Rewards are among the most powerful things managers can use to motivate behavior. The reward system consists of all organizational components - including people, processes, rules and procedures, and decision-making activities - involved in allocating compensation and benefits to employees in exchange for their contributions to the organization.

The purpose of the reward system in most organizations is to attract, retain, and motivate qualified employees. The organization’s compensation structure must be equitable and consistent to ensure equality of treatment and compliance with the law.

Compensation should also be a fair reward for the individual’s contributions to the organization, although in most cases these contributions are difficult, if not impossible, to measure objectively. Given this limitation, managers should be as fair and as equitable as possible.

Most organizations use several different types of rewards. The most common are base pay (wages or salary), incentive systems, benefits, perquisites, and awards.

For managers to take full advantage of the symbolic value of pay, there must be a perception on the part of employees that their rewards are linked to their performance.

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