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CHAPTER ONE

INTRODUCTION

1.1.  Background of the Study

Compensation processes are based on Compensation Philosophies and strategies and contain arrangement in the shape of Policies and strategies, guiding principles, structures and procedures which are devised and managed to provide and maintain appropriate types and levels of pay, benefits and other forms of compensation (Bob, 2011). This constitutes measuring job values, designing and maintaining pay structures, paying for performance, competence and skill, and providing employee benefits. However, compensation administration is not just about money. It is also concerned with that non- financial compensation which provides intrinsic or extrinsic motivation for employees to improve in their performance (Bob, 2011).

Compensation implies having a compensation structure in which the employees who perform better are rewarded much more than the average performing employees (Pearce, 2010).Compensation Administration is concerned with the formulation and implementation of strategies and Policies that aim to compensate people fairly, equitably and consistently in accordance with their value to the organization (Armstrong, 2005). The task in compensation administration is to develop policies and procedures that will attain maximum return on Naira spent in the terms of attracting, satisfying, retaining and perhaps motivating employees (Anyebe, 2003).

Over time it has been a case in some organizations that their employees are under-remunerated or that some organizations do not have good compensation administration programs. This could be that employee promotion does not come in time, or that their pay packages are not commensurate to the work they have done for the organization (Fein, 2010). At times, this could be a deliberate act by management in other to frustrate the employees or that the management lacks the required managerial capabilities to effectively administer a compensation administration program (Dyer & Schwab 2004). Gone are those days when such issues can be condoned or accepted by the employees, and therefore there is a need to tackle the problem head long so that employees can bring out their best in terms of performance in order to boost their productivity. Compensation is one of the key drivers of productivity because humans are naturally inclined to perform better when they perceive that they will get sufficient payment or returns from their efforts. While people exert effort for different reasons, today’s competitive economic environment coupled with the

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