Individual extrinsic non-financial rewards can practically be offered in a wide variety of
forms, from a managers saying “thank you” to publicly show appreciation for an
employee commitment and results at a special official event or dinner. In between these
two kinds of initiatives can be included several others forms of extrinsic non-financial
rewards such as proclaiming the employee of the week, month or year, or other forms of
“public applause” such as show appreciation for the employee in the business newsletter
or during a team or unit meeting (Silverman, 2004). As contended by Armstrong (2010),
however, since some of these forms of appreciation and praise give to some individuals a
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certain degree of visibility within the organization, which some others could perceive as
detrimental for themselves, in order to avoid likely drawbacks, employers should take
particular care with managing these initiatives. Whether not appropriately handled in fact
such forms of rewards can potentially generate negative feeling and dissatisfaction
amongst the non-appraised employees and cause the harmful sensation that within the
business, a single unit or team there are acclaimed successful winners but also neglected
failing losers.
Other less visible but similarly effective forms of extrinsic non-financial rewards are, for
instance, represented by the direct manager or a senior manager within the business
writing to a person to thank him/her personally.
Employers can obviously decide to adopt as many initiatives as they want. Whatever the
number and the types of initiatives identified and deemed suitable to support the
organizational culture, aims and objectives, however, employers should invariably start
from organizing this type of rewards on a scale. This will enable managers to offer
employees the different rewards according to the degree of importance they associate
with the different achievements or actions they intend to award. The extent of visibility
and formality of the reward offered to an employee will clearly increase proportionally to
the value attributed by managers to the results produced by this (Silverman, 2004).
Regardless of any official scheme or programme eventually implemented by the
employer, to ensure that employees who have performed well are recognized and
praised in some ways, thanking these for their contribution, performance and the
valuable suggestions these have eventually provided should anyhow be considered by
managers as something they have to care about and do as a matter of course.
Group or collective extrinsic non-financial rewards
Are included in this grouping all the types of rewards which are simultaneously offered or
made available to the entire workforce. These are indeed different in scope from the
individual extrinsic non-financial rewards in that by means of these employers are not
aiming at praising or thanking an employee in relation to a particular act or contribution.
These types of rewards are in fact primarily intended to create a sustainable workplace
and increase the quality of the working experience providing employees with a stronger
sense of stability and, as such, the feeling that the employer is actually honouring the
psychological contract.
Since the main feature of this group of rewards is that of being accessible and available
to everybody within the organization, these are mainly offered to employees in the form
of policies, programmes and procedures (Armstrong, 2010).
Can be definitely included in this category of rewards voluntary benefit schemes, which
can in many ways be considered as the seminal form of collective extrinsic non-financial
rewards. These schemes enable employees to buy goods or services, utilities included, at
favourable prices which have previously been agreed by the employer directly with the
goods manufacturers or dealers and the services providers. Voluntary benefit schemes
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are also very often associated with the concept of salary sacrifice in that employees, in
order to buy the goods or services to which they can have favourable access by means
of these programmes, have to use their own money, which is usually deducted from
their pay and recorded in their salary slip. These schemes are essentially operated by
employers the same way as some types of cooperatives or collective buying communities
are. It is basically on account of the large number of items of the same goods which a
business can ensure the producer or dealer to sell, that employees can benefit of very
competitive prices.
One of the most effective, arguably the most effective, and most widely used initiative
employers introduce and implement within their businesses is definitely represented by
flexible working hours patterns. This kind of policy is particularly welcomed and
appreciated by employees in that enable them to better manage their work-life balance.
These practices were formerly recognized as family-friendly policies; indeed, even
though it is unquestionable that caring individuals and working parents definitely receive
and perceive the most evident benefits from such policies, without a doubt also single
individuals do appreciate and receive priceless benefits from them. That is basically why,
more recently, it is referred to these policies as enabling a better work-life balance
rather than a better work-family balance.
An additional initiative employers can have recourse to in order to make feel individuals
more relaxed and less concerned about their personal daily life duties and commitments,
beyond contributing to enhance the quality of employee working experience, is the
offering of well-being services. These are basically intended to help individuals to more
effectively and adequately deal with their personal private life problems and more
promptly sort them out. These types of services are typically offered in the form of
counselling and advisory services (Armstrong, 2010).
Employers can also offer to their staff a wide array of additional different services,
usually lumped together under the umbrella term of concierge services. The
implementation of such an initiative implies that employers take in charge some of the
daily duties usually carried out by the employees as part of their daily private life. In
practice, employer will delegate other people to carry out these duties on behalf of the
employees. Typical examples of concierge services are the collection and delivery of
laundry, some types of shopping, parcel dispatch and delivery, home and car repair and
so forth (Armstrong, 2010).
Although Armstrong (2010) includes learning and development opportunities amongst
the collective forms of extrinsic non-financial rewards, their classification presents in
some ways a certain degree of difficulty and, according to the circumstances, may not be
consequently reveal so obvious. Whether on the one hand programmes and growth
prospects are potentially made available to the entire staff, on the other hand these
opportunities will practically be offered only to those individuals who have the potential
to grow and more effectively contribute to the business success. Differently from the
courses offered to employees in order to these developing their knowledge, interest and
abilities related to specific subjects or areas of personal interest, these programmes are
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intended to improve employees skills and abilities within the workplace or anyway
enhance the quality of individuals behaviour in work-related situations. Notwithstanding,
it cannot be denied that whether, and provided that, all of the employees can potentially
take advantage of these opportunities, these can be considered, as maintained by
Armstrong (2010), as collective extrinsic forms of non-financial reward.
167
References
Armstrong, M. , (2009), Armstrong’s Handbook of Human Resource Management
Practice, 11th Edition; London: Kogan Page.
Armstrong, M. , (2010), Armstrong’s handbook of reward management practice; London:
Kogan Page.
Derthoo, P., Wouters, E. and Vanassche, D. , (2011), Salary costs versus “net wages”
and “net spendable income” – European salary survey; Gent: Deloitte.
Hachman, J. R. , and Oldham, G. R. , (1980), Work redesign; Reading (MA): Addison-
Wesley.
Her Majesty’s Revenue and Customs, (2011), Luncheon Vouchers: Repeal of Relief,;
London: HMR&C
Herzberg, F. , (1968), One more time: how do you motivate employees? , Harvard
Business Review, January-February.
IusLaboris, (2010), Compensation and Benefits Reference Guide, August 2010.
Markovich, P. N. , (1997), Mobilizing your human potential, Journal for quality and
participation, Vol. 20, No. 2, pages 48-53.
Porter, K., Smith, P. and Fagg, R. , (2006), L eadership and Management for HR
Professionals; Oxford: Butterworth-Heinemann.
Silverman, M. , (2004), Non-financial recognition – The most effective of rewards? ;
Brighton: Institute for Employment Studies.
Tandem Integrated Business Solutions, (2010), Taxability of food coupon/voucher;
Chennai: TIBS.
The Office of the Revenue Commissioners, (2012), Employee expenses; Dublin:
Revenue Irish Tax and Customs.
Whitaker, P. , (2009), What non-financial rewards are successful motivators? ; Strategic
HR Review, Volume 9, Issue 1.
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Section VII
Para-financial Reward
Defining para-financial rewards
Inasmuch as non-financial rewards are usually identified with all of those types of
rewards which are expressed in every form but money, many of the non-financial
rewards offered by employers to their staff actually do have a not negligible financial
value. Silverman (2004) defining non-financial recognition contends that “non-financial
recognition … simply means that whatever is given, it should not be just money”, but he
also recognizes that this “does not necessarily mean that the recognition provided should
have no financial value.”
Rewards and the different existing forms of recognition have always been traditionally
classified into two groups: financial and non-financial. This bipartite classification,
however, can no longer be considered adequate in modern times. All too often, non-
financial rewards have a financial and tangible value which, in some circumstances, can
even be considered on a scale from appreciable to very high. This is not clearly
invariably the case, but it cannot be overlooked the fact that the financial value of the
non-financial rewards offered by employers to their employees is in some cases quite
remarkable.
Many employees more frequently, but not necessary exclusively, at executive level
benefit, for instance, of company cars and sometimes even of luxury cars. Individuals
who receive a company car are not usually charged of any expenses related to the car
possession and use, as for example car insurance and maintenance. Beneficiaries cost as
regards such type of benefit is usually limited, when the value of the car lease concurs to
the definition of the individual taxable income, to the payment on this specific amount of
the regular taxes, as provided for by the local government fiscal law. Yet, many
organizations offering a company car to some of their managers and executives also
provide beneficiaries with gas cards by means of which the company directly takes in
charge individuals’ fuel expenses. Indeed, whether the relevant petrol company also
offers some loyalty or reward programmes to its customers, employees would also
benefit of additional free gifts on the basis of the money spent by their employer.
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This is just an example, but it is obvious that all of the mentioned perquisites: car, fuel,
insurance, parking, etc., clearly represent an additional financial burden for the employer
and, to some extent, unexpected (which will later become expected and taken as
axiomatic) huge financial savings for the individuals concerned. The financial value of the
above mentioned costs and savings, respectively for businesses and employees, might
sometimes clearly be rather remarkable.
The circumstance that these types of rewards are not offered in cash does not clearly
impair their worthiness which, overall, has an undeniable considerable financial value. It
is not about cash, but it can hardly be considered that these benefits do not have a well-
identifiable financial worth.
Being essentially in between financial and non-financial rewards, but definitely closer to
financial rewards, this type of benefits can be defined as “para-financial.”
The main feature of these rewards is that their financial worth can usually promptly be
identified. The cost of leasing a car and covering fuel, parking and insurance policies
expenses, for instance, can immediately be determined by everybody, regardless of the
importance each individual can associate to each of these perquisites. Rewards which
can promptly be measured are not only those which are normally offered to part of a
business employees or executives; the same conclusions can be drawn with reference to
the benefits which are usually offered to the entire workforce, as is the case, for instance,
of meal and fuel vouchers, regardless of the circumstance that these may be the subject
of NICs or represent taxable income. Luncheon and fuel vouchers have printed in their
front a clear amount of their worthiness expressed in local currency, called denomination
or front value, which promptly enable beneficiaries to appreciate their financial value.
Non-financial rewards are instead in general non-measurable or rather non-objectively
measureable, entailing that different individuals can attribute to each of them a different
value and level of appreciation.
The circumstance that the financial worth of para-financial rewards can promptly be
estimated is also associated with another feature often typical, but not exclusive, of this
form of rewards, namely their tangibility. Albeit para-rewards might sometimes be
represented by small pieces of paper called vouchers, these can promptly be associated
with the goods that those pieces of paper represent. Retail vouchers, for instance, can
directly be associated with a piece of furniture, an item of clothing, a domestic appliance
or something else by every employee accordingly. Theatre tickets or travel vouchers,
even though referred to services and as such to something intangible for definition, can
in any case immediately be estimated in value by individuals, who are able to determine
their worthiness and the financial savings they can make thanks to them. All of this can
contribute to let employees perceive this type of perquisites as virtually tangible.
The fact that rewards such as retail and fuel vouchers can immediately be measured and,
as such, compared in value with those received by other beneficiaries of the same
perquisite, actually reinforces the argument for these rewards being considered para-
financial. The same tenet can be applied to other benefits such as company cars, laptops,
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tablets, smart phones, etc. Individuals can virtually instantly associate with each of them
an immediate financial value and make a reliable comparison. That is also why financial
rewards in general are usually deemed as tangible, whereas non-financial rewards are
typically acknowledged as intangible; albeit, as we have seen, not all of these can be
considered as such.
It is objectively difficult to compare the effect produced and the worthiness attributed to
an informal “thank you” by two different individuals; this becomes easier when it takes
to compare the importance and value which two different employees attribute to a
holiday or a dinner at the local exclusive restaurant. The level of appreciation can
actually be different, but the objective value of the benefit will invariably be the same.
Despite all of these perquisites are not actually offered in cash, it can be directly
associated with them a precise financial value and a cost which the employee has not to
face in that is the employer which will take it in charge. The difference between an
informal “thank you” and a travel voucher for a holiday for two in a popular holiday
destination, not to mention a company car, is anyhow glaring and remarkable.
Another reward’s feature which can help to determine whether classify it as para-
financial or non-financial, is the scope or reason for an employer giving the reward to an
individual. The example of a training programme could help to explain this aspect more
in-depth. As we have seen, collective non-financial rewards are traditionally offered to
individuals in order to provide them with a more pleasant and enjoyable workplace and
relieve them of the pressure put on them by their personal problems, whatever their
nature. This should contribute to individuals being more focused on their job and
enhance the quality of their working experience. Non-financial rewards, hence, mainly
relate to the work and the workplace. In contrast, para-financial rewards are non-work
related and are offered to employees in order to improve their out-of-work quality life,
nurture their personal interests and enjoy their leisure.
Training programmes offered to employees in order to improve their professional skills
are clearly different from cooking or swimming courses. Indeed, the difference is at the
basis of the offer, by means of the former organizations intend to contribute to an
individual professional growth, which will in turn enable employers to extend the level of
responsibility which they can entrust to the person concerned; by means of the latter
employers want to offer an individual opportunities to relax, have fun or, anyhow, to do
something he/she appreciates, enjoys and likes to do as part of his/her private life.
Employers will take in charge a specific cost which will be saved by the individual
concerned. It is not about cash, but it can hardly be said that there is no money behind
this: that spent by the employer and that saved by the beneficiary.
Why is this important?
It could be argued that introducing the further definition of para-reward is not necessary
and that this would only contribute to overload the reward terminology just for the sake
of introducing new terms and definitions.
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Considering the relevance that these types of rewards are gaining within the overall
reward packages usually offered by employers to their staff and the fact that all of these
rewards go under the definition of non-financial rewards, in spite of the relevant value
these also have from the financial point of view, it clearly emerges that the importance
of pointing out the characteristics of this form of rewards is not just rhetorical.
Both employers and employees need to be aware and conscious of the circumstance that
some of the rewards they respectively offer and receive, albeit not being provided in
cash, have a certain financial value and represent expenses for the employers and
savings for the employees. Unquestionably, all of these rewards have a financial value
which can clearly and promptly be estimated. It is, hence, crucially important that
individuals perceive and truly consider para-rewards as valuable as cash.
This distinction can reveal to be particularly useful for those organizations, increasingly
growing in quantity, which are used to offer to their staff total reward statements. The
introduction of the concept of para-rewards will in fact certainly enable employers to
better make individuals understand the worthiness of the overall reward packages they
receive and employees to more promptly and genuinely appreciate these.
Classification of para-financial rewards
Para-financial rewards can essentially be divided into two main groupings, namely:
collective and individual para-financial rewards. Also in this case, the reason for the
different classification mainly depends on whether or not rewards are simultaneously
offered and accessible to the entire workforce. Notwithstanding, the circumstance that
these rewards are provided by employers to the entire staff or to employees individually
does neither entail nor make any difference in the shape rewards can practically came in.
In order to offer para-financial rewards to their employees, organizations can also have
recourse to the collective approach and more in particular to flexible benefits schemes,
which are usually offered in the form of cafeteria benefits. These schemes enable
individuals to choose the rewards they consider most appropriate to satisfy their wants
amongst a selection of benefits pre-identified by the