COMPENSATION MANAGEMENT AS A TOOL FOR IMPROVING ORGANISATIONAL PERFORMANCE IN THE PUBLIC SECTOR

ABSTRACT

The growing emphasis on employee engagement as critical to organizational performance means that the concept of total reward is exerting more and influence on reward strategy.

Reward management however, is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organization.

This study attempted to examine compensation management as a tool for improving organizational performance in public sector. Relevant literatures were reviewed to highlight the subject matter. State Internal Revenue Service [LIRS] was chosen as the case study. Selected representative comprising of staff and management of LIRS formed the sample size examined. A sample of one hundred (100) was drawn from the population. Simple Random Sampling technique was used in selecting the sample. A structured questionnaire was used to collect data. Respondents responses were presented in frequency tables and simple percentages was used for demographic data, while correlation method of data analysis was employed for hypotheses testing.

Two hypotheses were formulated and tested accordingly. The test resulted to rejecting the two null hypotheses and concluding that poor compensation packages affects workers morale and productivity in public sector. And effective remuneration structure aids organization in achieving high level of performance.

Consequently, it was proffered that compensation should be goal driven for instance, State Internal Revenue Service [LIRS]  should place more emphasis on financial reward, this will aid workers to evaluate his performance towards the organization, thereby promoting organizational performance and profitability.

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND TO THE STUDY

The compensation of employees at all level has become one of the major functions of human resource management. It is one of the most important, complex and problematic issues in managing human resources in any organization. Every business enterprise that wants to gain competitive advantage over its competitors must attract the services of high quality employees. According to Faraland (2001) ‘Man is a rational animal covered with maximizing his economic gains’. He continuously put forth effort to satisfy his personal needs ranging from physiological needs to self actualization.

Maslow (1970) states that it is the way to desire to satisfy the needs that motivate workers into higher performances and productivity, they strive to increase their output and efficiency in order to acquire the means for satisfying these needs.

Mutter & Donald (2003) describes remuneration as payment system based on effort, performance and productivity in essence; remuneration refers to salary or wages and the allowance and financial benefits payable to employee, either in cash or kind in return for his service. In a nutshell remuneration is the price of labour. Essentially, employees work to produce reward for their performances. Thus, the exchange of labour for financial reward is the heart of the compensation process. However, formal compensation can be offered using three types of reward namely; Pay, Incentives and Benefits.