MGMT90015 · Foundations Of Human Resource Management
Remuneration and Rewards
Reward is where the subject argues that fairness, not just the figure, drives satisfaction. The chapter opens with the total-rewards view: intrinsic rewards (meaningful work, recognition, growth) sit alongside extrinsic ones (pay, benefits), and pay itself splits into guaranteed (base) versus at-risk (bonus, incentive) components. It then answers 'why are some jobs paid more?' with the two relativities: internal relativity (job evaluation ranks roles within the firm — not the same as appraising a person) and external relativity (pay surveys benchmark against the market). The analytical heart is distributive vs procedural justice: distributive justice is the perceived fairness of the outcome (the pay itself), procedural justice the perceived fairness of the process that set it — and procedural fairness often matters more for trust. Performance-related pay (PRP) can sharpen line-of-sight between effort and reward but risks gaming and inequity, and the chapter closes on the real-world fairness gaps: wage theft, the gender pay gap, and the CEO-to-worker pay ratio.
What this chapter covers
- 01The total-rewards view — intrinsic vs extrinsic
- 02Types of pay — guaranteed (base) vs at-risk (incentive)
- 03Internal relativity — job evaluation (not appraisal)
- 04External relativity — pay surveys and the market
- 05Distributive justice — fairness of the outcome
- 06Procedural justice — fairness of the process
- 07Performance-related pay — line-of-sight, gaming and equity risks
- 08Fairness gaps — wage theft, gender pay gap, CEO ratio
Diagnosing a pay-equity grievance with the two justices
- +1Name and define the two justices: distributive justice is the perceived fairness of the outcome (the pay itself); procedural justice is the perceived fairness of the process that set it.
- +1Diagnose the outcome: the pay gap for similar work is a distributive-justice problem — the outcome looks inequitable.
- +1Diagnose the process: the anger 'at how it was decided' is a procedural-justice problem — an opaque, inconsistent process erodes trust even more than the gap itself.
- +1Apply the two relativities: check internal relativity (did a job evaluation rank these roles consistently?) and external relativity (does a pay survey justify the difference?) — this tests whether the gap is defensible.
- +1Recommend and conclude: fix the process first — transparent, consistent pay rules and a credible job-evaluation basis — because procedural fairness often restores trust faster than the dollar adjustment alone.
Key terms
- Total rewards
- The full package an employer offers, combining extrinsic rewards (pay, bonuses, benefits) with intrinsic rewards (meaningful work, recognition, development and autonomy). The view warns against treating pay as the only motivator.
- Guaranteed vs at-risk pay
- The split between fixed base pay that is paid regardless of performance (guaranteed) and variable pay that depends on individual, team or company results (at-risk, e.g. bonuses and incentives). The balance shapes how much risk is shifted onto the employee.
- The two relativities
- The two reference points that set pay: internal relativity, established by job evaluation that ranks roles within the firm (distinct from appraising a person), and external relativity, established by pay surveys that benchmark roles against the market.
- Distributive vs procedural justice
- Distributive justice is the perceived fairness of the reward outcome (the pay itself); procedural justice is the perceived fairness of the process used to determine it. Procedural fairness often has a larger effect on trust and acceptance than the outcome alone.
- Performance-related pay (PRP)
- Pay tied to measured performance, intended to strengthen the line-of-sight between effort and reward. Its risks mirror SMART-goal gaming: it can distort behaviour toward the metric, create inequity, and damage intrinsic motivation if poorly designed.
Remuneration and Rewards FAQ
Why does fairness matter more than the amount in reward?
Because perceived justice, not the absolute figure, drives satisfaction and trust. An employee may accept a lower outcome (distributive justice) if the process that set it was transparent and consistent (procedural justice), and procedural fairness often matters more — so reward answers should diagnose both.
What are the two relativities?
Internal relativity is how roles rank against each other inside the firm, set by job evaluation (which assesses the job, not the person). External relativity is how the firm's pay compares to the market, set by pay surveys. Together they explain why some jobs are paid more, and whether a pay gap is defensible.
What are the risks of performance-related pay?
PRP can sharpen the line-of-sight between effort and reward, but it risks gaming (optimising the measured metric), perceived inequity, and crowding out intrinsic motivation. Like SMART goals, it works only when the measures are well-designed and the process is seen as fair.
What are the fairness gaps the chapter highlights?
Wage theft (underpayment, often through misapplied awards), the gender pay gap, and the CEO-to-worker pay ratio. They are real-world hooks that let you connect reward to ethics, diversity and the Harvard model's societal-wellbeing pole, which strengthens an integrating answer.
Exam move
Make distributive vs procedural justice the analytical spine of every reward answer, and remember procedural fairness often outweighs the outcome. Keep the two relativities (job evaluation and pay surveys) ready to test whether a pay gap is defensible, and hold the transparency-is-not-disclosure distinction. Use the fairness gaps (wage theft, gender pay gap, CEO ratio) as cross-links into ethics and diversity for the integrating exam questions.
