Compensation Administration: Its Effect On The Performance Of Workers

Project and Seminar Material for Business Administration and Management BAM

Compensation Administration: Its Effect On The Performance Of Workers

Chapter One


1.1 Background of the Study

The issue of pay is critical in the contract of employment, which essentially is a double input –output exchange process. It is the very basic of any contractual relationship at work. The centrality of work place conflict often centres on the issue of pay.

Compensation is one of the elements of increasing and maintaining productivity and morals. It is also a course a prime factor in attracting and peeking good employees.

Compensation administration is therefore one of the strategic tools employed by companies to attract the retain qualified employees and contribute a large chunk to the organization expenses. It examines the means of rewarding and motivating employees for efforts toward the attainment of the organization goals. Compensation is a systematic approach to providing monetary and non-monetary employees in exchange for work performance. Basically, compensation enables employees to maintain a reasonable standard of living. Beyond this, it provide a tangible measure of the value of the employees to the organization.

In practical reality, to set-up a successful compensation administration system, the administration must take certain decision on the wages level wages structure and individual wages determination.

Economically, man works for money and the money is used more directly to satisfy his needs, usually, physiological, for purchasing foods for shelter and for acquiring other good things of life. As a matter of fact money gives status and a nice saving account as well as a feeling of security.

1.2 Statement of the Problem

The cause of the study is in term of the determination of the effect of compensation administration on workers performance. Since compensation administration aids in the performance of an organization, it has to be treated well, the study will therefore endeavour to find out if compensation administration aids in the performance of an organization.

Prior to the major problem stated above, the following are specific problems questions that would be investigated.

  1. Can lack of compensation administration bring about commitment of workers?
  2. Can compensation administration lead to improve workers productivities?

1.3 Aim and Objectives of the Study

The main aim of this research work is to examine the effect of compensation administration on workers performance.

Others objectives which this research would try to achieve are as follows:

  1. To know whether compensation administration has been the actual tools used for improving performance employee.
  2. To know to external of relationship between workers compensation and their performance.
  3. To know the effectiveness of performance of workers through compensation chains.

1.4 Research Questions

At the completion of this research the following cogent research question must have been satisfactorily provided answers to.

  1. Does compensation administration affect on workers performance?
  2. How does compensation administration affect workers productivity on Ijebu North Local Government?
  3. Does compensation administration really examines the means of rewarding and motivating employees for their effort towards the attainment of the organization goals in Ijebu North Local government.

1.5 Research Hypothesis

In the course of this research work the following hypothesis will be tested.

Ho: Compensation administration has no significant effect on workers performance

Hi: Compensation administration has significant effect on worker’s performance.

1.6 Methodology of the Study

This methodology of the study bothered on method adopted for used in carrying out this research project under the following heading.

(i) Source of Data:

that makes used of both primary and secondary data of gathering information.

(ii) Method of Data Collection:

That is used on this study is questionnaires, which will be administered out of the target population under study.

(iii) Method of Data Analysis:

This study will analysed through the use of frequency distribution, simple percentage and chi-square method.

1.7 Scope of the Study

Due to time and financial constraints, this study was confined to the operation of Ijebu – Ode North Local Government (INLG). However in view of the fact that INLG is one of the leading local government in Ogun State, it is hoped that we will cover almost the entirely of compensation administration and method of administering compensation in INLG. This research work will cover the period of six years (2003 -2009).

1.8 Limitation of the Study

This study is basically limited to INLG in Ogun State, Nigeria. The attitude of staff of Ijebu – North Local government, not given total co-operation when questionnaires are administered for fear of being quoted or misrepresented.

The research will require spending a lot of money for processing the data collected.

Time constraint will also be a limitation because the submission of the concluded work is fixed therefore the work-would have to carried out with in a short times. Despite the constraint, the research promises to be consistent, reliable and dependable for further research work.

1.9 Justification of the Study

The importance of this research work is to find out how well compensation administration would be utilized as an instrument to improve job performance and better work condition’s for employees in an organization.

However, it has been seen that after various evaluation on the different theories of motivation it is with convincing that compensation through monetary incentive and non-monetary incentive has been the primary sources of enhancing workers performance in an organization and hence will help to solve all problem relating to employees performance in the organization.

1.10 Definition of Terms

i. Compensation:

includes all rewards individual receive as a result of their employment. As such, it is more that monetary income.

ii. Pay:

The monetary that a person is paid for performing job, that it direct financial compensation .

iii. Benefit:

Additional financial benefits other than basic pay such as paid holidays, medical insurance and many more.

iv. Non-Financial:

Non-monetary rewards that an employee may receive such as enjoyment of the work performed and a working environment and prestige.

v. Salary:

Is a fixed periodical payment to a non-manual employee it is usually expressed in annual terms implying a relatively permanent employment relationship through normally paid monthly interval.

vi. Wage:

A wage in the payment made to manual work. It is nearly always expressed as a rate per hair.

vii. Incentive:

It is used to describe wage payment plans which tie wages directly to productivity standard.

viii. INLG:

Ijebu – North Local Government.

1.11 Organization Of The Study

This research work would be arranged into five chapters starting with an introductory chapter, statement of the problem, objective of the study, research question, scope of the study, limitation of the study, justification of the study, research hypothesis, definition of term and organization of the study.

This would followed by literature review and theoretical framework enclosed in chapter two, chapter three will be devoted to the methodology of the research study with the study are a while the fourth chapter will deal with data presentation analysis and interpretation of result, finally the study will end with the summary of the study conclusion and recommendation of policy while will arrange in chapter five.

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Frequently Asked Questions

How does compensation affect employee performance and efficiency?

On the other hand, employee performance and efficiency can be drastically affected if a good compensation package is absent. Here are a few reasons why: Low job satisfaction – Employees will feel under appreciated and derive low satisfaction from their job.

What is the basic aim of compensation administration?

The basic aim of compensation administration is to retain, attract and motivate employees towards the job. (a) To attract and retain competent employees – An organization pays employees a competitive salary to retain then and also attract salary to retain them and also attract skilful employees from also attract skilful employees from outside.

Does compensation increase or decrease employee motivation?

This means that a fair and acceptable compensation amount, both financial and non-financial compensation will increase employee motivation, but employee work motivation will decrease if the compensation received by employees is not sufficient to meet the needs of employees.

What is competitive compensation and why is it important?

Compensation must be attractive to employees, able to compete with other companies, in accordance with the size of the responsibilities undertaken or the level of complexity of work and can stimulate employees to better achievement because of a value of appropriate or higher rewards.

Does compensation motivate employees?

The effects of great compensation and an attractive benefits package should never be overlooked. Compensation and benefits have been proven to motivate employees and boost productivity, leading to greater job satisfaction.

How to coach an employee to improve performance?

Coaching: Performance Management Gets Personal. If you feel negatively about performance management, you’re not alone: Across organizations, performance management has a -60 net promoter score. 1 At the same time, employee expectations regarding growth and development are changing: A perceived inability to learn and grow is now the No. 1 reason people are leaving their jobs. 2 Organizations …

What is the importance of compensation administration?

Also, “it is a strategic management to ensure the proper distribution of income and saving to control industrial harmony and manage productivity, profitability and growth of the organization.” The basic aim of compensation administration is to retain, attract and motivate employees towards the job.

What is the basic objective of compensation management?

The basic objective of compensation management can be briefly termed as meeting the needs of both employees and organization. Since both these needs emerge from different sources, often, there is a conflict between the two. This conflict can be understood by agency theory which explains relationship between employers and employees.

Who should use the compensation management system?

The compensation management system should be easily understood by human resource specialists, operating managers, and employees. Wage and salary programs should be managed efficiently, making optimal use of the HRIS, although this objective should be a secondary consideration with other objectives.

How to manage employee compensation effectively?

1. Acquire Qualified Personnel 2. Retain Present Employees 3. Ensure Equity 4. Reward Desired Behaviours 5. Control Costs 6. Comply with Legal Regulations 7. Facilitate Understanding 8. Further Administrative Efficiency 9. Attracting and Retaining Personnel. 10. Motivating Personnel 11. Optimizing Cost of Compensation 

What does competitive salary actually mean?

‘Competitive’ means a salary comparable to other employers in the market. For a similar job, a competitive salary is equal to or above the standard offered by companies in the same industry or geographical area.

What does competitive compensation mean?

What’s competitive?: A competitive compensation package includes salaries that are “at market” or above. If you can’t be at or above market on salary, you can make up for it by being generous in other categories (see below!). Identifying salary ranges ensures that pay is competitive with other organizations.

Can compensation be a source of competitive advantage?

The labor market is competitive especially in countries where skilled labor is not enough. Because of this, compensation can be used as a competitive advantage since it can be used in the key job positions whereby organization sets competitive price to obtain the best employees for a certain position.

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