Effect of Compensation Package on Employee Performance

Effect of Compensation Package on Employee Performance

Abstract of Effect of Compensation Package on Employee Performance

This work is set to critically analyze the Effect of  Compensation Package on Employee Performance. It is a known  fact that one of the most vexed issues in employer/labour relations is matter relating to compensation. Therefore, it is proper to say that compensation package is a matter that is closet to the heart of every employee and the employer. In doing this, related literature was reviewed and data was collected using questionnaire and interview methods. Respondent were randomly selected from the population of study. The population of study was the employees of KPMG professional services, Lagos. The data collected from field work was presented and analysed using simple percentage and chi-square. Findings were made and summarized. Adequate recommendations were equally made. The major findings of the study are; that compensation affects employees performance, that the employees morale is affected by the adequate of other wise of their compensation, that labour turnover is minimal if compensation is perceived to be adequate, that adequate compensation of employees bring about good labour employee performance on his is a function of satisfaction. Therefore, organization with good compensation packages enjoys stability team work, higher productivity and profitability. As the research is no a reservoir of knowledge in this field of study, suggestion for further studies was made.

Chapter One of Effect of Compensation Package on Employee Performance

INTRODUCTION

Background to the Study 

Prior to the arrival of the colonialists on our shores, there was vitality no wage employment. The Nigeria economy was purely agrarian with the workforce made up of father, his children and the wife (or wives). The only non-family member’s employed on the farm were the slaves. Even when additional hand is engaged from outside to work on the family farm. Payment in form of “wage” is usually in kind and not in cash.

With the arrival of the Europeans, things started to change and the need to hire the natives either as cooks, drivers, gardeners, interpreters or clerks became inevitable and consequently cash economy and wage employment began emerge. As this group of Nigeria workers stayed for a long time their masters, there began the need to keep records of their employment.

Consequently personnel” files were opened and all records of employment were kept therein. These records eventually become the basis for making many personnel decisions including the payment of compensation for any retiring employee. As the environment in which business operates began to grow complex day in day out, compensation become fiercer and the issue of compensation took the center stage. Employee began to demand for better working conditions. They argued that they have helped an organization bake the cake (profit), it will be a good idea to partake in its sharing. Hence, compensation becomes an instrument through which organization attracts, motivates retains the best hand, in the industry.

Again, as the world economy began to advance, and the standard of living continues to increase, employees world wide continue to ask for better working conditions. These have led most organization to fashion out better ways to ensure that employees are satisfied because satisfied employee will put in his best towards attainment of organizational objectives.

In this work, we would evaluate the relationship between compensation and employee performance. We will also look at how organization can ensure adequate compensation of employees.

More so, that rate at which most employees move from one organization to another for a little financial inducement suggests that all is not well with the compensation of most organizations. Hence the need to take a study of these field of human Endeavour. Labour turnover does no organization any good. Apart from loss of recruitment cost, to also result to loss of manpower, market share and set back to attainment of organizational goals. Labour turnover equally destroys employee’s morale as the staying may take time to acquaint with incoming employees. Therefore, a study into this field will  be revealing and informing.

Statement of Problems

One of the major symptoms of inadequate compensation of employee is high turnover. No sooner than the employee pay packet fails to meet his basic needs than the employee begin to think how to leave the organization.

The consequence of high labour turnover is that morale will decline and productivity will follow the downward trend. Employee come into an organization with two basic objectives in mind; first, to help the organization meet its own objectives and secondly to meet their own personal goals and aspirations.  When the compensation package on offer to employee fails the second need of the individual employee, the first basic objective could be a foul cry from being realized. A motivated worker dreams his job, think his job, sing his job, and indeed devote his time for his job. The reverse is the case when the compensation is inadequate. An employee’s compensation not only fulfill, the economic role but also serve as a measure of social ranking in the society. Money therefore is a classifier of individuals into several classes. Because of human tendency to be classified as member of a higher social class, the size of pay becomes important to every employee and acquire a motivating factor to employees since high status leads to more respect and more attention. Therefore, organization should pay more attention to issues relating to workers compensation as the only means to get best out of them.

Research Questions

In the research work, certain question shall be asked which will form the guide to the design of research, instrument for effective data collection s for analysis. The essence of the research question is to keep the research focused on the subject matter as rational answer shall be sort for. The following questions are asked.

1.                 What is the effect of adequate compensation on employee’s turnover?

2.                 To what degree does compensation affect morale of employee’s?

3.                 What is the effect of adequate compensation on employee’s performance?

4.                  What is the effect of adequate compensation on productivity?

5.                 What is the effect of adequate compensation to employee’s labour relationships?

6.                 What is the effect of adequate compensation to the leaving standard of the employee?

7.                 Does adequate compensation reduces the cost of doing business to an organization?