FACULTY OF BUSINESS AND MANAGEMENT

BUSINESS ADMINISTRATION (HONS.) HUMAN RESOURCE MANAGEMENT

PERFORMANCE MANAGEMENT
HRM544

INDIVIDUAL ASSIGNMENT TERM PAPER: REWARD SYSTEM

PREPARED BY:
NAME STUDENT NO.
AINA SYAZWANI BINTI ANUAR 2021117915

PREPARED FOR:
DR NUR ZAINIE ABD HAMID

GROUP:
RBA2434D

DATE:
28 NOVEMBER 2022
 TABLE OF CONTENTS

ACKNOWLEDGEMENT

1.0 INTRODUCTION 1

2.0 DISCUSSION 2-3

3.0 RECOMMENDATION 4

4.0 CONCLUSION 5

REFERENCES 6
 ACKNOWLEDGEMENT

First and foremost, I would like to praise and thank Almight Allah as He has easier my
journey in completing this individual assignment. I managed to complete this assignment
successfully despite the entire hard journey I need to go through. Without Him, I might not be
able to complete this assignment.

I am very glad that the accomplishment of this Individual Assignment: Term Paper
was successful. Blessing and the heart pledged support. On completion of this report, it gives
me great pleasure and satisfaction. Hence, I would like to take this opportunity to express our
gratitude towards those who made this possible.

Words cannot express the zeal of ecstasy while depicting our deep sense of gratitude
to my esteemed, knowledge guide, Dr. Nur Zainie Abd Hamid who inspires me to undertake
this work. Her dynamic guidance and continuous interest kept us inspired by all difficulties.
Her technical guidance, knowledge and dynamic approach is the cornerstone. This
dissertation could not be possible without her most valuable suggestion and guidance.

Furthermore, I would like to thank my parents, who are indirectly involved assisting
me in making my journey easier. They understood that I would require my own space and
time to complete this task assignment. As a result, they have prepared a space for me to
complete the assignment and do not bother me while I was working on the assignment. In
addition, thank you for their endless support and consideration for me. I believed I was able
to complete this assignment because of the prayers they made for me.

Finally, yet importantly, I also thankful to all friends in our group and classmates for
their kind support at various stages of work. Thank you for all the cooperation and support
they gave towards me.
1.0 INTRODUCTION

Benefits and financial incentive make up an employee's pay, often known as

tangible returns. Employees also gain relational returns, which are intangible benefits
like position and recognition, job security, interesting work, and training possibilities.
An employment relationship's set of procedures for allocating both tangible and
intangible rewards is known as a reward system. Compensation is under the scope of
an organization's human resources (HR) division. Employers utilise it as a
management and motivational tool to ensure that staff members work well. The
company's compensation policy should be attractive, encourage employees to work
hard, and support the benefits it offers to its employees. The pay structure should also
guarantee that staff morale is high and turnover is kept to a minimum. Prior to
designing the compensation system, a business must take into account its goal, vision,
and strategies in order to ensure that all of these elements are interconnected and in
sync (Shawkat Jahan).
According to Walters et al. (2019), by establishing goals that are relevant to the
work provided, such as exceeding particular sales targets, rewards can be used to boost
performance. It has been shown through research that people tend to perform better
when they are complimented and appreciated. To encourage exceptional performance,
it's often possible to divide a percentage of the end-of-year profit or retained earnings.
This is just another strategy an organisation may use to reward better performance.
The organisation newsletter or meetings could feature praise.

The topic of this term paper will be the employees' dissatisfaction with the
compensation system as a result of seniority-based promotions. Since employees just need to
fulfil the bare minimum of their duties and continue to perform them until they have reached
the required number of years, seniority-based promotions undermine motivation.

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2.0 DISCUSSION
The impacts of compensation system as a result of seniority-based promotion are
decreased motivation, increase turnover rates, decreased efficiency, increased frustation and
promotion criteria. Offering promotions based on seniority might cause excellent workers to
lose their work ethic and even take their skillsets elsewhere as they seek career advancement.
Firstly, the decreasing motivation for seniority-based promotion will negatively affect
the employees. An employee's motivation and engagement may decline if they come to
believe that their promotion will be determined on seniority rather than merit. This is due to
the fact that they are aware that whether they put in extra effort or go above and beyond the
call of duty will not affect whether they are promoted. So they start to wonder why they
should put their all into their work. A rise in money and status serves as an external drive for
many people, even if many people enjoy their professions and find fulfilment and joy in their
work. Their entire motivation is drastically reduced when it is taken away. Without adding
promotion mechanisms to the mix, it can be challenging to maintain staff enthusiasm and
engagement (Cindy Constable).
Next, the impact of compensation system as a result of seniority-based promotion is
increase turnover rates. Highly competent workers are aware of their value to an organisation.
To reach their skill level, they typically invest a lot of money in pricey education, professional
training, practise, and training. Most workers don't put in this kind of effort to advance their
careers slowly. A seniority-based promotion system may result in lower employee retention
rates when highly qualified workers seek out places that will value and reward their skills
after being passed up for advancements owing to a lack of seniority. Higher-ranking
employees who are less likely to be promoted then enter the workforce as a result of a high
turnover rate and the cycle repeats (Cindy Constable).
According to Cindy Constable, when a promotion system based on seniority is
implemented, a culture of reduced productivity may result. Both senior and junior staff will be
less driven to deliver at a high level for various reasons. Senior employees are aware that their
chances of receiving a promotion are excellent simply because of their length of service.
Because of their tenure, they are not required to operate at their best. As previously
mentioned, those without seniority are aware that they will not be promoted, thus without that
as a motivational incentive, they are less committed to their work. Additionally, a seniority-
based

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promotion system eliminates healthy employee competition that can occasionally result in
improved work performance.
Moreover, frustation from employees also will be increased. Imagine working hard for
a company and always being passed over for a promotion because you haven't worked there
for a specific amount of time. Instead, you see folks with less talent elevated to positions of
more responsibility year after year. When you view things from that angle, a certain level of
irritation develops within you. This irritation is what causes a company's motivation to drop,
its productivity to decline, and its turnover rate to rise (Cindy Constable).
Lastly, a merit-based promotion system can also have issues, even while seniority-
based promotion has drawbacks. There is frequently concern that those who are more well-
liked or have a stronger connection to the management team will get promoted first when
merit-based promotions are in place. Naturally, this can also result in lower productivity and
motivation as well as higher rates of frustration and turnover. It is best to make sure that there
is a criterion for promotions that is consistent and impartial if a merit-based system is
implemented. Everyone should be aware of the standard factors taken into account when
making promotions, and those in charge of making promotions should employ these particular
factors for each promotion (Cindy Constable).

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3.0 RECOMMENDATION

As a result, the best way for compensation pay based on job performance. The
researchers discovered that performance-based compensation had a favourable influence on
work satisfaction, employee commitment, and management trust if the profit-related pay was
dispersed fairly throughout the firm when they particularly examined pay associated to
corporate earnings (Sean Peek, 2022).

Then, compensation pay based on job performance can improve recruitment and
retention of high performing talent. Sean Peek (2022) said that top performers are motivated
to stay when they know what is expected of them, meet or exceed those goals, and profit from
the rewards. In order to create the ideal workforce, your HR team can examine the
characteristics of these top achievers and spot those characteristics in potential recruits.

Also, it can identify and reveal on some areas for improvement. Business executives
can identify "weak links" by using performance-based pay because it gives team members'
contributions measurable worth. You can find areas in your company that require
improvement, such as training procedures, management, and communication, by first
identifying the low performers and then examining why they are performing below
expectations (Sean Peek, 2022). For example, if your employees have problem with
teamwork, so you can make one program that can create relationship and closeness among
them.

Additionally, it can increase the productivity of the employees. Because of the nature
of the pay system, employees who contribute more to the business are compensated more,
which promotes greater productivity. Team members can use these expectations to complete
work more quickly in organisations that use pay-for-performance remuneration. These
organisations typically use a calendar or timetable to manage deadlines (Sean Peek, 2022).

Finally, the employees also can have clear expectations on themselves. With
performance-based pay, the employee has a greater say in their salary and can raise their own
income. In addition to giving the employee more control over their salary, this creates clear

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expectations for raises, which prevents misunderstandings and promotes clarity surrounding
the topic of pay.

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4.0 CONCLUSION

To conclude, compensation pay based on seniority will make employees unsatisfied

and decrease motivation to work. If the employees were not spirited to work, the mission,
vision and goals were hard to achieve. The employer plays an important role in this issue. He
or she needs to think wisely to make employees have higher motivation and valuable payment
for their hard work of them.

An organization must set up on how you want to decide on what based on

compensation pay before recruiting new employees. To achieve goals that have been set, we
must recruiting employees that have a good skill. Based on skill that employees have, job
performance will be looks. High job performance, you will get higher compensation pay.
Observe with job performance can make employees realize that what them need to improve.

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 REFERENCES

Constable, Cindy. “The Consequences of a Seniority-Based Promotion System.” Cindy R

Constable Leadership Consultant The Consequences of a SeniorityBased Promotion

System Comments, https://cindyrconstable.com/the-consequences-of-a-seniority-based-

promotion-system/.

Jahan, Shawkat. “Definition of Reward Systems: Human Resource Management.” Human

Resource Management | A School of Human Resource Management.

https://hrmpractice.com/definition-of-reward-systems/

Ngwa, Walters t., et al. “Effect of Reward System on Employee Performance among Selected

Manufacturing Firms in the Litoral Region of Cameroon .” Academy of Strategic

Management Journal, vol. 18, no. 3, Jan. 2019, pp. 1–16., https://doi.org/1939-6104-18-

3-382.

Peek, Sean. (2022). “Is Performance-Based Pay an Incentive for Employees?” Business News

Daily, https://www.businessnewsdaily.com/9712-performance-based-pay.html.