The Effect of Remuneration Discrimination in the Public and Private Sectors in Lagos State on Employee Performance (a Case Study of Beverage Industries)

The Effect of Remuneration Discrimination in the Public and Private Sectors in Lagos State on Employee Performance (a Case Study of Beverage Industries)

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Abstract on 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 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 of The Effect of Remuneration Discrimination in the Public and Private Sectors in Lagos State on Employee Performance (a Case Study of Beverage Industries)

INTRODUCTION

Background to Study

Remuneration (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 remuneration 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). Remuneration 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. Accprding 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.

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

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 remuneration discrimination and  employee preformance in private and public sectors

2. To evaluate the effects of remuneration discrimination in both private and public sectors on employee performance

3. To determine the factors influencing remuneration variations in both private and public sectors.

 Research Questions

1. What is the relationship between remuneration discrimination and  employee preformance in private and public sectors ?

2. What are the effects of remuneration discrimination in both private and public sectors on employee performance ?

3. What are the factors influencing remuneration variations in both private and public sectors ?

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 remuneration discrimination and  employee preformance in private and public sectors

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 remuneration discrimination in the public and private sectors in Lagos State on employee performance.

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

Definition of Terms

Remuneration

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.

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