THE EFFECT OF COMPENSATION MANAGEMENT IN ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF BELOXXI INDUSTRY LIMITED)

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Abstract

In most cases, the achievement of the objectives of the organization is achieved through human resources, so it is necessary to strengthen the participation of staff with the organization. Therefore, identifying all possible factors that increase employee participation is of paramount importance. In fact, compensation management is an important element of human resources management. It influences the decision of the potential employee to join an organization and determines the relationship between the employer and the employee after the employee joins the organization. The compensation policy must also cover the monetary and non-monetary remuneration paid to the employee in exchange for the services provided, taking into account the employment contract, skills and abilities. The objective of this study was to determine the impact of compensation policy on employee engagement in the Beloxxi industry. The primary data were collected using a self-administered questionnaire and the data was analyzed using the Pearson product correlation. Data were presented using a simple percentage table. Overall, the study found that payment for performance was a popular compensation. It was also discovered that the compensation policy affects employee participation due to the relationship between the variables. This resulted in higher performance, confidence in the administration and a strong relationship in the organization. In addition, cash rewards reflected individual skills and efforts that included consideration of additional responsibilities and responsibilities. Employee compensation included pension plans; personal safety through the protection of health, health or accident insurance; Work safety, financial support for loans, purchase of organizational products and working life.

 

CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

 Employees in Beloxxi Ltd are of different category and department, ranging from manufacturing, quality control and assurance, research and development, sales and marketing, administration and consulting. The collective efforts of all and different employees in their respective capacities tends to determine the performance of the organization at large. This is to say that the commitment of employees as a factor in determining the level of performance in any organization cannot be over emphasized. Therefore it is of almost importance to strategically device means of getting employees in an organization to be fully committed to their work, one of the ways of achieving this is by designing an effective compensation policy that is capable of driving the employees into the perception of being part of the organization. Compensation is defined as the different types of financial incomes and benefits that employees receive based on the employment relationship (Bernadin, 2007). Direct compensation includes the basic pay that the employee is entitled for his or her job. It includes all forms of salary, wages, overtime pay, and bonuses. Indirect compensation includes protection programs, insurance plans, insurance plans, educational assistance and pay for time not worked, feeling of advancement, achievement opportunity, opportunities for recognition and other forms of benefits (Adeniji and Osibanjo, 2012).  Compensation policies are the collection of rules that govern the calculation of the net pay for all individuals employed in an organization. It goes a long way in determining the perception of employees in the organization as regards the way their welfare is covered and thus contribute to how committed they are to the objectives of the organization.

The concept of organizational commitment has received attention particularly in the field of industrial and organizational psychology (Cohen, 2003). It is a feeling of identification with organization’s values, contribution in the interest of the organization, and loyalty, expressed by employees (Steers, 1977). Organizational commitment is regarded as a dynamic construct comprising affective, continuance and normative commitment (Malik, Wahab and Naheem, 2010). Commitment is also described as the psychological connection that binds employees to their employing organization.

It must also be noted that a good and successful compensation and incentive package is hinged on a number of factors which one may call indicators. The compensation package should be tied to the vision strategy, culture, business models and goals of the organization. A good communication system must exist to ensure there is a clear understanding of the organisation’s future. Employees must understand the roles they place in achieving the objectives of the company and they must feel secure in performing those roles. 

As alluded to above, compensation plans must be well defined at various levels of the organization and must be review periodically to keep the motivational levels of employees at desired heights. Also promises made concerning compensation by both employees and management must be honored to ensure a fair relationship between the two parties. It can be guaranteed that to indicators of a good compensation system as discussed above if given proper attention by the management of companies has the tendency of impacting on the attitudes and behaviours of employees positively hence sustaining their motivational levels to achieve corporate organizational goals.

1.2 Statement Of The Problem 

 Human capital as an intangible asset gets increasingly important in modern economies. More and more companies operate in employee-intensive businesses where human capital is regarded as a critical asset and not purely a cost factor (Lev (2001)). As personnel costs often represent the largest part of total costs in companies, the design of compensation packages is of strategic importance and therefore directly influences corporate performance. Additionally, the structure of the pay mix is highly important for the motivation, commitment, and behavior of employees inside the company as well as for activities along the HR value chain like e.g. recruiting, developing and retaining employees. And, most important, performance-related pay helps to align the goals of managers and employees with those of the company respectively the shareholders. Hence, the design of competitive compensation policy is one of the major challenges companies have to face with in recent times. More so, with the rapid development of economy, the market competition is increasingly fierce and enterprises are faced with more severe policy and economic environment. In order to survive and develop, enterprises need to strengthen internal management effectively and attach great importance to the outside-in feedback management, that is to say, enterprises should establish an effective management control system. As an essential part of management control system, compensation policy design is undoubtedly of great importance. Compensation policy is one of the important tools for enterprises to carry out enterprise management and pursue business success. 

1.3 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:

i.     To determine the relationship between compensation policy planning and employees commitment    

ii.         To identify the compensation packages available

iii.        To investigate the problems and challenges associated with compensation management

iv.        To identify other forms of compensation and recommendation ways of addressing challenges in compensation management 

1.4 Research Question

Based on the research objectives the following research questions are posed.

1.What is the relationship between compensation policy planning and employees commitment?

2. what is the compensation packages available ?

3. what are the problems and challenges associated with compensation management?

1.5 Research Hypothesis  

Based on the theoretical framework, the following hypothesis has been based on developed.

Ho: There is no relationship between compensation policy planning and  employees commitment. 

Hi: There is a positive relationship between compensation policy planning and employees commitment.

1.6 Significance Of The Study

The study will be of significance to the various human resource management stakeholders, policy developers, academicians and researchers.

The study will add new body of knowledge to existing contributions by providing more information through its contextual framework. HR practitioners will find the study to be of value when developing appropriate compensation policies which are intended to increase employee commitment. 

Consultants will use the study when drawing comparatives of employee commitment and compensation policies across their clients in different organizations. The research findings will be replicated in other organizations in similar environment as pharmaceuticals .HR policies geared toward increase of commitment will be developed by the practitioners with an objective increasing commitment levels in the organization. Such policies include employee involvement, empowerment, participation and leadership. Scholars and researchers on the other hand will use the study as basis of further research.

1.7 Scope of the study

The study of the relationship between compensation management and organizational performance was conducted on beloxxi industry limited. The design, planning and implementation of compensation policies in these company and how it motivates employees to be fully committed to their works formed the basis of the study.

1.8 Limitations of the study

This research is limited to the activities of the beloxxi industry limited.

this is consequent to the time constraint on the duration of this research, so that the researcher can fully investigate the problem area. 

Therefore, the researcher has focused solely on Beloxxi limited for the research.

1.9 Definition Of Terms 

Compensation: Compensation is the total cash and non-cash payments that you give to an employee in exchange for the work they do for your business. It is typically one of the biggest expenses for businesses with employees. Compensation is more than an employee’s regular paid wages. It also includes many other types of wages and benefits.

Compensation management: Compensation management is the act of providing monetary value to an employee for the work they do by means of a company process or policy. Some types of compensation include salary, bonuses, and benefit packages. Companies use compensation management in order to find, keep, and motivate employees to do quality work

Organizational performance: Organizational performance comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives)

Human resources: Human Resources is also the function in an organization that deals with the people and issues related to people such as compensation and benefits, recruiting and hiring employees, onboarding employees, performance management, training, and organization development and culture


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