Reward systems: Emerging trends and issues

In response to the emerging environmental pressures, organizations are transforming their structures and management systems. As a result, many organizations are rethinking their reward strategies to better align them with the new realities. This paper provides an overview of key considerations that must be kept in mind in developing organizational reward systems. Against this background, it examines four alternative approaches to rewards that have been recently suggested in the literature. These include skill-based pay, broadbanding, variable pay, and team rewards. The paper highlights relevant design issues that need to be addressed in developing and implementing these approaches. Today's organizations are faced with a highly dynamic, complex and competitive environment. In order to cope with this environment, organizations are undergoing fundamental changes in their structures and management systems. In this paper, we focus on the impact of these changes on employee reward systems. We begin by providing an overview of key requirements for effectiveness of reward systems. Next, we describe the prevailing reward systems in organizations and the pressures on these systems to change. We then provide a detailed discussion on selected new approaches to rewards. For each approach, the underlying logic is explained, the available evidence on its usage and experience is examined, and key design and implementation issues are highlighted.