., and Adam-Smith, D. (2006) Contemporary Employment Relations: A critical introduction, Oxford: University Press Equality of Human Rights Commission, available from: http://www.equalityhumanrights.com/human-rights/ – date accessed 23/10/12 PLC Employment Law, available from: [email protected] – date accessed 26/10/12
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