Employee Perception On Compensation Management And

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International Journal of Trend in Research and Development, Volume 3(2), ISSN: 2394-9333www.ijtrd.comEmployee perception on Compensation Management and BenefitPolicy at commercial bank of Ethiopia(A case study on commercial banks in Dessie Town, Ethiopia)1Dr.Ponduri SB and 2Dr.Aravind Soudikar,Associate Professor, Department of Management, College of Business and Economics,Wollo Univeristy, Dessie, Ethiopia2Assocaite Professor, School of Management & Accounting, Hawasa Univerisity, Hawasa, Ethiopia1Abstract: The aim of the study is to examine employees‟perception on compensation management and benefitpolicy at selected Commercial Banks in Dessie town,Wollo region, Ethiopia. To meet the objectives researcheradopted descriptive research design by using quantitativeand qualitative data interpretation. From the total 12licensed commercial banks currently operating in Dessietown the sample areas of the study has selected from twobranches of public commercial banks and the two brachesprivate commercial banks by using purposive samplingtechniques. The primary data was collected throughquestionnaire from a sample of 100 clerical employees ofthe banks and interviews from human resource department.The data has been analyzed by using descriptive statisticsfrequency, tables and charts. From the research it isobserved that employees perception towards currentcompensation and benefits are unfair, not distributedbetween supervisor and clerical employees. Employees arenot participating in compensation and benefits decision andalso the compensation system not communicated sationmanagement, benefits policy, commercial bank, SelectedBanks, purposive sampling.INTRODUCTIONCompensation is the remuneration received by anemployee in return to his/her contribution to theorganization. It is considered to be the most important taskin any human resource management process. It occursperiodically, demand accuracy and must not be delayed. Itis also concerned with the formulation and implementationof strategies and policies that aim to compensate peoplefairly, equitably and consistently in accordance with theirvalue to the organization. It requires integrating humanresource information with business process and strategiesto achieve the organizational goals and objectives. Fair andreasonable compensation will always help the organizationto retain the employees to get desired goals and objectives.This practice helps in maintaining good industrial relationsby providing monetary and non-monetary benefits to all theemployees. A fair compensation system always helps theorganization in enhancing the satisfaction, productivity,performance, attendance and retention of employees.IJTRD Mar - Apr 2016Available [email protected] of the study To examine the perception of employees oncurrent compensation system and benefit policy.To identify the most favored type of benefit policyavailable with the organization.To observe the difference between qualificationand experience in perceiving compensation andbenefit policy.To describe the role of employees incompensation, benefit decisions and degree ofcommunications about and benefit practices.Significance of the StudyEvery organization should build an effective compensationmanagement system in order to sustain in the competitiveworld. It may be financial and non-financial compensation.It is useful to attract, retain and motivate individualstowards higher performance. In order to get work done bythe employees and workers organizations need to pay therequired amount of wages and salaries in the form ofcompensation. This system is important for every countryand industry and Ethiopian banking industry is not anexception. The current research initiated to examine theperception of employees on current compensationmanagement system and benefit policy in commercialbanks at Dessie town, Ethiopia.Scope of the StudyThe scope of the study is to examine the employees‟perception on compensation management systems andbenefit policy in the selected commercial banks in Dessietown. They are Commercial Bank of Ethiopia,Construction and Business bank, Dashen Bank, andWugagen bank. As compensation system and benefits areimplemented on permanent employees the study isdelimited to the data obtained from clerical staff of selectedbranches of public and private commercial banks.Literature reviewHuman resources are the most vital resources for everyorganization. Pay has a significant impact on employee163

International Journal of Trend in Research and Development, Volume 3(2), ISSN: 2394-9333www.ijtrd.combehavior, performance and effectiveness in organizations.(Edwards and Gilman, 1999 as cited by FitsumGhebregiorgis and Karsten, 2006). According to Bowman(2006), compensation management can be defined as allthe employers‟ available tools that may be used to attract,retain, motivates and satisfy employees. This encompassesevery single investment that an organization makes in itspeople and everything its employees value in theemployment relationship. It is also useful in recruitment,job performance and job satisfaction. The notion ofcompensation management just says that there is more' torewarding the people than throwing money at them.Understanding the construct of compensation systems, itsimpact upon the organization's structure, strategies, andemployees has been an important area. Popoola and Ayeni(2007) to use compensation as a motivator effectively,personnel managers must consider four major componentsof a pay structures in an organization these are: (a) Job rate,which is the importance the organization attaches to eachjob; (b) Payment, which encourages employees byrewarding them according to their performance; (c)Personal or special allowances and (d) Fringe benefits suchas holidays with pay, pensions, and so on. Akintoye (2000)the success in attaining goals in human resource planningrelated to attracting and recruiting human capital is directlylinked to compensation offered. Also, the ability tomotivate workers and retain desired employees is largelyinfluenced by compensation offered Dulebohn and Werling(2007). Mulis and Watson in Armstrong (2008) put it "themonetary value in the compensation package is still matterbut they are not only the factor". They also stress thatcompensation policies are based on “building a muchdeeper understanding of the employee agenda across allelements of reward". In the words of Brown as quoted byArmstrong (2008) compensation and reward process areflow of events that determine the level, differentials offinancial rewards, fringe benefits and non-financialrewards received by each member of the organization. Inrecent years, the inclusion of non-financial measures hasgained more popularity in compensation managementsystems. Some scholars demonstrate positive effects ofincorporating non- financial measures into thecompensation management system. Empirically (world atwork, 2008). Thus Dalton McFarland asserted that "amongthe various devices for eliciting the loyalty, corporationand effort of individuals are the various forms ofeconomics reward both financial and non-financial".Compensation includes direct cash payments, indirectpayments in the form of employee benefits & incentives tomotivate employees to strive for higher level ofproductivity are critical component of employmentrelationship. Compensation is affected by many factors likelabor market factors, collective bargaining, governmentlegislation & top management philosophy regarding paybenefits (world at work, 2008) The compensationmanagement process was summed up by work force (2008)IJTRD Mar - Apr 2016Available [email protected] follows: Creating a fun, challenging empowering workenvironment in which individual are able to use theirabilities to do meaningful jobs for which they are shownappreciation is likely to be a more certain way to enhancemotivation and performance even though creating such anenvironment may be more difficult and take more timethan merely turning the reward lever. According to Brownin Armstrong (2008), Compensation strategy defines whatthe organization intends to do in the longer term to developand implement reward policies and process that will furtherthe achievement of its business goals. It establishespriorities for developing reward plan that can be aligned to'business and human resources strategies. According toBrown in Armstrong (2008), compensation strategy isultimately a way of thinking that you can apply to anyreward Issue arising in your organization, to see how youcan create value from it. To him, it is necessary torecognize that effective compensation strategies have threecomponents: The compensation management is concernedwith the financial aspects of needs, motivation andrewards. Managers, therefore, analyze and interpret theneeds of their employees so that reward can be individuallydesigned to satisfy these needs. For it has been rightly saidthat people do what they do to satisfy some need. Beforethey do anything, they look for a reward or pay-off. Thereward may be money or promotion, but more likely it willbe some pay-off-a smile, acceptance by a peer, receipt ofinformation, a kind word of recognition etc.(world at work,2008). Thus, Rao and Rao in workforce management(2008), asserted that the main objective of job evaluationare: To gather data and information relating to jobdescription, job specification and employee specificationsof various jobs in an organization, to compare the duties,responsibilities and demands of a job with that of other job,to determine the hierarchy and place of various jobs in anorganization and to ensure fair and equitable wages on thebasis of relative worth or value of jobs. According toArmstrong (2008), an organizational compensationmanagement system includes anything an employee's valueand desire that an employer is able and willing to offer inexchange for employee's contribution. More specificallysuch compensation includes financial and non-financialrewards. Compensation management is an integral part ofhuman resource management that helps in motivating theemployees and improving organizational effectiveness(Naukrihub 2009, 37). They are responsible for eachdecision taken, work done and for every results. Theproficiency of employees plays a vital role in the context ofdiverse challenges faced by the modern organizations. It isan organized practice that involves balancing the workemployee relation by providing monetary and nonmonetary benefits to employees. Bhattacharya (2009) saysthat balancing the cost of compensation and retainingemployees has now become the most important priority fortoday‟s organization (pp.2). The most previous studiesfocus on the relationship between compensation and164

International Journal of Trend in Research and Development, Volume 3(2), ISSN: 2394-9333www.ijtrd.comhuman resources outcomes like satisfaction, productivity,performance, attendance, and retention. According toNaukrihub (2009) compensation provided to an employeescan be direct in the form for monetary benefits and orindirect in the form of non-monetary benefits known asperks, time off etc. compensation does not include onlysalary but it is the sum total of all rewards and allowancesprovided to the employees in return for their' services. Ifthe compensation is effectively managed, it contributes tohigh organizational productivity. Bob (2011) described inhis study that compensation processes are based oncompensation philosophies and strategies. These containarrangement in the shape of policies, strategies, guidingprinciples, structures and procedures. These are devisedand managed to provide appropriate types, levels of pay,benefits and other forms of compensation. FaheemGhazanfar (2011) Relationship between Satisfaction withCompensation and Work Motivation: There is no firmbasis for the assumption that paying people more willencourage them to do better work or even, in the long run,more work. Bob (2011) Compensation processes are basedon Compensation Philosophies and strategies and containarrangement in the shape of Policies and strategies, guidingprinciples, structures and procedures which are devised andmanaged to provide and maintain appropriate types andlevels of pay, benefits and other forms of compensation.Adekoya Ismaeel Adeniyi (2013) “Compensationmanagement and Employees‟ Performance in PublicSector” (Case Study of Nigeria Port Authority) Finally theanalysis of data collected from respondents shows thatcompensation management system has impacts onemployees performance and also there are other factorsapart from monetary factor that influence the performanceof employees either positively or negatively.Research GapEthiopian banking industry is suffering with high labourturnover and has high flow of employees from one bank toanother bank to facilitate their life style by comparing theirbank pay scale and benefit package with other banks.Employees are also finding the most preferred or perceivedcompensation and benefit management system this mayaffect the productivity of the organization. From the earlierresearches it is observed that compensation management ismainly to improve the behavior, productivity, performanceand effectiveness. It is also useful to retain, motivate,satisfy and improves the attendance of the employees. Itfocuses mainly on the core function of human resourcemanagement such as recruitment, performance, satisfactionand relationship. Some opinioned that it is not throwingmoney on the employees. It should be focused on theemployee agenda like what for the employee is workingand their desires. Some focused on differential rewards,fringe benefits and non-financial rewards. Some observedin balancing the cost of compensation. But no research hasfocused on the internal desires and wants of the employeesIJTRD Mar - Apr 2016Available [email protected] how these will be fulfilled. So, the researcher initiatedto