The Use Of Compensation Packages For Employees Performance And Retention In Nigeria
This study sought to assess the use of compensation packages for employees’ performance and retention in Nigeria with specific focus on Nigerian Brewery Plc. The problem that the research seeks to address is the limited study done on how compensation affects the productivity of employees. The objective will be to investigate the effects of Compensation on employee Productivity, in Nigerian Brewery Plc. The findings of this study will assist Nigerian Brewery Plc and other organizations to formulate acceptable and better compensation strategies in order to enhance and increase employee motivation and uplifting their morale and have a positive attitude towards work hence high productivity which results to a high competitive advantage. The study adopted a descriptive research design that will enable the use of questionnaires as research instruments. The target population consisted of one fifty (150) employees of Nigerian Brewery Plc. These included management staff, support staff and subordinate staff in the establishment. Stratified proportionate random sampling was used to obtain a sample size of 45 respondents. The data was analyzed using the qualitatively and quantitatively through the use of SPSS and then put on tables and figures. The research questions were answered from the data analyzed where conclusion was made and then recommendations. Data was presented using pie charts, tables, graphs and figures.
Based on the findings of this study the following conclusions were drawn: There exist fixed and constant monthly salaries with flexible dates though some months are fixed during payment. It is not very substantive to conclude that the salary being offered is not sufficient to motivate and retain employees since a considerable number termed the salary as sufficient. There is also no conclusive position on the salaries and remuneration reflecting the skills, competence and work output offered by employees. The study recommended that there is need to ensure that existing fixed and constant monthly salaries have fixed dates to avoid frustrating employees due to some possible delays triggered by flexibility of dates. Also further research on how salaries and remuneration should reflect the skills, competence, retention and employee output.
Table of Content
- 1.1 Background to the Study
- 1.2 Statement of the Problem
- 1.3 Objectives of the Study
- 1.4 Research Question
- 1.5 Research Hypothesis
- 1.6 Significance of the Study
- 1.7 Scope of Study
- 1.8 Limitation of the Study
- 1.9 Definition of Terms
- 1.10 Organisation of the Study
2.0 Literature Review
- 2.1 Conceptual Framework
- 2.2 Types of Compensation
- 2.3 Compensation Management and Strategy
- 2.4 An Overview of Retention Strategies
- 2.5 Employee Retention and Employee Satisfaction
- 2.6 Theoretical Literature Review
- 2.6.1 The Reinforcement Theory
- 2.6.2 Expectancy Theory
- 2.6.3 Equity Theory
- 2.7 Empirical Review
3.0 Research Methodology
- 3.1 Research Design
- 3.2 Population
- 3.3 Sample and Sampling Technique
- 3.4 Instrument for Data Collection
- 3.5 Validity of the Instrument
- 3.6 Reliability of the Instrument
- 3.7 Method of Data Collection
- 3.8 Data Analysis
4.0 Results and Discussion
- 4.1 Result
- 4.2 Discussion
5.0 Summary, Conclusion and Recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
1.1 Background to the Study
Farrel and Rusbolt (2011) found that turning into a proficient pioneer is one among the biggest impediments for numerous Business people all inclusive. Reliable with them, keeping staff driven and dependable and true may be eminently extreme all through the stages of a startup. Eisenberger, Fasolo and Davis (2010),argued that those staff Joined together Countries office sense that they are concerned for by their organization and directors not exclusively have advanced levels of engagement, in any case that they’re a part of mindful with respect to their obligations, have greater inclusion inside the organization, and zone unit a part of inventive and beneficial.
They steered that bosses and establishments should reward and back up their staff for the job that they are doing as a result of this perceived support permits for a lot of faith and job contentment within the organization. These interpretations results to the fore the connectedness of worker inspiration in making certain output. (McCollum, 2011).
Its relate degree indisputable truth that efficiency of a company relies upon the fulfillment level of its job drive and indeed a parcel of, on the emolument of specialists (McCollum, J. S., 2011). As a result there has been a great intrigued inside the evaluation of stipend factors of laborer as they influence efficiency.
Steady with Perry (2007) the thought of recompense has pulled in sizable consideration over later a long time and has gotten to be a essential goal of human asset administration. He demonstrated that Human Asset Administration arrangements zone unit right now being planned to expand structure integration, laborer commitment, adaptability and quality of labor. Meyer and Smith (2007) found out that remuneration and specialist fulfillment drive efficiency, by implication making benefit for a company. To them, these are stipulations for employee’s maintenance.
They conjointly found out that organizations with higher specialists maintenance rates range unit actually higher at holding data, which may result in higher execution and benefit for the business. Steady with Meyer and Smith (2007), remuneration factors improve laborer fulfillment, cut back the esteem of workers turnover, construct entirety devotion with specialists relate decreed position the corporate as a pioneer of choice that draws capable persons to the establishment. It’s common information that nearly all workers disturb for higher situations of benefit, while bosses grumble of little efficiency.
Workers range unit interminably on the post for promotions on what they depict as higher occupations. These laborers range unit able to take off their occupations for distinctive employments. Others utilize their blessing employments to create the required abilities and information, a request for numerous employments. Managers conjointly put in numerous locks in conditions of benefit and check out to make solid work environments in an endeavor to realize the commitment of specialists. (McCollum, 2011). It is relate degree undeniable reality that efficiency of a company depends upon the fulfillment level of its work drive and indeed a part of, on the stipend of laborers (McCollum, 2011).
As an outcome there has been a countless concern inside evaluation of remuneration factors of specialist as they influence on productivity. Reliable with Perry (2007) the thought of recompense has pulled in sizable consideration over later a long time and has gotten to be a vital goal of human asset administration. He demonstrated that Human Asset Administration approaches region unit at the moment are planned to maximize structure integration, laborer commitment, adaptability and labor quality.
Meyer and Smith (2007) found out that remuneration and laborer fulfillment drive efficiency, by implication making benefit for a company. To them, these are stipulations for employee’s maintenance. They conjointly found out that organizations with higher laborers maintenance rates region unit actually higher at holding data, which may result in higher execution and benefit for the business. Reliable with Meyer and Smith (2007), recompense factors progress worker fulfillment, cut back the esteem of workers turnover, and construct entirety devotion with laborers relate degreed position the corporate as a pioneer of determination that draws capable people to the organization.
It’s common information that nearly all laborers disturb for higher conditions of benefit, though managers complain of moo efficiency. Specialists range unit interminably on the post for promotions on what they depict as higher occupations. These specialists range unit able to take off their employments for distinctive occupations. Others utilize their blessing occupations to create the required aptitudes and information, a request for numerous occupations. Managers conjointly put in numerous locks in conditions of benefit and check out to make solid job situations in an endeavor to realize the engagement of specialists. (Greenberg, 2005).
In the global world of today, for any organization to have competitive edge amidst her competitors there must be in place a formidable compensation strategy to attract, retain and motivate people to join the organization. This should also reduce the turnover intent from the employers. This is because compensation is one factor that affects employee retention in organization positively and negatively. The type of compensation that will motivate employee to perform positively will depend on how much it addresses their needs for status, security and survival as postulated by Maslow (1943) in his hierarchy of needs.
Recently, human resource has been seen as the most important asset of any organization. Human resource is really significant in the retention of employees for the purpose of achieving organizational goals. This is so because no matter how up to date the excellent machineries and equipment are, the presence of human beings behind those machineries is necessary. Compensation is a subject that is very important to employees and employers. To employers, potential power is needed to influence employers’ behaviour while to employees it is a reward that is a source of both economic and psychological income.
Therefore, the task facing the employer is to allocate this reward, in a way that optimizes the returns on money spent on employee during recruitment and training. Compensation is basic to all forms of payment or reward going to employee in exchange for work performed. Compensation plays a great role in the employees’ retention and its productivity. Thus enough compensation must be provided by employers for employees because good relationship between employees and management will initiate employees to work together on the job. Usually, compensation can be performed in the form of wage, salary, and fringe benefit.
Wage is usually daily rate paid to employees and production maintenance of their wellbeing. Salaries are paid weekly or monthly to clerical, administrative and professional employees. Fringe benefit can be given to an employee in addition to their wages and salaries such as vacation time, health life insurance and pension programme. On the other hand, for any organization to thrive and remain competitive it is important that it attracts and retain its skillful employees. This implies that employees retention play a vital role in the growth of organization. The main purpose of employee retention is to prevent competent employees from leaving an organization as this could have adverse effect on productivity and profitability (Samuel and Chipunza, 2019).
Employee retention brings all kinds of benefits especially since globalization and the creation of regional economic blocs have increased labour mobility across nations.
1.2 Statement of the Problem
While remuneration is apparently one in each of the key drivers of Productivity and one in each of the first considered zones, questions are strong by atomic physicist, (1957) and Armstrong (2008) on the viability of remuneration. They contended that, though need of it causes discontent, its arrangement doesn’t lead to enduring inspiration. The results of remuneration on efficiency change from organization to organization Most of the individuals are affected by cash a least of for his or her fundamental wants and needs (DeNisi and Griffins, 2008).
Laborer productivity through stipend is in numerous shapes together with pay raises, execution rewards, commissions, share and distinctive assist preferences like excursions, cars and distinctive substantial things that are utilized as rewards (Campbell, 2007).
This remuneration framework is classified as either direct monetary payment or indirect financial disbursements (Dessler, 2004). Nelson and Spitzer (2003) says that in recent job air, there’s extra alteration and vulnerability, there’s hyperbolic would like for authorized specialists, there’s decay in antiquated motivating forces, there’s rise of nontraditional motivating forces and there’s hyperbolic utilize of variable stipend
Studies have conjointly shown that recompense packages and also the ways of administration have an effect on worker productivity, (Bowen, 2000). Scholars have centered on contentment, gratitude, thankfulness and job surroundings as worker stimulators in several organizations (Kosgei, 2011). Compensation perhaps is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensation for their employees. Other aspects of compensation which makes up the total compensation package for the employee are not given much attention. Employees themselves fail to recognize the fact that their compensation is a package and not only related to cash. The by-product of the above understanding of compensation is that it is poorly managed and most of the time performance is affected adversely. Therefore one of the problem the researcher intends to investigate into is to understand what contributes to total compensation and how it can be better managed and linked to employee retention.
Secondly, compensation is seen as one of the key drivers of employee retention because employee are naturally inclined to perform better and have a sense of retention when they perceive that they will be compensated for their efforts. While people exert effort for different reasons, today’s competitive economic environment coupled with the consumer society has made compensation arguably the most important motivational factor. A lot of people are motivated by money atleast for their basic needs and wants. Compensation in any form is the most obvious extrinsic reward; it provides the carrot that most employees want, it is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensating their employees. Other aspects of compensation such as Health/Medical Insurance recognition, paid time off, retirement benefits, etc. which makes up the total compensation package for the employee are not given much attention. Employees themselves fail to recognize the fact that their compensation is a package and not only related to cash. Furthermore, most employees in recent times have lamented about the poor compensation plan in the institutions and how it affects their level of commitment, performance, moral or zeal to work. The management of organizations believe that as long as salaries are paid to the employees then there is no need for any other compensation, while compensation is arguably one of the key drivers of employee retention and one of the most researched areas, doubts have been cast by Herzberg, Mausner, Peterson and Capwell (1957) and Armstrong (2008) on the effectiveness of compensation. They argued that, while lack of it causes dissatisfaction, its provision does not result in lasting motivation. The effects of compensation on employee retention vary from organization to organization. This study therefore sought to assess the use of compensation packages for employees’ performance and retention in Nigeria.
1.3 Objectives of the Study
The aim of this study is to assess the use of compensation packages for employees’ performance and retention in Nigeria.
Specifically, the objectives of the study include to;
- To examine the effects of financial compensation on employee productivity at Nigerian Brewery Plc
- To establish the effects of non-financial compensation on employee productivity at Nigerian Brewery Plc
- To determine the effect of compensation on employee retention in Guinness Nigeria Plc and Nigerian Brewery Plc.
- To establish the effects of total reward on employees’ performance and retention at Nigerian Brewery Plc
1.4 Research Question
The following research questions are formulated to guide this research:
- What are the effects of financial compensation on employee productivity atNigerian Brewery Plc?
- What are the effects of non-financial compensation on employee productivity at Nigerian Brewery Plc?
- What is the effect of compensation on employee retention in Guinness Nigeria Plc and Nigerian Brewery Plc?
- What are the effects of total reward on employees’ performance and retention at Nigerian Brewery Plc?
1.5 Research Hypothesis
- HO1 There is no significant influence of compensation packages on employees’ performance and retention at Nigerian Brewery Plc
- HA1 There is a significant influence of compensation packages on employees’ performance and retention at Nigerian Brewery Plc
1.6 Significance of the Study
The findings of this study will assist Nigerian Brewery Plc and other organizations countrywide to formulate better and acceptable compensation strategies in order to enhance an affirmative outlook among employees and motivate them toward doing their work hence a better service quality and a high productivity.
This study will be of significance to other researchers by assisting them have a better understanding of the subject under study for relevant resources in the future. This can be done through identification of gaps in knowledge and offer recommendations for further studies.
1.7 Scope of Study
The general purpose of this study is to investigate the use of compensation packages for employees’ performance and retention in Nigeria. Specifically, the scope of this study is limited to Nigerian Brewery Plc.
1.8 Limitation of the Study
During the study the researcher anticipates that some of the employees will not be willing to respond to the questionnaires due to the fear that the information they divulge may be used against them. To solve this problem, the researcher will have a letter of introduction from the University which clearly indicates that the study is specifically meant for academic purposes and that the information obtained will be treated with strict confidentiality. The researcher will consequently present this letter when administering the questionnaires and similarly clarify its content whenever there will be need to.
It was difficult to access information with regard to productivity strategies by organizations. To solve this problem the researcher approached the management of Nigerian Brewery Plcand explained that the study is being carried strictly for academic purposes and that the information provided will to be treated with utmost confidentiality. This clarification backed by the letter of introduction will convince the managers to share information needed for the success of this study.
1.9 Definition of Terms
Is a summary of all the ways a company directly or indirectly pays an employee for services rendered or work done.
Refers to how an employee fulfills their job duties and executes their required tasks.
Is an organization’s ability to prevent employee turnover, or the number of people who leave their job in a certain period, either voluntarily or involuntarily.
1.10 Organisation of the Study
This study is organized into five chapters. Chapter one included the background of the study, research problem, research objectives and questions as well as limitation of the study. Chapter two contains the literature review. Chapter three includes the methodology and study area. Chapter Four contains the results and discussion of key findings of the study. Chapter Five finally looks at the summary, conclusions, and recommendations based on the findings.
5.0 Summary, Conclusion and Recommendation
This study was carried out to assess the use of compensation packages for employees’ performance and retention in Nigeria using Nigerian Brewery Plc as a case study. From the findingsof the study, It was clear that the organization was offering fixed and constant monthly salary as the direct financial compensation for the service rendered which stood at 82%. The dates for salary and wages were flexible according to 58% though sometimes the dates could be fixed for some months as of 13%. On the salary being sufficient to retain employees, it was noted that 60% did not agree to it while 40% agreed. Then on the salaries and remuneration reflecting the skills, competence and work output of employees, 24% agreed to having a true reflection while 40% termed it as somehow reflective but not fully.
According to 91%, indirect financial compensation like health insurance, paid leave etc existed at Nigerian Brewery Plc and they had great impact at 40% and normal impact at 33% on the productivity of employees. The respondents indicated that the company was not concerned with the personal needs of employees such as child care services, domestic partners benefits according to 80% of the respondents. The company did not administer the benefits fairly to the employees in regard to their competence and work output according to 50% though sometimes it could be fair according to 33% of the respondents.
The non-financial compensation like flexible work schedule and job sharing were offered at Nigerian Brewery Plc according to 87%. Respondents at 84% agreed that working environment like seating, lighting, noise, recognition and promotion determines the productivity of employees. On employee recognition through giving of shopping vouchers, praise dinners and trophies to employees to ensure productivity was termed to be effective by 31% while 40% somehow.
The respondents at 80% confirmed that the relationship between top management determines the productivity of employees. The participants at 73% agreed to the mix of both financial and non- financial reward when compensating employees has great impact on the productivity of employees. Then finally respondents affirmed employee involvement in design of total reward strategy as important in facilitating employee acceptance and commitment to the designed strategy as of 71%.
Based on the findings of this study the following conclusions were drawn: There exist fixed and constant monthly salaries with flexible dates though some months are fixed during payment. It is not very substantive to conclude that the salary being offered is not sufficient to motivate and retain employees since a considerable number termed the salary as sufficient. There is also no conclusive position on the salaries and remuneration reflecting the skills, competence and work output offered by employees.
Indirect financial compensation like health insurance and paid leave impact on the productivity of employees. The personal needs of employees like child care services and domestic partners benefits are not taken care of by the company. Many times the company administers the benefits fairly though sometimes it does it unfairly.
Non-financial compensation like flexible work schedule and job sharing are necessary. Also working environment like seating, lighting, noise, recognition and promotion are relevant in determining employee productivity. Employee recognition through giving of shopping vouchers, praise dinners and trophies to employees does not necessary ensure employee productivity.
The relationship between top management and organizational employees is relevant in determining employee productivity. The productivity of employees can be of great impact if both financial and non-financial rewards are mixed during employee compensation. It is important to involve employees in designing of total reward strategy to ensure acceptance and commitment of employees to the strategy.
Based on the findings of this study, the following are recommended;
- There is need to ensure that existing fixed and constant monthly salaries have fixed dates to avoid frustrating employees due to some possible delays triggered by flexibility of dates. More studies to be explored to establish the factors will conclusively make the salary offered to employees sufficient to motivate and retain employees. Also further research on how salaries and remuneration should reflect the skills, competence and employee output.
- The employers should consider taking care of the personal needs of employees like child care services and domestic partners benefits to promote productivity of employees.
- The benefits administered by the company should be done fairly all the time to ensure consistency and cultivate trust from employees.
- Reward for employee recognition like shopping vouchers, praise dinners and trophies should not be premised on as the main motivators for employee productivity. A conducive working environment with sufficient seating space, proper lighting and due promotions should be facilitated for effective employee productivity.
- Organizations should consider offering employees mixed financial and non-financial compensation reward to have double impact on their productivity.
- It is essential to involve workforces in the designing of total reward approach for employee ownership and engagement to the strategy during implementation
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Frequently Asked Questions
What are the benefits of compensation packages?
Compensation packages helps to motivate employee’s that to perform better for the given tasks related to their work and improves organization effectiveness . It is very important for the performance of employees and for the organization too. It is a systematic approach for providing monetary and non-monetary benefits to the employees.
What are the factors that affect employee compensation packages?
These factors include employee’s training, employee’s health, motivation which helps to increase the productivity of organization. In some organizations effective compensation packages have improved the performance of organizations and make the employees to work more innovatively.
What is the role of compensation management in the employment trade?
Employees are the assets to develop the organization growth in the world. Compensation management plays a vital role because it is the heart beat of Human Resource Management. It refers to all forms of financial benefits employees receive for the exchange of their contribution of work. Compensation is at the core of any employment trade.
What is the relationship between total compensation and productivity?
The management has to set up compensation system in the organization in pursuit of increased performance and general growth to ensure. This study focuses on the total compensation factors explores that which organization is providing the incentives to the staff and explains the relationship between compensation and productivity.
How to evaluate the compensation package and job offer?
Evaluate the Compensation Package. Consider the net value of all monetary benefits and expenses. Fringe benefits, such as health insurance, retirement contributions, and tuition reimbursement programs, can amount to 25–40 percent of the salary. Job-related expenses, such as safe and convenient housing and transportation, can significantly …
Why are compensation packages important?
Compensation and benefits are two of the best tools for companies to recruit and retain quality employees. Enticing benefits and compensation also help existing employees stay motivated to excel each day at work. Competitive compensation packages ensure a company attracts the top talent available in the industry.
What are the factors that influence compensation?
Employee: The employee or a worker himself influences the compensation in one of the following ways. Performance: The better performance fetches more pay to the employee, and thus with the increased compensation, they get motivated and perform their job more efficiently.
What are the factors that affect the pay of employees?
Economic Conditions: Organizations having state-of-the-art technology in place, excellent productivity records, higher operational efficiency, a pool of skilled manpower, etc., can be better pay masters. Thus, compensation is the consequence of the level of competitiveness .prevailing in a given industry.
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.
How do good compensation packages for employees help to increase productivity?
Finally it can say that good compensation packages for employee works as motivational factors in an organization while it reduces absenteeism and turnover rates in an organization on the other hand it also helps to increases company productivity. UKEssays. (November 2018).
Why is compensation important to a company’s employees?
From a manager’s point of view, the compensation package offered to a company’s employees is essential not only because it costs money, but because it is likely to be the primary reason the employees work for the firm. Compensation packages with good pay and advantages can help attract and retain the best employees.
What does a compensation manager do?
This involves researching and understanding the current and upcoming competitive markets for employee pay and benefits. A compensation manager must find ways to ensure that pay rates are fair and equitable in order to retain and recruit employees.
What is Comp compensation and how does it work?
Compensation is the remuneration awarded to an employee in exchange for their services or individual contributions to your business. The contributions can be their time, knowledge, skills, abilities and commitment to your company or a project. In simpler words, compensation is the money received by an employee from an employer as a salary or wages.
What is HRM-compensation management?
HRM – Compensation Management. A compensation scheme projects what the company expects of its employees. For example, if quality is an essential value, then it should be implemented through some element of the total compensation system.
Does employee compensation affect productivity?
Employee compensation and productivity. The results indicated a significant relationship between compensation and productivity. Keywords: employee compensation, motivation, productivity. 1. Introduction entrepreneurs.
What are the components of the gap between productivity and compensation?
The gap between productivity and compensation can be divided into two components: (1) the difference between compensation adjusted by the CPI and by the output deflator, as detailed in the previous section and (2) the change in the labor share of income.
Is there a relationship between organizational compensation and employee performance?
Consequently, this study concludes that there is a positive relationship between organizational compensation and employee performance. Based on the major findings, the study therefore recommend that firms should strategically structure their compensation plan accordingly.
What does it mean to have a good compensation system?
It means that employees use knowledge, skills, energy and part of time to work on any organization, but on the other hand the employees are expected to receive certain rewards. Yamoah (2013) states that good compensation is a motivating strategy for employees to increase their work productivity.