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EFFECT OF COMPENSATION PACKAGE ON EMPLOYEE PERFORMANCE

ABSTRACT

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

INTRODUCTION

1.1     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.

1.2     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.

1.3     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?

1.4     Objectives of the Study

The objectives of this research work are to critically analyze the effect of compensation packages on employee performance in the audit and business advisory firm using KPMG as a case study. It is a known fact that is clearest to the heart of every employee after hold is the issues of compensation; because the size of compensation package is the determinant of the goodies the employee will enjoy. Who wants to suffer denial? When he can better his conditions by belonging to organization that offer good rewards for labour and services rendered. Therefore this study intends to find out.

1.     The effect of adequate compensation on employee’s turnover.

2.     The effect of adequate compensation on employee’s morale.

3.     The relationship between adequate compensation and profitability.

4.     The role of adequate compensation on labour management relation.

5.     The benefit that accrue to organization package compensation package for employees.

1.5   Statement of Hypotheses

A research of this nature will not be complete without a hypothesis. A hypothesis is just an information guess of the research into the subject matter. Hypothesis formulated shall be tested for acceptance or rejection and reform the basis on which conclusion and recommendation will be made. Hence the following hypothesis is formulated.

1. Adequate compensation does not affect employee performance.

2. Adequate compensation does not affect employee morale.

3. Adequate compensation does not affect labour turnover.

4. Adequate compensation does not affect employee labour relation.

5. There is no relationship between adequate compensation and organization profitability.

1.6   Scope of the Study

It would be right to say that research at this level should be realistic, studying the problems in a well concise and detailed manner. This objective can be achieved if the project is not out of problem. To carry out this research objective creditably well, the topics involves a core human capital problem, the researcher chooses KPMG professional services, Lagos as a case study. Data collected shall be completely analyzed and finding made may be applicable to other organization, a recommendation drawn from it. The choice of KPMG professional services is not to make the work easier for the researcher but based on the fact that researcher does not have the resources to study the whole of audit and business advisory firms littered in Lagos, therefore KPMG is a just simple survey from there the data for analysis shall be generated. 

1.7     Significance of the Study

The growing incidence of poor performance of employee in most industries and growing tendency of labour turnover in most industry is a cause for worry to both government and the employers of labour. Most employees whom are poorly remunerated are constantly in search for job opportunities with better offer for same or similar position. The case at which employee move from one organization to another for slight increase in pay suggest that there is something with most organizations compensation policy hence the need for this study.  

This study is very significance in that it will reveal the effect of inadequate compensation on worker’s performance and the causes of labour turnover. Individual employee on entry into an organization has to be  trained and oriented to integrate into the corporate culture of the new organization and this involves financial cost and time. It amount to losses to an organization to loss an employee within a short period without justifying the investment on such employee. Hence this study will x –ray the implication to employee and to the organization. Policy maker will benefit from such knowledge. Again, organization with equitable compensation package will enjoy stability and growth, as this is capable of attracting and retaining the best hand in the industry. The study will also make a good reading text to interested parties who may want gain knowledge in this filed and finally, it will add to the wealth of knowledge available in this field of human endeavour. 

1.8   Limitation of the Study

In the course of the research work, the researcher encountered some difficulties. Tracking own staff of KPMG Lagos who is in position to give some information was very difficult. Owing to the buys schedule of these executives, the researcher schedules a number of meetings that often could not hold. Again, the task of combing work with academic was in no way a small task. The conflicting elements of the two are more than stress to the researcher. Time was a major constraint to the researchers, as the researcher has to balance the demand of work and academics. Finally, the metropolitan nature of Lagos contributed in no small way to limit researcher. Quality time that could have been spent in other things was spent in traffic jams that have become a daily occurrence in Lagos.

1.9   Operational Definition of Terms

Certain terms where used in the cause of this work and would be appropriate to define them, as to give the exact meaning as it relate to this work. The following terms are defined. 

Productivity: This is the output per individual worker per day or week or month or year.

Labour Turnover: This is the rate at which employee leaves the  organization as compared to the rate at which they are employed.

Employee Compensation: This is the totality of what an employee receives in exchange for his labour services to an organization.

Moon Lighting: This is a term used to refer to employee attitude whereby they will come to work sign attendance register and either disappear or avoid doing the work.

Human Capital: The totality of an organization workforce is referred to as the human capital of that organization.

Synergy: The combination of the effort of employees is  greater than the sum of their individuals efforts. That is the sum of A and B is less than their product.

Downsizing: This is a situation whereby organization reduces its workforce to cut cost of personnel.

Delaying: This is a situation whereby organization reduces or eliminate some hierarchy in an organization so that some duties will be merged and some employee retrenched.

Outsourcing: This is a situation whereby organization subcontracts some of its functions or duties to another organization to reduce cost.

Dysfunctional Behaviour: When employee attitude to work are such that do not support the achievement of corporate goals, it is said to be dysfunctional. 

Re-engineering: This is the total overhaul of organization process, procedures and introducing a new system that is superior to former employer may be affected in this process.

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