Compensation and Job Satisfaction in Organizations

This assignment delves into the crucial relationship between compensation strategies and employee job satisfaction. It examines various research studies that explore how different compensation plans influence employee morale, motivation, and overall job contentment. The analysis considers diverse industries and organizational contexts to provide a comprehensive understanding of this important aspect of human resource management.

Topic: Research Proposal: Impact of Compensation
and Benefits on Job Satisfaction and employee
retention
1

Table of Contents
Chapter 1: Introduction....................................................................................................................3
Background......................................................................................................................................3
Scope of the research.......................................................................................................................3
Aim of the study..............................................................................................................................3
Research problem and research gap................................................................................................4
Research question............................................................................................................................5
Objective of the study......................................................................................................................5
Literature review..............................................................................................................................5
Methodology....................................................................................................................................8
Conclusion and implication.............................................................................................................9
2

Chapter 1: Introduction
Background
Compensation is the best tool for improving the enhancing the employee motivation and
commitment towards the organizational goals and objectives. It is an evident fact that the
employees are the main resources of an organization through which companies are able to
survive in tough competitive advantages (Popoola and Ayeni, 2007). But recent studies have
highlighted that the compensation is recommended mostly for executives while ignoring the
employees or the subordinates. The impact of compensation is evident upon the aspects of job
satisfaction and employee retention as the sense of hard work and determination to meet
organizational objectives could be achieved among employees (Sinclair, 2002). Thus, the issues
related to employee dissatisfaction and core reason behind the lack of human capital in
organizations could be evaluated through the concept of compensation and its benefits as well.
Scope of the research
The scope of the research related to the impact of compensation and its benefits in relation to
acquiring satisfaction and employee retention could be stated in terms of evaluating the needs
that remain unattended so far. But it is realized that in the last few decades the face ways in
which the organizational scenario has changed and due to the increasing competition the
employee retention has become one of the burning issues (Smith & Smith, 2007). Thus, the
scope of this study is to evaluate the chances of employee retention and job satisfaction as well.
On the other hand, another scope is to understand the required measures in relation to increasing
job satisfaction and retention through compensation among employees.
Aim of the study
The aim of this study is to provide a clear insight regarding the practices of an organization in
relation to ensure job satisfaction and employee retention through compensation. Along with
this, it also manifests the association between compensation and job satisfaction in the industrial
scenario (Chhabra, 2001). Thus, the study would be conducting the evaluation of all the relevant
aspect in order to justify the concept.
3

Significance of the study
The study is significant as it attempted in explaining the aspects that remain untouched from
quite a long time. But this study would be concentrating upon the evaluation of how employees
especially subordinates are devoid of compensation as it has been believed that executives are
the main source of organizational performances and also awarded with compensation while the
subordinates are the main carrier of performances. Thus, the significance of the study could be
realized in terms of highlighting the importance of employee compensation and how it influences
employee retention and job satisfaction.
Research problem and research gap
The compensation has a great influence on job satisfaction and employee retention, as these
aspects are interrelated to each other. On the other hand, compensation has the influence upon
productivity and job performance as well, as employees in an organization can be motivated
through providing good compensation (E.Deepa & Dr.S.Kuppusamy, 2011). The research
problem could be stated in terms of poor compensation or lack of proper compensation to the
employees instead of good organisational performance and organizations in the contemporary
business scenario is concentrating more on executive compensation rather than the employees
working under that executive. Apart from this, the subordinates are the base of organisational
performance as they work hard and help the entire organisation to meet its objectives and very
few studies have been conducted in relation to highlight this part of the managerial issues so far
(Makena Muguongo, 2015). Thus, this study would help in evaluating the importance of
compensation and its benefits for employees or subordinates which can ensure quality
performance and increased productivity as well. In this regard, the research gaps could be stated
in terms of the concentration of the previous researches on one part of the organization that is the
executives. Many previous types of research have manifested the benefits of compensation in
relation to the executives and how it has helped in enhancing organizational performances (M.O,
& Oluwaseun, 2014). But the main research gap shows that not only executives but
compensation to employees could evidently increase organizational productivity and possibilities
of employee retention as well.
4

Research question
The research questions are significant in the research study as it would help in conducting the
research in a right direction and with relevant information. Thus, the research questions are
stated in the following manner.
i) What is the significance of compensation in an organization?
ii) What is the association between compensation and job satisfaction and employee retention?
iii) How could employee retention be ensured through providing compensation?
iv) What are the benefits of compensation in delivering job satisfaction to employees?
Objective of the study
The objective of the study could be stated in the following manner.
i) To assess the significance of compensation in an organization.
ii) To discuss the ways in which compensation is related to employee satisfaction and
retention.
iii) To state the aspects that help in ensuring employee retention through compensation.
iv) To evaluate the benefits of compensation in an organization.
Literature review
Compensation plays the most important and vital role in the organizational setting and in
accordance with the four Ms that involve men, material, machines and money, men have been
considered as the most important part of organizational development and retaining and
maintaining the required amount of human capital is also significant to conduct business
activities in an effective manner (Adler & Ghiselli, 2015). In order to state the role or
importance of compensation in an organization it could be asserted that the primary aim of
compensation is to enhance the motivation f the existing employees and to execute quality
performances in this regard. Thus, the significance could be stated in the following manner.
 To enhance the commitment level of the existing employees and extracting quality
performance from them.
5

 To retain the services of the employees the for longer period of time and utilize most of the
part of their corporate dedication.
 To deliver a sense of trust and worthiness to the employees over executive compensation.
 On the other hand, compensation also plays an important role in the context of attracting
new talents and makes them retain for a longer period of time (Ahrne & Brunsson, 2010).
Thus, compensation and its related practices could ensure the increase in organizational
productivity, quality and efficiency among employees, while, it is also important in motivating
the employees who are observed to be demotivated due to extreme organizational pressure
(Terera & Ngirande, 2014). Thus, compensation is important for job satisfaction and employee
retention with the organization.
Similarly, high job satisfaction among employees will promote high-end job satisfaction among
employees that work in the subordinated groups and other employees (Bhattacharyya, 2015).
Thus, it is realized that delivering a handsome amount of compensation would increase job
satisfaction as employees are getting paid for their hard work and commitment. Therefore, the
association between compensation and job satisfaction could be evaluated through expectancy
theory. In accordance with the expectancy theory, the aspects of motivation could be defined in
terms of valence, instrumentality and expectancy. On the other hand, the compensation system in
the organisational scenario helps in ensuring employee motivation and it has been realised that
with relevant reward system the employees manifest a change in behaviours as a result of
compensation and rewards for their performed works. The employee job satisfaction directly
could be related to the aspects of compensation that involves pay, interaction with supervisors,
positive words from the supervisor and so on (Biddle & Emmett, 2013). In accordance with the
expectancy theory, each and every employee inculcates few expectation at the time of joining a
job. This theory has also recommended the definition of compensation in terms of a set of
tangible and intangible assets which employees get in the form of monetary expenses.
Thus, there is an evident relationship between compensation and job satisfaction along with
employee retention (Mishra & Farooqi, 2013). Two reasons behind it could be realised such as
the importance of money in order to fulfil one’s needs and secondly, the management’s concern
regarding the employees. As employee expect to have a systematic pay in each organisation, it is
quite evident that fulfilment of the desired pay and other treatments delivered by the
management would obviously result in satisfaction. Thus, the increasing organisational settings
6

and the demand of talented employees have compelled the organisations in adopting relevant pay
programmes and compensation system (Gelard & Rezaei, 2016).
Apart from this, employees always wanted to be getting paid in order to satisfy their self-esteem
and personal needs as well. Therefore, the importance of compensation relies upon the type and
work nature of the industry in which employees are usually performing. If an employee is being
rewarded with relevant salaries in the industry it is quite evident that the employee would retain
for a longer time in the same working place as all his or her for a longer time. Some of the
disadvantages in this regard are that if an employee does not retain for a longer time, the
employers have to carry a cost of recruiting and in this period the productivity of the organisation
may decrease (Giancola, 2010). Thus, it is quite evident that the compensation has the severe
influence upon the employee retention.
Along with such aspect, it is quite evident that compensation does have certain benefits which
also satisfy the employees and make them retain their present job for a longer period of time
(Makena Muguongo, 2015). The compensation delivered to the employees normally addresses
social security, and no financial benefits to the employees that include disability payment, day
care, and retirement benefits and tuition reimbursement and so on. Therefore, the particular
reason behind job dissatisfaction and lack of proper talent in the organisations have been realised
in terms of ignorance of employee performances while highlighting the executive performance
and contribution (Khan et al. 2011). Apart from this, the subordinates are the base of
organisational performance as they work hard and help the entire organisation to meet its
objectives and very few studies have been conducted in relation to highlight this part of the
managerial issues so far. It is being observed in the past several years that management and
board of directors have focused on executive compensation in order to enhance employee
performances and productivity in an organisation. But, due to the traditional thinking of
management employee dissatisfaction and change of job have been recorded among the
employees or the subordinates. Thus, the organisations and managements have shifted its
concentration upon the well being of the employees as well as they are at the core of
organisational performances and quality of services. With a concluding note, it could be asserted
that the compensation mainly works as the driving force for relevant working capital (Krukoff,
2006). It is also evident that is employees are compensated in a well-structured manner that
eventually contributes to developing job satisfaction in the contemporary organisations. Thus,
7

practices should be adopted by the organisations in terms of revised pay of the employees in
relation to compensation. Hence, it could be stated that the concept and aspect of compensation
would help in ensuring consumer retention and job satisfaction.
Methodology
The methodology part is an essential aspect in the context of a research proposal as it depicts the
relevant and required techniques and methods in relation to accomplish the research work and
accumulate data in this regard. With the incorporation of positivism philosophy in relation the
study and to evaluate and accumulate data for explaining the impact and benefits of
compensation upon the aspects of employee retention and job satisfaction positivism philosophy
would help in assessing the data depending upon the practical ground (Fletcher, 2016). On the
other hand, the descriptive design of the study would also help in evaluating the factors in a more
systematic manner. Therefore, both primary and secondary data would be used in this regard as
the both the manners of data collection could ensure reliability and validity in the context of the
study. Under the primary data, two types of data collections could be ensured such as
quantitative and qualitative data collection. In the quantitative data collection, the data will be
gathers from the employee perspective and the qualitative data will be derived from the
managerial perspectives. Thus, a set of survey questionnaire would be prepared by the researcher
in order to gather information from the employees and record their perspectives regarding
compensation and its benefits (Jha, 2008). The questionnaire would be prepared in accordance
with the Likert scale and would be surveyed in the survey money. 120 samples of employees
would be interviewed and surveyed with multiple choice questions in an ethical manner.
On the other hand, in the case of the qualitative data collection, the researcher would be
conducting a face to face interview in order to accumulate information regarding the research
topic from the managers of some industries (Usman & Danush, 2010). The sample of 10
managers from five different industries would be taken for assessing and realizing the impact of
compensation in the respective industries. Here, the main variables are compensation, job
satisfaction, and employee retention, and benefits. Along with this, in the case of secondary data
five scholarly journals could be included in order to accumulate empirical information presented
by previous researchers. Thus, it could be realized that the respective and mentioned
8

methodology would be able to accumulate valid and reliable data from the selected respondents
and deliver relevant and acute implication to the topic of the research.
Conclusion and implication
In conclusion, it could be stated that a little amount of research has been done in the context of
evaluating and explaining the impact of compensation on job satisfaction and employee
retention. It is being observed in the above explanation that compensation has a great impact on
the employee retention and satisfaction towards their jobs. In accordance with the expectancy
theory, the aspects of motivation could be defined in terms of valence, instrumentality and
expectancy which explain the effectiveness of expectancy theory. The impact of compensation is
evident upon the aspects of job satisfaction and employee retention as the sense of hard work and
determination to meet organizational objectives could be achieved among employees. The aim of
this research has been realized in terms of evaluating the impact of compensation and its benefits
for employees in the organizational settings. Therefore, the association between compensation
and job satisfaction could be evaluated through expectancy theory. Thus, through involving both
qualitative and quantitative data collection in order to collect reliable and valid implications
could be developed. On the other hand, in a case of secondary data, a detailed evaluation of the
scholarly sources could be stated in order to generate empirical information. Thus, it could be
concluded that compensation has the severe influence upon the aspects of job satisfaction and
employee retention irrespective of any industry.
9

References
Adler, H., & Ghiselli, R. (2015). The Importance of Compensation and Benefits on University
Students’ Perceptions of Organizations as Potential Employers. Journal Of Management
And Strategy, 6(1). http://dx.doi.org/10.5430/jms.v6n1p1
Ahrne, G., & Brunsson, N. (2010). Organization outside organizations: the significance of partial
organization. Organization, 18(1), 83-104. http://dx.doi.org/10.1177/1350508410376256
Bhattacharyya, D. (2015). Compensation and Benefits Program a Mediating Variable for Talent
Retention. Compensation & Benefits Review, 47(2), 75-80.
http://dx.doi.org/10.1177/0886368715584481
Biddle, J., & Emmett, R. (2013). Research in the history of economic thought and methodology.
Chhabra, T. N. (2001). Human Resource Management, Concepts and Issues, 2nd Revised Ed.,
Delhi: Dhanpat Rai & Co. (P) Ltd. view of Economic Studies 71, 514-534.
E.Deepa, E., & Dr.S.Kuppusamy, D. (2011). Impact of Performance Appraisal System on Job
Satisfaction, Employee Engagement, Organizational Citizenship Behavior and
Productivity. Indian Journal Of Applied Research, 4(2), 4-6.
http://dx.doi.org/10.15373/2249555x/feb2014/55
Fletcher, A. (2016). Applying critical realism in qualitative research: methodology meets
method. International Journal Of Social Research Methodology, 20(2), 181-194.
http://dx.doi.org/10.1080/13645579.2016.1144401
Gelard, P., & Rezaei, S. (2016). The Relationship between Job Motivation, Compensation
Satisfaction and Job Satisfaction in Employees of Tax Administration – A Case Study in
Tehran. Asian Social Science, 12(2), 165. http://dx.doi.org/10.5539/ass.v12n2p165
Giancola, F. (2010). Examining the Job Itself as a Source of Employee
Motivation. Compensation & Benefits Review, 43(1), 23-29.
http://dx.doi.org/10.1177/0886368710390493
Jha, N. (2008). Research methodology. Chandigarh [India]: Abhishek Publications.
10

Khan, R., Aslam, H., & Lodhi, I. (2011). Compensation Management: A strategic conduit
towards achieving employee retention and Job Satisfaction in Banking Sector of
Pakistan. International Journal Of Human Resource Studies, 1(1), 89.
http://dx.doi.org/10.5296/ijhrs.v1i1.809
Krukoff, D. (2006). Compensation. Saskatoon, Sask.: Thistledown Press.
M.O, O., & Oluwaseun, Y. (2014). An Assessment of the impact of Compensation Plan on
workers Performance of selected Quoted Food and Beverages Manufacturing Companies
in Nigeria. IOSR Journal Of Business And Management, 16(7), 05-12.
http://dx.doi.org/10.9790/487x-16710512
Makena Muguongo, M. (2015). Effects of Compensation on Job Satisfaction Among Secondary
School Teachers in Maara Sub - County of Tharaka Nithi County, Kenya. Journal Of
Human Resource Management, 3(6), 47. http://dx.doi.org/10.11648/j.jhrm.20150306.11
Makena Muguongo, M. (2015). Effects of Compensation on Job Satisfaction Among Secondary
School Teachers in Maara Sub - County of Tharaka Nithi County, Kenya. Journal Of
Human Resource Management, 3(6), 47. http://dx.doi.org/10.11648/j.jhrm.20150306.11
Mishra, G., & Farooqi, R. (2013). Exploring Employee Satisfaction With Performance
Management and the Challenges Faced in Context of IT Industry. Compensation &
Benefits Review, 45(6), 329-339. http://dx.doi.org/10.1177/0886368714525016
Popoola, S. O., Ayeni, C. O., (2007) Work Motivation, Job Satisfaction, and Organisational
Commitment of Library Personnel in Academic and Research Libraries in Oyo State,
Nigeria. Library Philosophy and Practice.
Sinclair, M. 2002. Planning Education in and after Emergencies. Paris: UNESCO, IIEP.
Smith, A. & Smith, E. (2007). The Role of Training in the Development of Human Resource
Management in Australian Organisations, Human Resource Development International, Vol. 10
No.3, pp.263-79.
11

Terera, S., & Ngirande, H. (2014). The Impact of Rewards on Job Satisfaction and Employee
Retention. Mediterranean Journal Of Social Sciences.
http://dx.doi.org/10.5901/mjss.2014.v5n1p481
Usman, A., & Danush, R. (2010). Work spirituality in Banking Managers and its impact on Job
Satisfaction. International Business Research, 3(2). http://dx.doi.org/10.5539/ibr.v3n2p65
12