Impact Of Reward System And Fringe Benefits On Job Satisfaction
Reward system is an important tool that management uses to channel employee’s motivation in desired ways such as better functionality and further improve company performance. The purpose of this study was to examine the impact of reward systems on job satisfaction in commercial banks in Lagos, Nigeria. The study was guided by four objectives. The study used descriptive research design which incorporated both quantitative and qualitative approaches. The study surveyed 65 employees from three commercial banks in Lagos, Zenith, UBA and Union bank, using self-administered questionnaire. It also interviewed selected employees. The data was analyzed with use of descriptive statistics (SPSS and excel) and data presented as frequency distribution tables and histograms. The findings of this study showed that the three commercial banks in Lagos offer both extrinsic (salary, bonus and promotion) and intrinsic (praise, recognition and genuine appreciation) rewards to their employees. However, the results found that employees were not satisfied with the current reward packages and salary level was viewed to be too low and did not reflect cost of living in Lagos. The study further indicated the intrinsic (non financial) rewards were not satisfactory to employees.
1.1 Background to the Study
Reward being seen as a vital instrument in employee performance. A well rewarded employee feels that he/she is being valued by the company that he/she is working for. They are also encouraged to work harder and better if they are aware that their well-being is taken seriously by their employers, and that their career and self development are also being honed and taken care of by their company. Employees are the engine of organization vehicles while reward is the fuel. In the modern time management, no organization can achieve its stated objectives without commiserate rewards and fringe benefits for its employees (Martocchio, 2011).
The role of reward system in shaping the live of an organization cannot be overemphasized. Reward system has been described as the development, implementation, maintenance, communication and evaluation of compensation processes (Galanou, Georgakopolous, Sotiropoulous and Dimitris, 2010). Ordinarily, the management of people at work is an integral part of the management process, put differently managers need to understand the critical importance of people in their organizations so as to recognize that the human element and the organization are synonymous (Popoola and Ayeni, 2007). Therefore, it is imperative and morally worthwhile to have a sound reward system and fringe benefits in place.
Fringe benefit is defined as any form of compensation provided by the organization other than wages or salaries that is paid for in whole or in part by the employer. Employee benefits are also essential for the development of corporate industrial relations. Examples include retirement plans, child care, elder care, hospitalization programs, social security, vacation and paid holidays (Christoph, cited in Ju, Kong and Hussin, 2008).
Cascio (2003) asserted that because of the importance that rewards holds on people’s lifestyle and self esteem, individuals are very concerned about what they are paid. While on the other hands organizations are concerned with what they pay because it motivates important decisions of employees about job satisfaction and overall corporate performance.
The happier people are with their jobs, the more satisfied they are said to be (Odunlade, 2012). The perception of being paid what one is worth predicts job satisfaction. Job satisfaction is perceived as an individual’s attitude and behavior towards aspects of his own job. Personal job satisfaction is an affective or emotional response toward various facets and outcomes of one’s job; meaning that personal satisfaction in relation to a job is not unitary, as a person may be satisfied with one aspect of his or her job and may be dissatisfied with the rest (Bozeman and Gaughan, 2011).
Employees will demonstrate pleasurable positive attitudes when they are satisfied with the corporate reward system and fringe benefits which the job brings. Thus, good reward system and fringe benefits will increase the employees’ job satisfaction which will invariably affect corporate productivity and performance (Millan et al, 2011). But, whether reward system and fringe benefits negatively or positively determines workers job satisfaction in Nigeria remains open to empirical studies. Hence, this study will investigate the impact of reward system and fringe benefits on job satisfaction with a special reference to Ensure Insurance Plc.
1.2 Statement of the Problem
Owing to the high level of unemployment that has plagued the labour market in Nigeria, many employers of labour have taken advantage of this menace by unilaterally fixing salaries and wages without the participation of their employees. Empirical researches also indicate that labour is largely underpriced since the numbers of job seekers are more than the number of available jobs. According to the National Manpower Board, (2009) the Nigeria labour market can barely absorb 10% of the over 3.8 million graduates turned out by the Nigeria educational system on a yearly basis.
Sometimes, employers prove very difficult to negotiate with. While the employee wants the highest and the best package, the employer would like to minimize cost as much as possible for profit maximization. Bad and depressed economic condition in Nigeria makes it the more difficult to fully implement a good reward and fringe benefits system.
Many of the studies on the dynamics of reward system, fringe benefits and job satisfactionwere done outside Nigeria. These studies particularly focus on workers in the banking industry. In Nigeria, most of the available studies such as Odunlade (2012) and Aninkan (2014) were too brief and lacking depths. Moreover, these researches were also theoretical studies whose findings were subjectively based on researchers’ personal opinions. It is noted that the past studies did not give adequate attention to reward system and fringe benefits, as well as highlighting plausible strategy that can stimulate employee job satisfaction in Nigeria. It is against this backdrop that this study seeks to fill in the gap in knowledge by critically examining the impact of reward system and fringe benefits on job satisfaction with a special reference to Ensure Insurance Plc.
1.3 Objectives of the Study
1.3.1 General Objective
The overall objective of the study is to assess the effect of reward systems and fringe benefits on the job satisfaction of commercial banks in Lagos, Nigeria.
1.3.2 Specific Objectives
- To determine the reward systems currently used in commercial Banks in Lagos
- To determine employees view of reward system used by commercial Banks in Lagos
- To assess the effect of fringe benefits (salary, bonus and promotion) on job satisfaction.
- To assess the effect of intrinsic Rewards (Praise and recognition) on job satisfaction.
1.4 Research Questions
- What are reward systems currently used in commercial Bank in Lagos city?
- What is the view of employees on reward system used by commercial Bank in Lagos?
- What is the effect of fringe benefits (Remuneration, bonus, salary and promotion) on job satisfaction?
- What are the effect of Intrinsic Rewards (praise and recognition) on job satisfaction?
1.5 Significance of the Study
In view of the study objectives, findings of this study will have some practical relevance. First, it will provide a deeper understanding of the appropriate reward systems that required to be adopted by commercial banking organization to influence employees work performance.
Second, the findings of the study will help the planners of Human Resource rewarding system on how to implement appropriate reward strategies within the organisation to enhance work performance. Third, tome of this study will help commercial banking management to reflect more on the purpose and benefits of rewarding employees in line with work performance. Finally, the findings of this research will add to the body of knowledge in the field of reward systems in private sector, especially commercials banks on their suitability and adequacy of reward packages to be introduced to lift employees’ performance.
1.6 Scope and Delimitation of the Study
This research was conducted in Lagos and specifically focused on impact of reward system work performance of employees in three commercial banks:. It was also limited to employees who have been working in the bank for at least 12 months and hence have experience reward system in their banks. These banks were selected because they are near to researcher and able to easily access the required information.
1.7 Organization of the Dissertation
The dissertation is organized into five chapters: Chapter One presents background information to the study; statement of the research problem; objectives of the study and research questions; justification and significance of the study; scope and delimitation of the study and conceptual framework. Chapter two is about review of the extant literature that consists of the theoretical and empirical review on reward systems and job satisfaction. Chapter three explains the research methodology used in this research. Chapter four provides a presentation and discussion of the research findings. Finally, Chapter five presents, the summary,
Summary, Conclusion and Recommendations
5.1 Summary and Conclusion
5.1.1 Research Objective 1: To Determine the Reward Systems Currently Used in Commercial Banks in Lagos
The research indicated that the commercial banks in Lagos offer fringe benefits in form of salary, bonus, commission and allowances. The employees are reasonably satisfied with the levels of these rewards. However the employees are somewhat satisfied with non- fringe benefits (praise from their bosses, formal and informal recognition, and of year family day) because these rewards are not frequently used in these commercial banks.
5.1.2 Research Objective 2: To Determine Employees’ View of Reward System Used by Commercial Banks in Lagos
The results revealed that bank employees find salary offered to be less than satisfaction. Also bonus only offered to management and commission also offered to a selected few employees. On the non-fringe benefits, the majority of the employees are dissatisfied with recognition given and there is absence of praise in the work place as only 4.6% of bank employees experienced praise rewards. This calls for implementation non-fringe benefit system in the banking sector.
5.1.3 Research Objective 3: To Assess the Effect of Extrinsic Rewards (Remuneration, Bonus, Salary and Promotion) in Organization Performance
The findings of this research revealed that the majority of the employees are not a happy with level of salary increment they get, although they are satisfied with the bonus level. Also employees were satisfied with the way promotion is being carried out at the bank. However, the study indicated that work performance would substantially increased when there is frequent salary increase, annual bonus level are increased and performance-based promotion are implement in the respective banks.
5.1.4 Research Objective 4: To Assess the Effect of Intrinsic Rewards (Praise and Recognition) on Job satisfaction in Commercial Banks of Lagos
The research revealed that the presence of intrinsic rewards such as praise and employee recognition motivates workers and subsequently improves their work performance. Workers recognition had more effect on workers motivation and performance compared to the annual family day. However, informal recognition through use of words such as “ thank you”, well done” and “you are a star in the organization” showed to be a powerful motivation tool when correctly and frequently used on individuals as well as teamwork as majority of the employees indicated that they would be motivated by them and also improve workers’ performance. Thus, these seemingly little things have a much greater impact on motivating employees for higher performance than extrinsic rewards and their impact need to be recognized in the stressful work environment such as commercial banks.
The importance of reward system in day-to-day performance of workers’ duties cannot be over emphasized especially when it comes to being rewarded for job done. Human performance of any sort is improved by increased motivation. From the results of this study, it can be concluded that bank workers reward system matters a lot and should be a concern of the bank and employees. The results of this study indicated that workers place a great value on different rewards given to them by their employees (commercial banks). The current system at the commercial banks is not sufficient enough to consistently motive workers.
The study also found that when, both financial and non fringe benefits are present at workplace, employees are motivated and so their job performance is improved and those efforts are reflected in the overall organisation performance. In absence of adequate reward, workers would tend to express their displeasure through poor performance and non- committed to their jobs. The study further highlighted that appropriate and consistent rewards to employees not only raise their motivation to work harder but also improves overall job satisfaction.
In brief, this study has demonstrated that intrinsic rewards (social recognition and appreciation) and extrinsic rewards (salary, bonus and performance promotion) affect on employee and organisation performance in commercial banks. The study agrees with previous study by Aktar, Sachu & Ali (2012) who found that each factor within both extrinsic and intrinsic reward was a highly significant factor which affects employees’ performance in commercial banks of Bangladesh.
This study uncovered some areas of concern that require attention of various stakeholders in the commercial banks. Next are recommendations to address those concerns. The research revealed that the present salary level offered to employees of commercial banks is very low and employees are not satisfied. This has led to low workers’ motivation and employee turnover.
The HRM department in conjunction with senior management and Trade unions should revise the current salary scale in line with prevailing economic environment and set an appropriate and competitive salary scale. This will not only motivate employees but also increase employees’ performance and reduce employees’ turnover.
The research revealed that bonuses are given to managers only and not ordinary employees this has generated discontentment and demotivation of employees as they see job satisfaction as collective action. The Human Resource Department (HRD) in conjunction with senior management should develop innovative bonus plan that also recognizes the efforts of non-managerial staff. This will not only motivate the employees to work harder during the year but will also bring harmony in the organization and encourage team work and overall greater performance in the organization.
The study revealed that current reward system especially remuneration in the surveyed commercial banks in Lagos are motivating workers enough. The HRD of the commercial department in conjunction with the senior management should develop appropriate incentive plan of a mix of extrinsic and intrinsic rewards that will encourage workers to be purposeful and improve their performance.
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