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THE EFFECT OF SALARY INCREASE ON THE PRODUCTIVITY OF WORKERS

CHAPTER ONE

INTRODUCTION

Salary is conceptually, a fixed amount of money paid to a worker usually measured at monthly and annual basis, not hourly, as opposed to wages. Salary is a fixed amount of money or compensation paid to an employee by an employer in return of work done (Idrees, Xinping, Shafi, Hua & Nazeer, 2015). Salary connotes a set wage based on a set of expected duties performed. A based salary guarantee provides employees with security, knowing they will receive at least a minimum pay for their time. Wildred, Elijah & Muturi (2014) added that basic salary is a fix periodical payment for non-manual employees usually expressed in annual terms, paid per month with generally no addition for productivity. Though, fixed salary in an organization can lead to complacency, with employees knowing they will get paid no matter how they produce the important of job satisfaction and a sense of purpose drive workers productivity. Therefore, incentive pay based on the quantity of work delivered rather than on the time spent on the job is particularly beneficial for increasing worker productivity (Ray, 2016). Employee productivity describes what an employee receives in exchange for wages or salary paid to an employee. Taylor (2009) noted that productivity relates to profit earned for a company, but productivity need not be a monetary measurement. It is evident that people are easily motivated by money, for instance, the salary an employee received from his employer has influence on his productivity. A worker is seemingly happy with the salary he earns and will perform to his potential. This is because when a worker earns a high salary he feels motivated to do a job to maintain his position (Woods, 2016). Hence, his feeling gives him a sense of security and accomplishment as he enjoys high status ranking in the organization because an employee when satisfied with his salary become more productive and motivated. It is worthy to stressed that monetary incentive such as salary is used by employers of labours to retain their best brains and as well compensate them for a job well done and excellence of job performance through monetary form (Olubusayo, Stephen & Maxwell, 2014; Nelson, 2003). Salary as a monetary incentive describes incentive payment plans which ties incentive directly to productive standard (Alaba & Owodunni, 2007). Sheridan (2005) opined that well-paid employees are the key to better productivity and ultimately a better performing organization. For instance, managers are mistaken if they believe tinkering with one aspect of compensation such as health-care benefits is going to have a meaningful impact on workers overall pay satisfaction and enhance the company productivity. It is the salary that counts. This implies that when it comes to choice, the most important incentive to employee is the salary. In addition, a happier employee is known by the overall pay, that is, the more satisfied employees are with their job the better the company performance. Kinicki and Williams (2008) stated that pay for performance is one of the popular monetary incentives, also known as merit pay. Different salaried employees might get different pay raises and other financial rewards depending on their overall job performance. Abosede & Adekunle (2012) reminded that salary increase has a motivational value but that the direct relationship between salary increase and employee productivity is contingent on the facts that: Increase salary is tied to higher performance and that workers are able to see direct relationship between increased salary and higher performance such that only the highest performers get the highest rewards, the workers perceive adequate degree of fairness between their salary and their work efforts, the employees firmly believe that better performance will always result in better performance and hence better salary, and the employees also believe that their efforts will always result in better performance and hence better salary. Until these aforementioned conditions are present, the direct relationship between increase salary and enhanced employee productivity cannot exist or be real. Employees are valuable resource of any organization. labour productivity nowadays has been the main concern of modern organizations. It is accepted that employees discover valuable sources of competitive edge for firms (Aslam, Ghaffer, Talha & Mushtaq, 2015). The fact that employees are motivated by monetary reward can be induced to expend greater effort in a task if those efforts are rewarded directly through performancerelated pay. The importance of salaried employment has minimizes fluctuations in pay, and thus give workers some degree of certainty about their income into the future as the reach performance threshold necessary to retain job and remain in business (Bryson, 2010). Most workers are salaried contract and they have their incentive effects on the workers productivity. Motivation has been considered as a critical factor for sustainable productivity. Motivation becomes the amount of effort an employee expends on the activities or task associated with the job. Monetary rewards are the primary motivator of workers (Idrees, et al, 2015). The importance of motivation in fulfillment of need is determined by the extent to which a job with its specified characteristics and duties, allow an individual workers to meet his/her personal need (Kinicki & Kreitner, 2007). In the same way, employees who perceive their needs as unmet are demotivated and become increasingly attracted to competing places of employment (Tziner, 2006). However, what motivates an employee is not limited to the nature of the job, but it also depends upon the individual perceptions of, attitudes to, and expectation from the job itself (Hong, White & Barriball, 2005). Financial remuneration has been considered as the sole of motivation. Herman, Harry and Ryan (2012) add that financial remuneration will be successful in terms of enhancing employee performance. It is one of the most important factor leading employees to accept job offer (Felman & Arnold, 1978). Financial remuneration includes the basic pay, cost-of-living adjustment, short-term incentives, and long-term incentive. Fay & Thompson (2001) affirm that extrinsic rewards have a critical role in determining the organization’s ability to attract high potential employee to retain high performing employees, and to achieve greater levels of quality and performance. Indeed, transformation may fail to deliver expected result if the underlying factors that extrinsically drive employee performance are not addressed properly. The modest but continuous growth in the Nigerian economy is a prospect for cement manufacturing firms in the South-South geopolitical zone to increase local production in order to meet the high demand for cement.

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