Employee reward is about how people are rewarded in accordance with their value to an organization (Armstrong, 2001). It is concerned with both financial and non financial rewards and embraces the philosophies, strategies, policies, plans and processes used by organization to development maintain reward systems. An employee reward system consist of an organizations integrated policies, processes, practice, structures and procedures which will provide and maintain appropriate type and levels of pays benefits and other forms of rewards.
The main components of a reward system include processes for measuring the value of jobs, the contribution of individuals’ in those jobs and the range and level of employee benefit to be provided, these processes consist of job evaluation, market rate analyses and performance management (Armstrong,2004). Practice for motivating people by use of financial and non-financial rewards, the financial reward rewards consist of base and variable pay and employee benefits and allowances and non-financial rewards are provided through effective leadership, the work itself and the opportunities given to employees to develop their skills and careers.
Structures for relating pay and benefit levels to the value of positions in the organization and for providing scope for rewarding people according to their performance, competence, skill and experience (Gephart&Caroll, 1998). Employee rewards are an effective way to drive performance and reinforce the behavior that helps a company meets its objectives. Pay bands are profiled in terms of the level of required competence, which describe the typical or minimum requirements of the roles allocated to each band.
Individual roles are then slotted into the appropriate band by the company their profile with the band profiles. The purpose of pay structure is to organize and demonstrate organizations compensation philosophy and to reflect and support the advancement of the company culture. An effective pay structure allows employees to attract and retain the people who can help achieve our business goals (Jones, 1991). Broad banded pay structure is one in which the range of pay is significantly higher than convectional graded structures.
The progression is appropriate because they provide for more flexibility in making and administrating pay decision. Broad banded structure recognizes that in flat organizations career are more likely to develop within more broadly homogenous areas of responsibilities rather than progressing up a number of steps in a clearly defined hierarchy. This structure has few broad bands which reduces the problem of grade drift.
More authority is developed to managers to manager rewards in their departments which they can view them as their kingdom. The broad banded pay structure posses a problem of controlling pay decision so that a fair degree of equity and consistency is achieved. Broad banded pay structure requires that the line managers are literate on the issues of pay otherwise the process will be badly managed and complains will arise in the organizational of discrimination in pay.
Broad banded pay structure can only succeed in sophisticated organizations with a tradition of good pay practices if this is not adhered to misunderstanding may occur due to irregularities in pay of employees doing the same job. Broad banded pay structure enable line mangers the freedom to manage the pay of their staff within their budget but this can become disadvantageous especially if the managers create their own kingdoms in these departments. Also too much scope for pay progression.
The control mechanism in broad banded pay structure can be provided but can be difficult to mange and costly as job evaluation of no longer drive grading decisions (White&Drunken, 2000). Broad banded may pay structure create unrealistic expectation or scope for pay rise as it seems to restrict the scope for promotions making if difficult to understand equal pay progress. All these issues can cause potential problems in an organization that operates a traditional narrow banded structure.
Narrow banded structure has ten or more graded and progression is expected to occur in small but relatively frequent steps. Progression is usually linked to performance. It is more appropriate in an organization when the organization is large and bureaucratic with well defined and extended hierarchies. In narrow banded structure pay progression is expected to occur in small but relatively frequent steps (Thrope&Homan, 2000). The culture in the organization having narrow banded structure is one in which mass significance is attached to status as indicated by grindings.
This pay structure is appropriate when same little scope of pay is wanted as it facilitates control and clearly indicating relativities. In a narrow banded structure the hierarchy is tall as all the jobs are allocated into a salary grade within the structure on the basis of an assessment of their internal and external value hence it will be difficult for a broad banded pay structure when being introduced in the organization as it is mostly appropriate for flat organization not all hierarchy organization.
Each salary grade consists of a salary range in narrow banded structure which can be 10 or more grades while in a broad banded pay structure. It is more flexible and can consist of five to six broad bans. In a narrow banded structure the rate of salary progressive is determined by performance as well as length of service while the broad banded pay structure progression is linked to contribution and competency of the employee.
In narrow banded pay structure the number of salary ranges required depends on the lower and upper salary level of the jobs in the structure of an organization, the differentiate between the ranges, and the number of distinct levels of responsibility in the hierarchy which need to be catered for by separate grades. This will create many pay grade which if a broad banded pay structure is introduced in the organization implementation will be difficult as it will be possible to design and differentiate them more accurately as an aid to better precision when grading jobs.