CHAPTER ONE

INTRODUCTION

1.1     Background to the Study

Compensation packages entail some basic features that tend to make employees satisfy on their job amongst which includes salaries, bonuses, incentives, allowances, promotion, recognition (Ezeh, 2014). All these have significant impact on employees’ performance, however, to avoid wrong perception and controversy by the employees, compensation system must be clearly communicated to employees with job measurement which will drive the much needed performance in the employees (Ezeh, 2014). The above raises concern regarding the attitudes of educators towards their work and their levels of job satisfaction or dissatisfaction (Steyn 2007). Employees’ satisfaction and retention as independent variables can be influenced by other variables such as allowances, salary, incentives, fringe benefits, bonus etc. This study is to test the use of compensation packages on employees’ performance and retention in Private Universities in Nigeria.  (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 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).

1.2     Statement of the Problem

Ways in which employee are valued and compensation can make a considerable impact on the effectiveness of the organization, and is at the heart of the employment relationship. Failure of adoption of ample reward frameworks can have a significant negative effect on the performance and retention of the employee and also commitment and morale of employees, hence a decline in organizational performance and effectiveness. Many organizations are suffering from high turnover rates and down falls because they do not apply compensation that may only need little effort (Aktar, Sachu & Ali, 2012). Additionally, though organizations are channeling more resources in enhancing organizational performance, there is widespread ignorance on how employee performance could increase when managers and human resource personnel use compensations on employees, the relationship existing between the kind of compensation and performance and how effective they can be utilized in an organization. Most importantly, the high cost of monetary compensation forces employers to give to employees sparingly, out of the failure to realize that small offers like recognition and open communication can be given any time, at very little cost, and could boost employee performance to a great extent. This proves the fact that most organizations are far away from realizing the importance of non-financial compensation or rewards; hence they continue offering monetary ones that can never be enough for employees. Although everyone needs money to obtain the smallest of essentials to live, employees prefer the benefits of non-monetary gifts and incentives for motivation in the workplace.

1.3     Objective of the Study

The main objective of this study is to investigate the use of compensation packages for employee’s performance and retention, specifically the study intends to:

1.     Find out the impact of compensation packages for employees performance and retention

2.     Find out the influence of using non-financial packages to motivate employee performance

3.     Find out the challenges of compensating employees in an organization

1.4     Research Question

1.     Is there any impact of compensation packages for employee’s performance and retention?

2.     What are the influence of using non-financial packages to motivate employee performance?

3.     Is there any challenges of compensating employees in an organization?

1.5     Research Hypothesis

Ho: there is no impact of compensation packages for employee’s performance and retention

Hi: there is no impact of compensation packages for employee’s performance and retention