The Effect Of Remuneration Discrimination In The Public And Private Sectors On Employee Performance

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The Effect Of Remuneration Discrimination In The Public And Private Sectors On Employee Performance


Abstract


The study examined the effect of remuneration discrimination in the public and private sectors in Lagos State on employee performance, a case study of beverage industries. The study employed the survey design and the purposive sampling technique to select 450 staff across management, senior and junior level. A well-constructed questionnaire, which was adjudged valid and reliable, was used for collection of data from the respondents. The data obtained through the administration of the questionnaires was analyzed using the Pearson correlation analysis.

The results of the correlation analysis showed that there is positive and significant discrimination on remuneration and employee performance in private and public sectors (r=0.772; p<0.05). The results were found to be consistent with empirical findings of past studies in literature.

The study concluded that the there is positive and significant discrimination on remuneration and employee performance in private and public sectors.

The study recommends that; Consisting remuneration should be employed by the management of every company to ensure that companies staffs are safeguarded in terms of confidence of getting paid; Employees performance should be adequately remunerated through attractive compensation packages in order to avoid temptation by the employees; Management should lead; The beverage industries management should ensure that employees are not getting tired of the overtime, and extra additional work.


Chapter One


Introduction

1.1 Background to Study

Renumeration (icluding wages and salary) and income inequality exists at organisational, country, regional and global levels. The methods and techniques for measuring wages and income inequality also vary from one country or region to another (OECD, 2011). This suggests that a generic view or analysis of wage and income inequality without considering to specific and common variables across countries/regions may be misleading. The diversity and dynamism of the employees’ needs and their individualized hierarchy is reflected in the broad set of external and internal factors that determine their level of motivation and engagement, which can be translated into continuous expanding and updating of the motivation methods used in the organization (Agba 2013). Consequently, it leads to evolution of ideas concerning the notion of remuneration. The issue of building organizational engagement encompasses the concept of total reward. It can be described as including all the possible ways of rewarding employees and guaranteeing a job satisfaction, and its goal is to maximize the impact of different components of remuneration on the motivation and engagement of employees. The growing inequality in wage and income at various levels across the world has gained much scholarly attention in recent years (Ushie, 2013). This scenario has generated large and expanding literature on discrimination in renumeration globally. According to ECA’s latest Salary Trends Survey, the median salary increase for local staff around the world was 4% in 2017. This is identical to the results for 2016, and is also forecast to remain at this level in 2018. This was particularly the case in the Africa and Middle East region with Algeria and Tanzania most affected as salaries increased by 2.1% and 2.7% respectively less than anticipated.

Actual increases were also lower overall in the Asia Pacific region, but the general stability in the Americas and Europe helped predictions for these regions to be accurate. In all regions except the Americas, nominal salary increases are expected to be higher in 2018. However, forecasts of higher pay awards than actually materialise has been a continuing trend in recent years, so this optimism should be tempered with a degree of caution. Indeed, despite similar forecasts by companies in last year’s survey, around half of the countries surveyed saw a reduction in the increase awarded compared to predictions. (ECA 2018). However, the generic presentation of wages and income inequality in Africa by most scholars and international organisations is largely responsible for the poor utilisation of such data/information by employers of labour, economy planners, and governments in the continent, especially in Nigeria. Remuneration is referred to as pay or reward given to individuals work done (Agba 2007). The indicators or remuneration include: basic salary, wages, health schemes, pension schemes, transport allowances overtime allowances and responsibility allowances. Salary is a fixed periodical payment for non-manual employees usually expressed in annual terms, paid per month with generally no additions for productivity. Salary is a fixed amount of money compensation paid to an employee by an employer in return for work performed. Salary is paid most frequently, in a bi-weekly pay check to an exempt or professional employee.

Wage refers to payment for labour or service to a worker, especially remuneration on hourly, daily or weekly basis or by the piece. It is a payment to manual workers, always calculated on hourly or price rates (Bratton and gold, 2003). According to the wages act 1986, a wage is any sum payable to the employer in connection with that employment. Therefore it includes fees, bonuses, commissions, holiday pay or other employment relevant to the employment whether specified in the contract of employment or not (Andrew 2010). Wages include company sick pay and any other statutory payments for example for time off for trade union duties and jury services. However, there are discriminations in gender pay gap which has to do with the relative differences in the average gross earnings of men and women within an economy. UNDP (2009) observes that between 1985 and 2008, inequality in Nigeria worsened from 0.43 to 0.49, placing the country among those with the highest inequality levels in the world. Despite its vast resources, Nigeria ranks among the most unequal countries in the world. The poverty problem in the country is partly a feature of high inequality which manifests in highly unequal income distribution and differential access to basic infrastructure, education, training and job opportunities. In the past three decades, women in Nigeria have made notable gains in participation in the workplace including increased labour force participation, substantial gains in educational attainment, employment growth in higher paying occupations, and significan gains in real earnings. However, notwithstanding these gains, there is still pay gap between males and females across almost all occupations in favour of men.

The Nigeria Human Development Report (2009) highlights agreement in principle on the desired path of development among independent development experts and Nigerian government officials. The declared goal of “growth with equity,” is however, faced by many obstacles to its implementation. In any organization, be it in the private or public sector, money is a very sensitive issue, not only to management but also to employees (Nwachukwu, 2009). Wages and salaries constitute a significant part of the total cost of operation in any organization or establishment. In some organizations, such as civil/ public service, they make up more than 50 percent of operating costs. In the organized private sector, large organization’s ability to attract and retain valuable employees in part depends largely on how much the pay (Agba 2013). Poor wages are a constant source of frustration when labour and management are engaged in constant strife with resulting decrease in productivity (Nwachukwu, 2009). Over the past few years there has been a growing recognition of the need to monitor wage trends and implement sustainable wage policies that prevent wage discrimination, raise the levels of pay for the millions of working poor around the world, ensure fair distribution, reduce excessive wage and income inequalities, and buttress consumption as a key pillar of sustainable economies. Wages administration in Nigeria is as old as civil service itself. Many administration have come and gone but not without deliberating on what constitutes the appropriate or minimum wage or salary of civil servants should be. In some situation, it has been without industrial disputes, especially during the military era while most of the civilian regimes were dominated by trade disputes initiated by major labour centers in the country (Obiora, 2013).

Sometimes, the crises arising from such dispute leads to break down of law and order, especially when they are hijacked by miscreants in the society. Workers, through their labour representatives have always asked for improved conditions of services and can go to any length to press home their demands. The role of employees in an organization cannot be overemphasized, as increased organizational efficiency can be achieved if there is proper management and equality of the workforce which would subsequently increase profitability. The fact remains that companies who fully realize the potential of their workforce, not only benefit from the reduced cost of recruiting new personnel, but also motivate their own workforce to maximize their potential (Tesfaye, 2010). Renumeration discrimination which refers to the disparity in terms of pay cccan also exists among workers of the same skills and educational qualifications. It entails remuneration discrimination that is perpetuated by employers of labour based on sex, nationality, religion, migration status, ethnic background, employment status, etc. It is the remuneration gaps between women and men, as well as between migrant and national workers (Chizueze 2011). These inequalities according to ILO (2015) arises from multiple and complex factors that varies from one country or region to another. In Nigeria, a great number of foreign nationals who work in the country earned far more income and wages other than their Nigerian counterpart. This is more eloquent in the petroleum sector of the economy where multinational companies dominate.

Other sectors where foreigners (including Chinese, Lebanese, Philippinos) are highly paid than Nigerians is the construction companies, manufacturing, cement factories, etc. The reason for these inequalities or gaps is often tied to the fact that foreign workers are more skilled and experienced than their Nigerian counterparts. The educational qualifications in this regard accounts less or nothing. ILO (2015) report shows that the Nigerian situation is similar to that of Chile where migrant workers earn more remuneration than their national counterparts. Wage and income gaps exist in Nigeria and elsewhere in the world because of workers engagements either in the formal or informal economy. Workers in the formal economy especially those in small and medium enterprises (SMEs) are often under-paid as compared to employees in government parastatals, department and cooperation. Again, disparity also occurs between workers in the organised private and those in the civil service. Most private entities especially in the petroleum sector, banks, construction companies, etc, pay their employees better than government establishments. However, employees’ in the informal economy of Nigeria are generally lowest especially at the bottom. Disability could be responsible for some discrimination that exists between workers in Nigeria (Heinze 2010. Workers who are physically challenges can be paid less especially the private sector, where the employers’ sees such employment as favour rather than call to service. Again, sex also account for income and wage inequality in the informal economy that required physical strength rather than skills or educational qualifications are less needed. In organizations where this is practised, female workers are poorly paid to discourage others from applying and this safe these enterprises of being accused of gender unfriendly. Wage and income inequality occasioned high labour turnover in most organisations especially in private bodies where pension, gratuity, insurance cover are not or near absent. However, some government establishments also lose staff to well-paid private organisations in the petroleum sector. Within the private (sector) organisations in Nigeria and elsewhere in Africa, wage and income inequality informs turnover and the trend is towards well-paid entities. This suggests that wage and income inequality can cause well-paid organisations to have surplus workers, and this is not without consequences. The positive side is that such organisations could employ the right workers; but it could also cause them to reduce the remuneration of workers.

According to Ushie (2010), once income/wages are reduced, employees’ commitment, effectiveness and motivation drop drastically, and this could affect productivity at individual and organisation levels. Similarly, renumeration is a significant determining factor of workers motivation and performance in an organisation; thus reduction of wage/income means low employees’ performance. Meanwhile employee perrformance to a large extant can be premised on the discrimination in renumeration, employee performance which leads to improved corporate performance when well-handled can be explained to be a process for establishing ashared workforce understanding about what is to be achieved at an organization level. It is about aligning the organizational objectives with the employees’ agreed measures, skills, competency requirements, development plans and the delivery of results. Good organizational performance refers to the employee performance (Ain, 2013). Renumeration constitutes an integral part of the success of any organization. It motivates employees to put in more effort in their services in the organisation and this in turn reflects positively on the efficiency and productivity of the organization. It is the single most important motivator used in the workplace.

Renumeration is an important process in human resources management covering economic rewards in form of wages and salaries and various forms of non-wage economic payments called fringe benefits, indirect compensation or supplementary pay (Neumark 2006) The significance of pay emanates mainly from the fact that it provides income to workers and constitutes an important cost item to the employer. It is the single largest cost for many organizations. It provides means of satisfying wants and needs for the workers. Pay is a major component of the compensation process, which is aimed at reimbursing employees for their work and motivating them to perform to the best of their abilities. Pay plans aim at meeting the needs of employees, including desires for security and self-esteem; attracting, motivating and retaining employees and thus competing with similar organizations and achieving desired performance (Otobo 2000). It also controls wages and salaries and thus control labour costs to be cost-effective; builds employee loyalty and commitment and to increase job satisfaction, reduce turnover, absenteeism, complaints and grievances. Renumeration motivates workers to achieve desired performance and improve morale and complies with labour contract and governmental regulations. Pay is a major factor in attracting individuals to an organization, persuading them to remain and inducing them to contribute positively to achieve corporate goals. Pay disparity has to do with comparative differences in pay between employees in similar organizations for similar jobs. An employee may feel good about his or her pay in comparison to what those working in other organizations are making. He or she may also believe that the company profits are fairly distributed within the company (Prabhat 2011). However, this same person may be very unhappy about his or her pay relative to several other people in other organizations. Better performances result only in those who perceive their pay as directly related to performance. When a job decreases in pay attractiveness, the employee is more likely to be dissatisfied with the job itself. In Nigeria the terms and conditions of service of civil servants are determined through the legislative process (Prabhat 2011).

The salaries and wages in the public sector depend on the wealth of the country that is on the revenues derived from crude oil and taxes. Political considerations affect the workings of collective bargaining process in the public sector. Renumeration disparity is when an organization pays less than what their competitors in the industry are paying other employees in same level. Disparity and imbalance in pay policies can create disequilibrium.Pay and employee compensation is usually affected by levels of aspiration and pay history. Internal and external in-equalities in pay can seriously strain employee- employer relationship and endanger industrial peace because employees compare their pay with those of relevant other persons based on their skill, knowledge and performance. Pay disparity affects employee pay satisfaction because pay is positively associated with the job satisfaction of the employees (Goldin 2014). Employees feel satisfied or dissatisfied with their pay- not so much by the total amount received, but by comparing their benefits with those enjoyed by others in the same field. Pay comparison provides a feeling of equity or inequity. There is a sense of equity when the employee pay is equal or comparable to with that of others in the same category of jobs. When the pay is lower, the employee feels inequitably treated. An employee sticks to an organisation when paid equitably. Organisation pay structure must, therefore be equitable and consistent. Renumeration dissatisfaction is an important in every organization. The desire for more pay has the potential to lead to reduced productivity and increased grievance levels, strikes, job accidents, absenteeism and search for higher paying jobs (Goldin 2014).

Employees who are dissatisfied with their jobs become less interested in their jobs, and may engage in moonlighting. Their commitment to duty will be low and the rate of turnover will be high. Workers dissatisfaction is likely to increase if either internal or external principles of pay are violated. The extent of an employee’s job performance is caused mainly by his state of mind and his view on his predisposition. When he is unhappy, there will be every tendency for him to engage in some dysfunctional and negative manner that would restrain his performance on his job rather than to enhance his job performance. Where an employee is unhappy and unsatisfied, he cannot perform up to his maximum. It can therefore be deduced that satisfaction causes performance. Green (1977) affirms that rewards constitute a necessary intervening variable and this satisfaction is considered as a function of performance related reward which implies that performance causes satisfaction. This implies that satisfaction does not just happen but is somehow caused by performance and achievement. The foregoing indicates that both performance and satisfaction are functions of rewards. A higher reward causes satisfaction, the employee experiences job satisfaction and is likely to perform better on the job. Whether it is performance that causes satisfaction or satisfaction that causes performance, reward causes satisfaction and satisfaction in-turn leads to good performance. Renumeration dissatisfaction matters to organizations, employers and employees since pay occupies an important place in the life of workers. Renumeration impacts on a worker’s standard of living, status in the society, motivation, loyalty and productivity.

Akomolafe (1993) affirms that pay dissatisfaction may affect organization outcomes, ranging from changes in job performance to withdrawal behaviours in the form of absenteeism or employee turnover. Attractive pay enables an organisation to attract, retain and motivate competent people. Pay satisfaction on the other hand enhances employer – employee relationship, improves employees’ standard of living, helps in the prevention of strikes, and reduces level of absenteeism in an organization. It also promotes industrial peace and harmony, helps in the reduction of grievances, improves organization productivity and increases the level of performance. Combining factors such as good wages, job security, opportunities for growth and promotion, and scope of work creates a culture conducive to motivation. However, the generic presentation of wages and incomeinequality in Africa by most scholars and international organisations is largely responsible for the poor utilisation of such data/information by employers of labour, economy planners, and governments in the continent, especially in Nigeria.


1.2 Statement of the Problem

The aim of remuneration is to evaluate employee performance fairly and to effectively stimulate them to fulfil their work assignments and to achieve high performance (Bol et al., 2015). Bol et al. (2015) further stress the importance of setting a fair remuneration system and its link to the performance appraisal system. The remuneration system includes both financial components (wages or salaries) and non‑financial components (fringe benefits). The importance of non‑financial components has been increasing. However in recent times there has been a huge discrimination in the renumaeration between employees of both private and public sectors. Hence this could result into employee poor performance result and low productivity, psychological distress, low employee involvement, lack of loyalty of employee, low salary of employee, reduced organizational and goodwill. Low employee performance negatively affects both individual and the entire organization. Hence this study seeks to evaluate the effect of discrimination on renumeration in the public and private sector in Lagos state on employee performance


1.3 Aim and Objectives of the study

The main aim of this study is to examine the effect of renumeration discrimination in the public and private sectors in Lagos State on employee performance. (A case study of beverage industries)

The specific objectives for this study

  1. To examine the relationship between renumeration discrimination and employee preformance in private and public sectors
  2. To evaluate the effects of renumeration discrimination in both private and public sectors on employee performance
  3. To determine the factors influencing renumeration variations in both private and public sectors.

1.4 Research Questions

  1. What is the relationship between renumeration discrimination and employee preformance in private and public sectors ?
  2. What are the effects of renumeration discrimination in both private and public sectors on employee performance ?
  3. What are the factors influencing renumeration variations in both private and public sectors ?

1.5 Research Hypotheses

H0: There is a significant relationship between renumeration discrimination and employee preformance in private and public sectors

H1: There is no significant relationship between renumeration discrimination and employee preformance in private and public sectors


1.6 Scope of Study

This study will adopt the descriptive survey approach to evaluate the effect of renumeration discrimination in the public and private sectors in Lagos State on employee performance. (A case study of beverage industries). The respective case studies for private and public sectors include Viju industries and Nigerian Breweries. The study will draft out questionnaires to know the knowledge of respondents on the effect of renumeration discrimination in the public and private sectors in Lagos State on employee performance.


1.7 Significance of the study

The findings and the recommendations there after of this study will be of immense benefit to the both private and public organizations. This is because, the relationship between the management, government and the workers through their representatives (labour unions), would be strengthened and made more cordial by the report. In recent times, employers and relevant stakeholders should be concerned about the factors that affecting employee performance, which also includes discriminattion in renumeration. A successful organization is regarding on how an employee perform their job, and what factor will affect employee performance in the industry. In addition, this research may great significant to relevant stakeholders and employers, it gives additional information on how employees want reasonable pay that satisfies their needs, this is because equitable renumeration or pay makes employees feel appreciated, and also reduces the biasness or unecessary discrimination in both public and priate sectors. Money is ranked at the top for creating motivation because people require money to fulfill the basic necessities of life so it motivates the employees more than any other incentive. Others believe that money is influential for fulfilling their non-monetary needs such as authority, rank and belonging ness with preferred groups. Lastly, this research can hope to help employers and relevant stakeholders to understand better on how renumeration discrimination affects employee performance, and ensure uniform renumeration scale in both private and public sectors.

The study has three major areas of significance namely;

Academic, Policymakers and the Society.

Academic Significance

It is envisaged that this study will contribute to and expand the frontiers of knowledge in the field of study, especially studies that has been done on discrimination on renumeration in private and public sectors.

Significance For Policymakers

The study underscores the importance of discrianation in renumerarion, and evaluating employee performane. The study will develop the foundation for basis to modify or improve some government polices especially on renumeration discrimination and how it affect employees motivation to match with current social economical and political Environment in both private and public sectors in Nigeria

Social Significance

It is envisaged that community will benefit by not witnessing disruption in the economy by way of industrial action that can lead to the closure of the business. When the employees are on strike because of renuerarion discrimination, the whole community may be affected in the sense that which affects other sectors of the economy.

Operationalization of Variables

Y = f(x)

Y = Dependent Variable

X = Independent variable

Where

Y= Employee performance (EP)

X = Discrimination on renumeration

Y = (Y)

X = (X1, X2, X3, X4).

Where

Y= Discrimination on renumeration

x1 = transport allwoance

x2 = housing allowance

x3 = basic salary

x4 = overtime pay


1.8 Definition of Terms

Renumeration

Remuneration is considered the pay or other compensation provided in exchange for the services performed.

Employee Performance

Performance can be defined as the ability of an employee to accomplish his or mission based on the expectations of an organisation. For example, let’s consider the performance of an artist on stage. Both the theatre company and the public will have their own expectations.


Chapter Five


Recommendation and Conclusion

5.1 Conclusion

The study concludes that there is a significant and positive relationship between remuneration and employees’ performance. It recommends employees’ participation in pay determination, prompt payment of salaries, wages, bonuses and incentives to prevent negative effects on performance of employees and issues of equity in pay.
In conclusion;

  1. The result showed that remuneration is a source of motivation on employees performance. This is in tandem with the work of babagana et al (2015), Edirisooriya (2014). Hameed et al (2014) and Sajuyigbe (2014) which also showed that rewards have positive and significant effects on employees’ performance
  2. The result also revealed that there is a positive and significant relationship between remuneration and employees performance which reinforces the reinforcement and expectancy theory of remuneration especially the concept of Thorndike’s Law of Effect meaning a response followed by a reward is more likely to recur in the future.

Recommendations

The following recommendations are forwarded

  1. The employers of labour both private and government must not take the remuneration of their employees for granted because it will result in low productivity. The research showed that there is a positive significant relationship between remuneration and employees’ performance.
  2. The reason for frequent workers strike is borne out of poor remuneration and condition of services which the government must see as a twin scourge destroying the economy.
  3. Participation of employees should be encouraged and allowed in pay determination both in the private and public sector.
  4. Since employees usually take the issue of equity in pay at work seriously, employers of labour should ensure that their pay is competitive when compared to firms in the same or similar industry.
  5. Prompt payment of salaries, wages and all entitlements.

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Frequently Asked Questions


What is the impact of remuneration on productivity?

Remuneration has a significant impact on workers attitudes and performances in organisation because it is the most effective motivational technique. Good remuneration improves productivity while poor remuneration affects productivity adversely.

How important is remuneration to employee performance?

Remuneration is very important for the performance of the employees. Therefore they are very important for any organization too. The purpose of this research is to measure the effect of remuneration on employee performance.

How does employee remuneration strategy affect the organisational objective?

“Employee remuneration strategy” into the policy and objective of the organisation on the total neglect is capable of having a great adverse effect on the organisational objective especially on the long run.

What is the relationship between personnel performance and organizational profitability?

There is significant relationship between personnel performance and organizational profitability. • There is no significant relationship between employee remuneration and organizational productivity.

What is employee remuneration and why is it important?

Employee remuneration can defined as, “the reward or compensation given to the employees for their work performances,” according to Management Study Guide. Remuneration is a method of promoting morale, increasing motivation and foster team cohesion.

Why do employers use performance-based remuneration?

It is the reason that most of employers now use remuneration policies to attract, motivate, retain and satisfy employees. It is founded through different research that performance-based remuneration motivates employees to work hard (Ajila and Abiola 2004).

How managers use remuneration as a tool of motivation?

Remuneration is one of the main tools to appraise the performances of the employees, which ultimately motivates them to work with zeal and enthusiasm. This topic is mainly focused that managers uses remuneration as a tool of motivation.

What is the relationship between performance and compensation in HR?

Employers need practices that enable productivity, feedback, and engagement while ensuring employees are effectively compensated for their work to adapt to this approach. The important relationship between performance and compensation is what we’ll consider next. Compensation is a critical component of any HR strategy.

What is the relationship between employee remuneration and productivity?

There is no significant relationship between employee remuneration and organizational productivity.

How does employee remuneration strategy affect the organisational objective?

“Employee remuneration strategy” into the policy and objective of the organisation on the total neglect is capable of having a great adverse effect on the organisational objective especially on the long run.

What is employee remuneration in psychology?

Employee remuneration as a psychology concept calls for a thorough understanding of employee’s need which will enable the management to blend them with the corporate need in order to have an equitable mix that will enhance the realisation of the overall objectives of the overall objectives of the organisation and employee.

Does increase in remuneration increase performance?

…increase in remuneration will lead a positive increase in employees’ performance. In other employees to increase their performance. This supports and reinforces the reinforcement and expectancy theory of remuneration.

How does pay affect an organization’s strategic goals?

In which of the following ways does pay affect an organization’s strategic goals? (Select all that apply.) It has an impact on employees’ attitudes and behaviors. It can help align employees’ interests with those of the organization.

What is an effective remuneration and reward strategy?

An effective remuneration and reward strategy is an essential tool to support overall business objectives and performance. This comes as no surprise when you consider that the investment in employee remuneration represents one of the biggest costs to the bottom line – one that can blow out if not kept in check.

Is employee remuneration an investment or a competitive advantage?

This comes as no surprise when you consider that the investment in employee remuneration represents one of the biggest costs to the bottom line – one that can blow out if not kept in check. By treating remuneration as a strategic investment, your remuneration strategy becomes your competitive advantage.

What is involved in the remuneration process?

The design and implementation of remuneration structures. Usually this will be remuneration bands associated with each role – based on the job size and your external market data Integration with your performance appraisal process.

What is the relationship between employee performance and organizational performance?

In fact, there is a close relationship between the employees’ performance and the organizational performance with the performance of the employees critically influencing the performance of the organization measured by the parameters of (i) productivity, (ii) profit, (iii) employee turnover, (iv) employee accidents, (v) quality of work life, …

What is the relationship between productivity and profitability?

Overall, the relationship between productivity and profitability is one that is dependent on the way in which employees are treated.

Does high employee performance lead to greater organizational success?

High employee performance leads to greater organizational success. In order for an organization to try to acquire higher levels of employee performance via increased employee motivation they must have a strategy to do so effectively.

What are the factors that contribute to employee performance?

Due to motivation being linked to employee engagement, satisfaction, commitment, and an employee’s intention to quit, it can be said that these major factors also contribute to performance. 

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