Compensation on Employee Job Satisfaction (A Case Study of Nestle Nigeria Plc, Lagos)
Chapter One
Objective of the study.
The main objective of this study is to investigate the impact of compensation management on the performance o. the specific objectives of the research:
- To find-out if there is a relationship between direct financial compensation and job satisfaction
- To determine if a positive relationship between indirect financial compensation and job satisfaction exists
- To find relationship between non-financial compensation and job satisfaction.
CHAPTER TWO
LITERATURE REVIEW
Conceptual Framework
Defining compensation
Milkovich and Newman (1999) stated that, Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. The Journal of Global Business and Economics (2010) also defines compensation as “the combination of all cash incentives and the fringe benefits mix that an employee received from a company which constitutes an individual’s total compensation.” (Chabra 2001) refers to Compensation as a wide range of financial and non-financial rewards given to employees in exchange for their services rendered to the organisation. According to him, it is paid in the form of wages, salaries and employee benefits such as paid vacations, insurance, maternity leave, free traveling facility, retirement benefits, etc. He indicated that the term ‘wage’ is used to denote remuneration to workers doing manual or physical work. Thus, wages are given to compensate the unskilled workers for their services rendered to the organization. Wages may be based on hourly, daily, weekly or even monthly bases.
According to DeNisi and Griffin (2001) compensation is a reward system that a company provide to individuals in return for their willingness to perform various jobs and tasks within organizations. They further stated that relevant and commensurate rewards need to be provided to the employees so that they feel valued and their expectations on exchanging their skills, abilities and contribution to the organization are met.
Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required. It is based on market research about the worth of similar jobs in the marketplace, employee contributions and accomplishments, the availability of employees with like skills in the marketplace, the desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and the profitability of the company or the funds available in a non-profit or public sector setting, and thus, the ability of an employer to pay market-rate compensation.
Compensation also includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and sales commission. It can also include non-monetary perks such as a company-paid car, stock options in certain instances, company-paid housing, and other non-monetary, but taxable income items. Compensation management is a general policy, designed to help an organization maximize the returns on available talent. The ultimate goal is to reward the right people to the greatest extent for the most relevant reasons.
Compensation systems, also known as reward systems and pay systems refer to the scheme by which rewards are distributed to an employee (Barr 1998). According to (Thomas 1998) the typical compensation package includes two basic components: direct pay and indirect pay or benefits. Compensation systems vary across organizations and Gerhart and Milkovich (1988, p. 12) suggested that “employers tend to distinguish among themselves through differences in the contingency of compensation.”
Scholars have argued that compensation systems provide outsiders with information about less visible organizational characteristics (Gerhart and Milkovich, 1990) and therefore, they might signal to a job applicant what an organization’s culture, norms, and values are like (Rynes and Barber, 1990). It is further suggested by Rynes (1987, p.190) that “compensation systems are capable of attracting (or repelling) the right kind of people because they communicate so much about an organization’s
philosophy, values, and practices.” Organizations could therefore take another look at their compensation packages and redesign them to attract those candidates on the job market who they think are very skilled and can help them reach their goals.
The Importance of Compensation Management on Employee Performance
According to Baker (2002) the output or performance of an employee is a combination of effort, ability and an error margin, providing for all uncontrollable factors, at least from the employee’s perspective. He stated that given the employee’s private information vis a vis the employer, the employer must depend on performance measures in order to estimate the effort the employee has put in. Performance measures are selected based on two criteria: (a) alignment with the organisational objective and, (b) controllability by the employee as proposed by Baker (2002). The performance measure is used to evaluate the performance of the employee, which forms the basis for determining the amount of variable monetary compensation an employee will receive and for making career decisions.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.
This study was carried out to examine the effect of Compensation on employee job satisfaction, staff of Nestle Nigeria plc, Lagos form the population of the study.
CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION
In this section, all relevant data collected were presented and analyzed in a tabular form. The questionnaire administered and collected measured up to the expectation of ensuring a high percentage of good responses.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
SUMMARY OF FINDINGS
Inefficient or no communication on compensation issues
The study revealed that issues concerning employee compensation were not communicated effectively through the institution and employees also did not have a forum to be heard on the issues they have concerning their compensation packages and their management. Employees therefore were not involved in the formulation and implementation of policies concerning compensation in the hospital.
Conclusions
From the findings of this study, it can be concluded that effective compensation policy enhances employee Job satisfaction. When employees perceive that the policies in place encompasses their welfare, performance will be enhanced through Job satisfaction to work and intention to leave the organization will be drastically reduced. The subject of compensation poses a critical challenge for the Nigerian workforce. This poses a threat to the achievement of organization; objective as human capital is already the sure way of achieving them. A fairly designed compensation policy will have a positive impact on performance outcomes and enhance the Job satisfaction levels of employees.
Recommendations
The following recommendations are provided for high performance based on the finding of this study: This study found that compensation policy has a significant relationship with employees Job satisfaction which therefore improves organizational performance. It is therefore recommended that:
- Appropriate and equitable compensation policy should be designed to facilitate increased employees Job satisfaction.
- The policy should be assessable to all/potential employees
- The research recommends that a review of all compensation packages should be instituted and undertaken periodically to ensure all packages are given equal attention and developed to be abreast with current economic situation.
- It is recommended that management should develop a manual that clearly spells out the categorization of the compensation packages and their administrative procedure and copies of this manual should be made available to the entire employee population to allay their fears in that regard.
References
- Armstrong, M. (2000). Strategic Human Resource Management: A Guide to Action. London: KoganPage. Philadelphia, USA
- Armstrong, M. & Murlis, H. (2007). Reward Management: A Hand Book of Remuneration Strategy and Practice. Kogan Page, Philadelphia, USA
- Avari, G. M. (2011).The Relationship between Compensation Practices and Affective Organization Job satisfaction. Interdisciplinary Journal of Research in Business, 44-55.
- Avari, R., Amin, S., Ahmed, U., Seliman, S. & Gamasari, M.S. (2011). The Relationship between Strategic Compensation Practices and Affective Organizational Job satisfaction. Interdisciplinary Journal of Research in Business, 1 (2), 44-55
- Chew, J. & Chan, C.C.A. (2008). Human Resource Practices, Organizational Job satisfaction and Intention to Stay. International Journal of Manpower, 6,503-522
- Cohen, A. (2003). Multiple Job satisfactions at Work: An Integrative Approach. Hillsdale, NJ: Lawrence Eribaum.