Remuneration and reward for graduates

| Remuneration and Reward for Graduates | | HRM 301 | Research Report | | | | | | Contents 1. Introduction 3 1. 1 Graduate programs 3 1. 2 Y Generation 4 2. Remuneration and Rewards 5 2. 1 Base Salary 5 2. 2 Incentives 6 2. 3 Travel 7 2. 4 Employee Benefits 7 3. Employee Engagement 8 4. Career Advancement 8 5. Training and Development 9 6. Conclusion 9 7. References 11 8. APPENDIX. Chart 1 13 Remuneration and Reward for Graduates 1. Introduction Maintaining excellence in human resource management enhances an organisations value and provides an opportunity to achieve competitive advantage. Managing the employer-employee relationship should incorporate efficiency in areas of recruitment, training and development and the appropriate recognition, reward and remuneration to ensure sustainability and increased profitability for the organisation, through continuing employee retention. Remuneration includes all aspects of financial payments and any other goods, rewards and benefits that an employee may receive in exchange for working for an organisation (Stone 2010). Rewards can either be short term and tied to simple and specific goals that focus within the impending 12 months; or long term rewards that commence beyond one year and are in line with more complex and broader ongoing goals of an organisation (Howe 2011). During recent times, global economic instability has influenced employee attitudes to remuneration and reward. Unrealistic demands from employees have reduced with employees being prepared to compromise and endure nominal benefits in the short term in order to gain larger reward and remuneration benefits in the long term (Anon. 2009). This report will investigate how new university graduates are rewarded and remunerated in the workplace, in line with the statement above. It will analyse both short term and long term rewards and how these influence the engagement and retention of valued employees. It will also explore how graduate expectations influence their satisfaction of compensation. 1. 1 Graduate programs Graduate programs are generally run by larger organisations to offer a challenging and rewarding career to new university graduates. Formally structured graduate programs provide an opportunity to work with and learn from experienced professionals from within the company, and offer great training and development opportunities. They assist in the transition from student to full time employee (John Holland Graduate Program 2011; Kpmg Graduates 2011). Graduate programs and their structured format vary greatly between industries. Engineering and accounting firms have structured formats (Kpmg Graduates 2011; John Holland Graduate Program 2011) as opposed to hospitality and tourism industries that take a more casual approach (Kelley-Patterson and George 2002). Kelley-Patterson and George (2002) presents the view that graduate employee expectations and measures of satisfaction for employment within graduate programs are * Suitable progress in salary (Base salary , Benefits, Incentives and R&R) * Diversity, challenge and variation within their job role (Employee engagement) * Career development, promotion and long term career prospects (Career Advancement) * Good quality induction, training and development programmes (Training and Development) * Open and honest communication A collection of research literature confirms this view that the above attributes were considered very important by the majority of candidates when selecting a graduate program across all industries (Kelley-Patterson and George 2002; The Aage Candidate Survey 2011; Maxwell 2010; Walker 2006) Graduate vacancies have risen in recent years and will continue to do so (The Aage Employer Survey 2011). They are being accepted by more organisations as a way to develop and retain a talent pipeline or succession plan (Meet Our Graduates 2011). A significant measure for the success of any graduate program is the engagement and retention of candidates who participate. About half of Australian employers have retained more than 90% of their graduates in the last 2 years (The Aage Employer Survey 2011). 2. 2 Y Generation Graduate employees are typically aged between 21 and 23 and are known as Generation Y or Gen Y (Dwyer 2009) . This cohort is the first generation born into a technological based world and have experienced increasing diversity at home, school and the workplace. Their livelihood has been influenced by terrorist attacks, governmental dishonour and celebrity scandal (Dwyer 2009) . Substantial research suggests that Gen Y and therefore the majority of graduate’s value diversity change and challenge in the workplace (Polach 2007; Eisner 2005; Dwyer 2009). By presenting them with skilled tasks to satisfy their need to achieve and generate expectations that they are the decision makers, organisations can hopefully lengthen the duration of their employment (Eisner 2005). Generational differences occur but similarities in regards to graduate needs, wants and behaviours can be inferred because they are at the same age and stage of their life. Companies can use the similarities of Y- Gen graduates; for example an adolescent (22-35) intent on establishing their career, social and family life (Polach 2007). These stereotypical factors can be taken advantage of by organisations when setting up their graduate program remuneration packages to ascertain the payments and reward conditions contained within their agreements, to ensure consistency and satisfaction amongst all graduates. 2. Remuneration and Rewards Organisations should necessitate a better balance between short and long term rewards, between individual and corporate performance and connecting financial, operational, customer and human metrics (Work on Your Winning Strategy 2010). “ Strategic and financial plans come to nothing unless they influence the ways in which people within the organisation behave”(Grant et al. 2011, 309). Perceptions of remuneration are dependent on the individual and are influenced by their individual needs, which vary greatly based on their personal and financial situation. Maslow’s hierarchy of needs theory (Samson and Daft 2009) puts forward the proposal that people are motivated via differing needs. These needs exist in a hierarchical order. The lower order needs take priority and it is suggested that once these needs are satisfied, it becomes less significant and the next highest need is activated. Chart 1 in the Appendix represents how Maslow’s theory relates to job fulfilment in regards to recognition, reward and remuneration for employees. A candidates perspective on benefits has also changed in recent time with salary and remuneration becoming more valuable to a candidate than additional benefits whilst job seeking (Anon. 2009). However this may change once the candidate has secured employment, and as a graduate is a long term prospective employee their remuneration must take into account the need for these additional benefits to retain them. This is reflected in Maslow’s theory as when the physiological need to have a base salary is met an individual will seek out higher needs (Samson and Daft 2009). Of these additional benefits ; promotion and career progression, quality of work and work life balance, were the three influencing factors which would lead a candidate to stay longer with an employer (The Aage Candidate Survey 2011). Graduates have a long term career outlook and see the long term benefits of lower paying , less challenging and rewarding roles in order to obtaining more rewarding, better paying jobs in the future. Some reward components may appear less evident and relevant to graduates in the short term but they do see long term advantages of these rewards (Kelley-Patterson and George 2002). 2. 1 Base Salary The base salary for a graduate is the major component of their remuneration package, and the one component that is usually viewed as the measure for a package. Maslow’s (Samson and Daft 2009) theory puts forward that people are motivated by an assortment of needs, the most basic of these needs are physiological needs which are the essential physical needs such as food, water and shelter. In an organisational context these basic needs extend to include base salary as the income necessary for (financial) survival. Differing demographic characteristics such as gender, education and industry, location will affect the starting salary for a graduate and may be positively affected by variables such as work history and experience within an industry, but is usually consistent for all graduates hired though the same intake (The Aage Employer Survey 2011; The Aage Graduate Development & Retention Survey 2011). The starting salary can be viewed as both a short term and long term reward because it is received immediately but also has the potential to increase. The majority of salary increases based on the cost of living, which is determined by the size of the city that the graduate lives and works (Barkley and Stock 1999). Uplift costs for working in remote areas, within industries such as engineering can increase salaries by between 30 and 45 % (The Aage Graduate Development & Retention Survey 2011). Graduate salaries differ considerably based on gender, with females being paid less than men, with all else being equal (Barkley and Stock 1999). This may make it difficult for employers to attract and retain female employees. Traditionally graduate salaries start at the lower end of the scale but advance a lot quicker. These rates can vary quite dramatically depending on the current labour market. Tourism management graduate salaries are perceived to be quite low (Weaver 2009), however industries with graduates in low supply can demand higher rates with the highest salaries in investment banking, oil and gas and mining and resources (The Aage Employer Survey 2011). The median starting salary for 2011 has increased from 2010 is currently $54, 000 (The Aage Employer Survey 2011). A study by Weaver (2009) has shown that some graduates have negative attitudes towards their pay. This was confirmed by Kelley-Patterson and George (2002) who found that a good basic rate of pay was ranked 32, of graduate employee expectations. One of the advantages that assist the planning of graduate remuneration plans is the ideal that graduates should remain employed beyond the one or two year graduate development program, allowing for the opportunity to implement long term remuneration and reward programs. “ Those graduates who are really determined will just have to be skint a little longer. The committed, talented ones will stick” (Anon. 2009). 2. 2 Incentives The aim of rewarding employees is to encourage employees to perform in a manner that will achieve the objectives of the company’s strategic plan and improve the bottom line. An effective incentive or reward system, such as a bonus, must implement performance targets that align with both the employees and the organisations goals (Work on Your Winning Strategy 2010). Promoting cooperation through incentives, compensation and promotion is an effective way of ensuring appropriate performance from employees. The key to designing these systems is to link pay to the inputs or outputs required of the employee that are key performance indicators to their role (Grant et al. 2011). Studies have shown that personality can affect an employee’s attraction to particular rewards, with ‘ Openness to experience’ being the most reliable predictor amongst the ‘ Big 5’ personality traits (Vandenberghe, St-Onge, and Robineau 2008). It has also been suggested that females and less educated employees award greater importance to bonuses (Vandenberghe, St-Onge, and Robineau 2008). Well established performance management systems can be utilised to quickly identify ineffective or underperforming employees (Stone 2010). The decision then must be made on whether or not to reward these employees for their performance, and if so the most appropriate method. Linking pay to individual performance is only recommended for individually performed tasks, However team or departmental performance need to be recognised by linking performance to company performance through commissions or profit sharing (Grant et al. 2011). These incentives must be utilised to reward performance rather than a retention tool. 2. 3 Travel Companies that offer secondments or opportunities for travel have an advantage over competitors as 45% of candidates think it would be most likely they will work overseas beyond 2013 for at least a couple of years(The Aage Candidate Survey 2011). Being able to retain these staff rather than have them move to a competitor to achieve these goals will be financially and organisationally beneficial in the long term for all parties. 2. 4 Employee Benefits Within the tourism industry, fringe benefits, such as cheap or free travel, tickets to entertainment and events and complimentary meals were seen as a necessary improvement to a low graduate salary by graduates. Tourism graduates have a realistic view of their low salary and understood the industry had a reputation for low pay but that did not seem to affect their aspiration to still work in the industry. Most graduates work in the industry for reasons other than the money (Weaver 2009). Employees in a professional environment that offer benefits and job security are more likely to take pleasure in developing enjoyable and productive social relationships (Vandenberghe, St-Onge, and Robineau 2008). Having intrinsic rewards for employees, such as job content and challenge, can improve job satisfaction and retention of graduates. “ The extent to which extrinsic or intrinsic rewards are valued is dependent on the individual” (Weaver 2009). 3. Employee Engagement Kelley-Patterson and George (2002, 55) contend that “ The psychological contract is a series of mutual expectations and needs arising from an organisational — individual relationship. ” The contract covers expectations of rights, responsibilities, obligations and privileges (which include remuneration) and creates a strong influence on employee behaviour, satisfaction and productivity. How graduates perceive their jobs and the associated remuneration has implications for the associated industry. Graduates have the knowledge and decision making capability to adapt the future of the industry. Weaver (2009)states that an employee’s perception of and contentment within their job can influence their decision to obtain and maintain their employment within a company. Their assessment of the quality of their job is influenced by both intrinsic and extrinsic rewards. For employers to retain competent employees, it is important that an organisation must have knowledge of what an employee’s perception of their job quality in order to provide job enrichment, and because it aligns with their individuality, confidence and wealth and satisfies the employees needs. The intrinsic rewards that come with helping customers are valued by graduates. Jobs that provided challenges and learning opportunities were valued by graduates as it enabled them a sense of achievement from carrying out complex tasks and created intellectual stimulation. They expressed concern if these opportunities were not available in the workplace (Weaver 2009) Providing a graduate with the opportunity to become involved in a challenging project can be seen as an important reward. Experiences and intangible benefits such as work life balance can override the benefits of an increased salary. 4. Career Advancement Graduates that enter a graduate program are looking for a long term career with their first employer. Current employees in graduate programs expect to stay with their current employer for an average of 3 – 5 years (AAGE Retention 2011). A graduate position provides opportunities to develop skills and move into a higher ranked position and graduates see the long term benefit of achieving this goal with their current employer. The negative effects associated with changing jobs often may be disregarded by graduates who may see a change in job as a step forward in their career (Maxwell 2010). Another reason graduates may change jobs can be due to the limited opportunities for career progression (Weaver 2009). Gen Y cohorts and graduates have some concerns about job security, although it is not of high importance to them. A graduates organisational commitment can be developed from a strong psychological contract, and if nurtured by an organisation, it has the potential to lead to career development and opportunities to receive promotions within the organisation (Kelley-Patterson and George 2002). “ Possible advancement opportunities can be an important characteristic of a job and can lead to increased earnings and other desirable job attributes” (Weaver 2009, , 589) Graduates who studied tourism management didn’t have specific ideas about the types of roles they preferred upon graduating (Weaver 2009). By providing these graduates with career guidance and development and the opportunity to fulfil their personal goals can influence wether they remain committed to the organisation. Currently graduates have mixed expectations regarding the security and duration of employment with their current employer. Some having confidence that career prospects exist, whilst others were uncertain (Kelley-Patterson and George 2002) 5. Training and Development Graduates see the importance of learning at work and positive professional development (Maxwell 2010; Barkley and Stock 1999; Kelley-Patterson and George 2002) . As a quarter of employers spend more than $10, 000 on training each new graduate during the program and provide at least 20 days training in the first year, that significance also comes from an organisational level (The Aage Employer Survey 2011). These development opportunities must be managed effectively so that graduates do not exploit these programmes for short term gain and then leave an organisation, this will ensure that both the organisation and the graduate get long term benefits 6. Conclusion This report has demonstrated how the productive use of graduate personnel can be utilised to contribute greatly to achieving strategic objectives for an organisation. Rewarding graduates with intrinsic rewards in addition to their physiological need for a base salary can encourage them to remain loyal to their employer and improve employee retention. Graduates seem tolerant of poor salary because money and wealth were not a primary motivator in job selection, so all other rewards and aspects of remuneration were viewed highly and had the ability to attract, engage and retain graduates. A number of graduates were disappointed with their salaries but were prepared to tolerate it. Graduates place value on the level of challenge contained within the tasks they perform at work and having a good job with opportunities for career development was essential. Employers should stress and promote these benefits whilst marketing their grad programmes and provide evidence that there are opportunities for career development and promotion. Lifestyle choices are important determinants for a graduate to base their initial package. Personality factors and need have a bearing on an individual’s expectation of remuneration and reward, as graduates all fit with the Gen Y , their needs and expectations can be safely collected and grouped for purpose of designing appropriate remuneration package for a graduate program. However focusing purely on the financial aspects of remuneration has the potential to disengage graduates who are motivated by goals they believe in rather than monetary benefits. Creating HR strategies that incorporate and focus on employee needs such as learning and development will ensure the psychological contract is maintained and improved in order to secure and retain a committed graduate workforce. 7. References The Aage Candidate Survey. 2011. Melbourne: Australian Associate of Graduate Employers. The Aage Employer Survey. 2011. Melbourne: Australian Associate of Graduate Employers. The Aage Graduate Development & Retention Survey. 2011. Melbourne: Australian Associate of Graduate Employers. Anon. 2009. ” Salaries: Take the Long View. .” Design week 24 (11). ProQuest ABI Inform Complete. http://proquest. umi. com. dbgw. lis. curtin. edu. au/pqdlink? Ver= 1&Exp= 09-22-2016&FMT= 7&DID= 1665510371&RQT= 309. Barkley, Andrew P., and Wendy A. Stock. 1999. ” Agricultural Graduate Earnings: The Impacts of College, Career, and Gender.” American Journal of Agricultural Economics 81 (4): 785. EBSCOhost Business Source Complete. http://search. ebscohost. com/login. aspx? direct= true&db= bth&AN= 2435945&site= ehost-live. Dwyer, Rocky. 2009. ” Prepare for the Impact of the Multi-Generational Workforce!” Transforming Government: People, Process and Policy 3 (2): 101-110. Emerald Management Xtra Plus. http://sfx. library. curtin. edu. au. Eisner, Susan P. 2005. ” Managing Generation Y. (Cover Story).” SAM Advanced Management Journal (07497075) 70 (4): 4-15. buh. http://search. ebscohost. com. Grant, Robert , Bella Butler, Humphry Hung, and Stuart Orr. 2011. Contemporary Strategic Management: An Australasian Perspective. Milton: John Wiley & Sons Howe, Christina. 2011. ” Lecture 6: Hrm 301 (Remuneration and Reward).” PowerPoint slides. Curtin University. http://lms. curtin. edu. au/webapps/portal. John Holland Graduate Program. 2011. Accessed September 29, 2011, http://graduates. johnholland. com. au/. Kelley-Patterson, Deirdre, and Christeen George. 2002. ” Mapping the Contract: An Exploration of the Comparative Expectations of Graduate Employees and Human Resource Managers within the Hospitality, Leisure and Tourism Industries in the United Kingdom.” Journal of Services Research 2 (1): 55. EBSCOhost Business Source Complete. http://search. ebscohost. com/login. aspx? direct= true&db= bth&AN= 9044450&site= ehost-live. Kpmg Graduates. 2011. Accessed September 29, 2011, http://www. kpmg. com/au/en/joinus/graduates-students/graduates/pages/default. aspx. Maxwell, Gillian. 2010. ” Generation Y’s Career Expectations and Aspirations: Engagement in the Hospitality Industry.” Journal of hospitality and tourism management 17 (1): 53-61. Informit Business Collection. http://sfx. library. curtin. edu. au Meet Our Graduates. 2011. Accessed September 29, 2011, https://www. det. nsw. edu. au/about-us/careers-centre/corporate-careers/graduate-roles. Polach, Janet L. 2007. ” Managing an Age-Diverse Work Force.” MIT Sloan Managament Review 48 (4): 8-10. ProQuest. http://proquest. umi. com. dbgw. lis. curtin. edu. au. Samson, Danny, and Richard L Daft. 2009. Fundamentals of Management. South Melbourne: Cengage Learning Australia Pty Limited. Stone, Raymond J. 2010. Managing Human Resources. Milton: John Wiley & Sons Vandenberghe, Christian, Sylvie St-Onge, and Évelyne Robineau. 2008. ” An Analysis of the Relation between Personality and the Attractiveness of Total Rewards Components. 63 (3): 425-453. EBSCOhost Business Source Complete. http://search. ebscohost. com/login. aspx? direct= true&db= bth&AN= 34485144&site= ehost-live. Walker, Kim. 2006. ” Generational Change: Y We Need to Re-Think the Way We Recruit and Retain.” nursing. aust 7 (3): 16-18. Informit Health Collection. http://sfx. library. curtin. edu. au. Weaver, Adam. 2009. ” Perceptions of Job Quality in the Tourism Industry: The Views of Recent Graduates of a University’s Tourism Management Programme.” International journal of contemporary hospitality management 21 (5): 579-593. Emerald Management Xtra Plus http://sfx. library. curtin. edu. au Work on Your Winning Strategy. 2010. Hay Group. http://lms. curtin. edu. au/webapps/portal/frameset. jsp? tab_id= _2_1&url=%2fwebapps%2fblackboard%2fexecute%2flauncher%3ftype%3dCourse%26id%3d_51848_1%26url%3d. 8. Appendix. Chart 1 (Samson and Daft 2009, 483)