In every business organization, compensation or reward is an important issue and is identified to be a motivating factor, for employees to perform well and contribute effectively to the organization’s growth and for the attainment to whatever goal the organization has. One of the organizations that needed to have a good reward system is the construction industry.
This is because the construction industry is composed of various workers: engineers, architects, electricians, technicians, foremen and laborers who are usually required to work even on holidays and weekends because construction projects have a definite time-frame and should be finished as demanded by the client and the weather.
Aside from that, construction workers are exposed to accidents, injuries and hazards, thus reward system in this industry should be carefully given attention.
Concept of Total Reward System in the Construction Industry
Total reward or total compensation is the activity by which organizations evaluate the contributions of employees in order to distribute fairly direct and indirect, monetary and non-monetary rewards within the organization’s ability to pay and within what is allowed by legal regulations (Schuler, 1975).
It is noted that, from the definition, rewards are classified as monetary and non-monetary; Ofili (2004) called this as extrinsic (monetary) and intrinsic (non-monetary rewards). It can also be noted that total compensation is related to fair and proper distribution of these rewards depending on the employees contributions to the organization.
In other words, total rewards are not only the payment for the work done but also serve as the motivating elements that satisfy the needs of the workers, driving them to perform their job effectively and contribute to the growth of the organization. However, the effectiveness of these elements as a motivation is subjective and still depends on the worker’s perception and behavior towards work. There are workers who are unsatisfied because they feel that they are not compensated well, while there are some who find satisfaction by having the work itself. Construction companies also set the reward system based on studies on the behavior of their workers.
For the construction industry, the elements of the reward system include both the monetary and non-monetary rewards: compensation, benefits, work importance, social interaction and work variety. These elements are chosen with regards to the nature of jobs in this particular industry. Monetary rewards, as with any industry, are very important to be able for employees to meet their needs and to support their lifestyle. Compensation involves wages and bonuses while benefits include insurances and premiums that can be received in particular instances. Wages and benefits in the construction industry vary from country to country depending on industry growth and legal regulations (ICAF, 2001).
Non-monetary rewards for this particular industry include social interaction; that is every construction projects, no one can work alone, every employee work as a team and there should be good rapport among each people involved in the project to be able to finish a quality project. Because of this, workers in this industry have learned good social interaction and team working, making a friendly working environment that are work conducive. Work importance is another element of the construction industry’s reward system.
Workers gained sense of achievement because the infrastructure or facilities they built have become very useful to the society and has given identity to cities or countries (ICAF, 2001). Work variety is another element because construction workers are able to experience working for different projects, enhancing their experiences and skills. For example, one worker may do a high-rise building construction but can also be able to work for road construction or airport construction for his next job.
Impact of the Reward System on the Organizational Performance
Organizational performance is basically dependent on how each employee is motivated to perform his job well. According to Delaney & Huselid (1996), providing a performance-related compensation is one of the means that organizations can use to enhance motivation and performance. Mendonca (2002) added that a reward and compensation system is based on the expectancy theory, which suggests that employees are more likely to be motivated to perform when they perceive that there is strong relationship between their performance and what they can get out of it.
In the construction industry, organizational performance is very important since every project requires teamwork and team effort that when even only one worker did not perform well may negatively affect the productivity of other workers and the quality of the project.
The good social interaction that can be gained from the reward system of the industry contributes to good communication between managers and workers while good communication is a foremost requirement to be able to form shared goals, employee involvement, and employee commitment (Brewster, 2001) that help improve organizational performance. In construction projects where work-related problems and tasks should be well-identified, managers are required to be approachable.
On the other hand, wages and salaries are generally less competitive considering that construction work is physically and conceptually demanding. However, those who are engaging in construction works have set their minds that the this job is a blue collar one and that they should expect salary lower than the salary from white collar jobs. Because of the low wage in construction industry, construction companies hire apprentices and workers from other low labor cost countries to address the issue on workers shortages. When there is a shortage of construction workers, projects tend to take more time to be completed and lead to increased employee workloads.
Moreover, benefits and insurance are commonly attractive to veteran workers only while the younger ones usually resign for more compensation for the competition because they tend to look more for higher wages rather than the benefits that they can receive only after a certain period (e.g. when they retire or when they got injured). This drop in the number of workers lead to inability to man jobs, drops in productivity and modification of project schedule and extension and project deadline, and sometimes poor design because there is no enough workers to carry out the design (Asmar et al, 1998).
The problems on employee turnover can be solved by short-run incentives such as quarterly bonuses or perks such as event tickets, gift certificates or catered lunches like what KTA, an engineering firm implemented (Asmar et al, 1998). These short run incentives also boost workers’ performance because workers are aiming for a particular goal, driving them to perform better to be able to achieve such goal. For example, when a goal of zero-accident during the project is reached, all workers will receive a certain amount at the end of the project. When there are no injuries in the workplace there is no work interruption, thus organizational performance is better.
Direct Financial Rewards
Wages and benefits are the direct financial rewards that are received in the construction industry. These are more important than the other elements of the reward because money helps meet the basic material needs; increases purchasing power of employees; raise the standard of living; and solve immediate financial problems (Ofili, 2004). The low wage prevalent in the industry is the reason behind the shortage of skilled workers and the difficulties attracting young people into the skill trades (ICAF, 2001).
The other elements of the reward system, work variety and work importance, are usually overlooked and can be only of importance to employees if they are well-compensated financially. Workers may feel the importance of the project when they are paid competitively and will engage in various construction works if they know that they will receive good compensation. In other words, financial reward is the primary reason why most people work while the non-monetary rewards are just secondary reasons.
Nevertheless, non-monetary rewards can also be as effective as financial rewards to some employees. Social events like a dinner party after the completion of successful project for example, will confirm a sense of belonging to employees while learning opportunities such as seminars or trainings on how to use new processes or high-tech equipment confirm real opportunity, building loyalties for the company (Amar et al, 1998).
Compensation and Motivation Practices in the Construction Industry
Despite of the increased demand for construction due to remodeling in the housing industry, construction of high-technology medical treatment facilities, nursing institutions, and industrial constructions due to the increased in manufacturing facilities (ICAF, 2001), financial compensation in the industry is still considered to be less competitive compared to less intensive jobs that require some educational attainment but as with the other industry, wage rate varies from different construction companies; there are some companies that provide good compensation.
The engineers and architects are highly compensated because they are the backbone or the brains of every construction projects and are needed in every phase of the project while the plumbers, electricians, carpenters, painters and other are needed only at particular phases of the project. Wages and salaries of construction workers also depends on how big the project is, thus their earnings are not stable.
Additionally, job tenure in construction is lower than in other industries and generally, construction work is, by nature, temporary (Ringen et al, 1995). Workers in the industry depend on contractors to provide work for them, when a certain project is finished workers may be out of work for a certain period until the contractor gets another project again, thus workers tend to transfer from one contractor to another or work for different employers at the same time, but large construction companies usually win bids and do not run out of good projects.
Benefits are commonly regulated and demanded by laws to provide protection against loss of income (Foster, 1999) in case of accidents or injuries. These benefits include retirement insurance, long-term and short-term disability insurance, life insurance and health insurance including hazard pay (Foster, 1999).Because construction companies do not want to pay the high hazard pay and insurance premiums, they ensure safety in the job.
Because of the unsafe nature of construction work and low wage, it can be noticed that the primary motivation practices in the construction industry is the good social interaction in the workplace and the short-run incentive implementation.
Additionally, to attract new applicants, the industry is now implementing trade apprenticeship and training programs for less skilled new construction workers. Different motivation practices is also applied on different type of workers who have different work attitudes: veteran employees are more motivated by long-term benefits while younger workers want short-run incentives. However, a friendly working environment with opportunities motivates every employee in the construction industry.
Therefore, the motivation practices in the construction industry is a reward system that does not only involved providing pay and incentives but also include good working relationship, the work itself, recognition of the workers’ performance levels and having the sense of contribution to the result of the project. These practices are not only the key to motivate present workers but also to recruit employees to address the issue on labor shortage. The industry is not very attractive and rewarding but some people find satisfaction with this kind of job having the awareness of how important their jobs are.
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