Academic journal article SA Journal of Human Resource Management

An Empirical Study of the Reward Preferences of South African Employees

Academic journal article SA Journal of Human Resource Management

An Empirical Study of the Reward Preferences of South African Employees

Article excerpt

Introduction

Key focus of the study

The rewards that employees receive should be important to them and address their needs. Rewards refer to the compensation that an employee receives from an organisation in exchange for his or her services (Jiang, Xiao, Qi & Xiao, 2009). When companies structure their reward systems correctly, employees inherently perform well to achieve the organisation's goals as well as their own (Pfau & Kay, 2002). Milkovich, Newman and Gerhart (2011) also specified that rewards can play a significant role in influencing employees' attitudes and perceptions of work. Owing to the fact that rewards represent anything that is valuable and meaningful to the recipient, skilled and talented employees are less likely to be motivated by rewards that are not aligned with their preferences and values (Chiang & Birtch, 2007). In the past, the primary focus of reward systems was on compensating employees by financial means (e.g. through a basic salary), but with a rapidly changing workforce, a more holistic and integrated approach to reward management is now required (Zingheim & Schuster, 2001).

During the past several years, the concept of total rewards has become a popular topic of discussion. According to Heneman (2007), the shiftfrom the phrase 'compensation and benefits' to 'total rewards' has resulted from the inability of many organisations to offer pay increases and added benefits because of intense competition in the marketplace. Employers therefore have to find alternate, less costly forms of rewards that will still attract, retain and motivate employees (Heneman, 2007). 'Total rewards' thus describes a reward strategy that combines compensation, employee benefits, work-life balance, personal recognition and career development in the benefits package (Armstrong & Brown, 2001; Costello, 2010; WorldatWork, 2007). These elements represent an inventory from which organisations can design reward packages that create value for the organisation and its employees. A total rewards framework allows employers to consider employee preferences in accordance with individual needs and be more flexible when designing reward packages (Bussin, 2011). It also enables organisations to identify the correct combination of rewards for its particular workforce (WorldatWork & Towers Watson, 2012). This understanding of total rewards forms the key focus of this study.

Background

In the past few years, companies have faced a difficult economic environment that has challenged traditional reward practices and strategies (Deloitte Development LLP, 2009). Having experienced the effects of a worldwide economic recession since 2008, human resource managers within South Africa face increasing pressure to contribute more significantly towards the success of their organisations (Grobler et al., 2011). Remuneration accounts for over half the operating costs of most South African organisations, which points to the importance of maximising the return on these costs (Sutherland, 2011), especially in trying economic times. Yet, unfortunately, according to the Africa competitiveness report 2011, South Africa received a score of only 3.2 out of possible 7.0 within the sub-pillar of 'pay and productivity', coming 112th out of 139 participating countries (World Economic Forum, World Bank & African Development Bank, 2011). This implies that pay is not strongly related to employee productivity in this country.

In addition, growing concern regarding the retention of high performers has resulted in employers rethinking the way in which they reward their employees (Deloitte Consulting LLP, 2008), particularly because of the shortage of skilled and executive employees in Africa (Sutherland, 2011). Businesses in Africa are struggling to find the skilled employees they require, with many skilled African graduates emigrating to developed countries (World Economic Forum et al., 2011). Meyer and Kirsten (2012) agreed with this, stating that there has been a steady loss of skilled and qualified individuals from South Africa as a result of emigration, which poses a problem because of the need for skills to promote production in the country. …

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