(Solution) 5HR03 Question 7. AC 3.1 Internal and external factors likely to impact reward decisions at Mercy Frontier

(Solution) 5HR03 Question 7. AC 3.1 Internal and external factors likely to impact reward decisions at Mercy Frontier

Solution

Internal factor: Donation-funded budget

The rewards that Mercy Frontier are able to give may be limited by the income generated from donations and grants, which can fluctuate, and when emergencies arise there may be extra expenditure needs. Reward should thus be both affordable over more than one year of funding and agreeable to funders. Compensation and benefits will impact retention but salary guarantees can limit the flexibility to adjust to operations (Bryant & Allen, 2013). Treasury – consider multi year costs; People Team – focus on turnover that would impact programmes the most.

Assessment of the internal factor

The lack of investment can result in vacancy, employees becoming frustrated and burnout and loss of organisational knowledge, while overgenerous provision may lead to the diversion of resources from beneficiaries. Motivation and opportunities to contribute both impact on performance with HR practices (Jiang et al., 2012). Mercy Frontier should prevent unfair advantages in base pay, essential benefits and development through HR practices, before expensive opportunities to win are introduced to achieve these benefits. Objective reasons for differences are also a requirement for differences per Acas guidance on equal pay (Acas, 2024).

External factor: labour-market scarcity and pay levels

The charity can be found externally at website editors, financial professionals, fundraisers, programme managers and for field people who have a good deal of experience. When organisations are able to draw the right people and skills together and retain them, human-capital resources form value in these capacities (Ployhart et al., 2014). Market rates can therefore, be higher than Mercy Frontier’s spot rates, due to labour shortage, inflation, location and security risk. CIPD (2025f) suggests that workforce planning be used to pin point future needs and requirements in terms of both demand and supply and areas of critical need.

Internal and external factors likely to impact reward
Internal and external factors likely to impact reward

Assessment and overall judgement

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