ABSTRACT
This research work assessed Compensation System in the Nigerian Construction Industry with specific reference to Arab Contractors Nigeria Limited in Enugu State. The research work tried to examine the compensation system applied on the Nigerian Construction Industry and to formulate remedies as to how to enhance its effectiveness and efficiency in its administration. To achieve the above research objective, three research hypotheses have been advanced to include that equitable compensation does not result in high productivity and achievement of organizational goal; organization that are practicing total compensation for their employees are not likely to succeed and that construction companies having 50% – 60% of their workforce does not need to engage in total compensation for their workers. The study uses the survey research method. The population of the study constitutes the staff of Arab Contractors. The sample for the study was selected by using simple random sampling procedure. The findings of the study include the followings; that equitable compensation result in high productivity and achievement of organizational goal; that organization that are practicing total compensation for their employees are likely to succeed and that construction companies having 50 – 60% of their workers need to engage in total compensation for their workers. Based on the above findings, the following conclusions and recommendations are hereby made. It was concluded that any organization that fails to recognize the essence of adequate compensation and its impact on both employees and employers is doing a lot of disservice to itself. For a business to progress, all the stakeholders in the business must be happy in order to contribute their respective quotas. It was recommended that construction firms should encourage indirect compensation system. This is a long-term plan, which benefits both the employees and the employers. Organization that implement this in other parts of the world gain in the long run and our country should not be an exception.
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Although all manages are intimately involved in solving problems in their areas and are held responsible for problems arising from their areas, it is generally agreed that for consistency, efficiency and equity, a central unit stands a better chance of providing, supporting personnel services and guidelines for carrying out management personnel functions. These unit is called personnel department, human resource department, employee relations department and in some unionized organizations it is called industrial relations department (Ugwudioha, 2003:1).
In any organization, it is therefore, the personnel department that ensures that the organization provides adequate compensation and good working conditions, which will enable the employees to contribute highly to the organizational growth. The major functions of personnel department of any organization includes the following:
i. Employment, placement and personnel planning ii. Compensation and benefits
iii. Training and development iv. Health, safety and security
v. Employee and labour relations
vi. Personnel research (Ugwudioha, 2003:1).
In dealing with personnel issues, personnel managers make use of personnel manual. Personnel manual contains a brief description of personnel policies. It is in form of a handbook describing every section of the policy guidelines in relation to personnel issues. It serves as a reference book in respect of personnel issues.
Compensation is one of the major issues involved in personnel
administration. Some of use who are professional manages have identified personnel administration as one of the major tasks facing the management of any organization. This is because human resources management takes a different dimension and approach from the management of material resources. Human beings can think, move and respond to stimuli while material resources cannot. This makes it imperative for management of most successful organizations to incorporate in their policies adequate compensation
and motivation for their employees in order to achieve their organizational objectives.
If human beings are not well compensated and motivated, they will not contribute effectively to the management and control of materials and other resources for attainment of organizational goals. Well compensated/ motivated employees contribute highly to he organizational growth and creation of wealth for the organization and is shareholders. Most successful organizations engage in total compensation for its employees for attainment of their organizational goals.
Total compensation involves the assessment of employee contributions to the organization in order to distribute fairly and equitably, direct and indirect rewards in exchange for the employee’s performance. Total compensation is made up of extrinsic and intrinsic rewards. Extrinsic reward is made up of direct and indirect rewards while intrinsic is related to job status and security (Dunn and Rachel,
1995:265).
This research work deals extensively with compensation system in Nigerian Construction firm with specific reference to Arab Contractors Nigeria Limited, Enugu State.
Arab Contractors Engineering Limited is a multinational
organization and one of he construction giants in Nigeria. The company is rated number three in construction industry in Nigeria.
The company’s major line of business is construction and civil engineering works, with main emphasis on road construction. It’s major clients are the World Bank, African Development Bank, Federal Ministry and State Ministry of Works and Housing.
It has branch offices in many parts of the country. Organizations that pay attention to equitable distribution of rewards draw their roots from Mayo’s management theory, which is the beginning of human relations movement.
Eltaon Mayos’ theory of human relations. Courtland L. Brovee,
John v. Thilli, Marian Burk Wood and George P. Dovel (1993:53); International ed.) sated that the controversy that trailed Howothrone studies prompted Mayo to search for a better understanding of human relations in organizations. Mayo was concerned that social
order has come unglived by the move from agrarian, family-oriented society to a more chaotic, technological oriented industrial society. He believed that management was more focused on satisfying material and economic needs than unfulfilling the human needs of individuals who work for the organizations. To restore meaning to work and to help employees feel more socially satisfied he believed that organization needed to consider individuals and heir interaction in the work place. The human relations movement that evolved from this thinking is the school of management thought that sees employees behaviour as responsive to the interpersonal processes within the work unit.
Mayo’s theory directs our attention to the following:
i. That management should not focus emphasis on only economic and material needs, but should also lay emphasis on fulfilling human needs for individuals working in the organization.
ii. That organization should consider individuals and their interactions in a work place.
iii. That the world has developed from agrarian society to an industrial, technological and now “an information age” with a more dynamic way o handling human and material resources. The human relations movement that evolved from this thinking
is a school of management thought that sees employees behaviours as being responsive to the interpersonal process within the work unit. To apply the human relations theories, however, managers would have to act more collaborately and would need good social skill as well as technical skill. Organizations that engages in total compensation tend to benefits the following:
a) To attract potential job applicants in conjunction with recruitment and selection efforts; the total compensation programme can help to ensure that pay is sufficient to attract the right people, at the right time and for the right job.
b) To retain good employees: Unless the total compensation
programme is perceived as internally equitable and externally competitive, good employees (those the organization want to retain) are likely to leave.
c) The motivate employees: While non-monetary awards may influence an employee’s motivation; performance – based pay has been shown to be the most effective motivator. Still, because of individual differences and preferences, organizations must determine the correct blend of monetary and non- monetary rewards.
d) To administer pay within legal regulations because several legal regulations are relevant to total compensation, organizations must be aware of them and avoid violating them in their pay programmes.
Arab Contractors O.A.U Nigeria Limited was established in 1991 with the objective of contributing to the great developmental efforts taking place in Nigeria. Within a short period of ten years; we have the privilege of successfully completing several projects and giving employment to over 300 Nigerians. Dams, Bridges, Culverts and Protection, irrigation and Hydraulic structures such as Weirs, Builders, Spillways, Ducts and Channels, schools, Hospitals, Buildings.
1.2 Statement of the Problem
Personnel administration is very pivotal to the growth and wealth creation of any organization. Personnel administration is said to be good if it can compensate and motivate its employees to enable them to put in their best performances in the organization. Some of the problems associated with total compensation include the following:
a) Negotiation and bargaining period of total compensation system is difficult. This is so because, some portions of total compensation are not backed up by laws/legislation but by negotiation and bargaining processes. Sometimes, the employer proves very difficult to negotiate with. While the employee wants the highest and the best package, the employer would like to minimize cost as much as possible for profit maximization.
b) Bad and depressed economic condition in Nigeria makes it difficult to fully implement a total compensation system. The employers usually cite prior economic condition as their excuses. On the other hand, the employee who knows his
worth usually cite his contributions to the growth of the organization as his reason for the demand for a better condition.
c) Most employees of labour in Nigeria disregard labour laws and
edicts. Sometimes, this situation leaves the dejected employees with no other condition than to accept what is offered to them, otherwise they will face unemployment consequences. There were some cases where employees were fired for not accepting paltry compensation.
d) In Nigeria, especially expatriate firms, there are significances
difference between the wages of expatriate staff and the wages of Nigerian staff. Sometimes, an expatriate staff having the same qualification and experience with Nigerian staff may be paid $4,000 (N550,000.00)/month while a Nigerian staff may be paid N300 (N430,000.00) month. This situation causes dissatisfaction between the expatriate staff and Nigerian staff and sometimes causes industrial unrests.
e) Workers in construction industry are casual workers and thus cannot receive a total compensation package. They are not full
employees and therefore cannot receive full entitlements. Efforts by Nigerian labour congress and construction workers union to regularize the conditions of all the casual workers who have spent up 90 days in any organization have proved abortive. This group of workers is up to 50% – 60% of construction workers in Nigeria.
f) Fear of losing one’s job makes it impossible for him to demand for an improvement in his working conditions. Some workers may know their rights but they cannot demand for them for fear of losing their jobs.
g) Each time government increases public service wages, private sectors are usually told to go and negotiate with their employers. This negotiation is difficult, as employers will always come out victorious most of the time.
1.3 Objectives of the Study
The broad/major objective of this research work is to examine compensation system in the Nigeria construction industry with reference to Arab Contractors Nigeria Limited in Enugu. Other specific objectives are as follows:
i. To examine whether equitable compensation results in high productivity and achievement of organizational goal.
ii. To examine whether organization that are practicing total compensation for their employees are more likely to succeed.
iii. To find out whether construction companies having 50% – 60% of their workers need to engage in total compensation for their workers.
iv. To make recommendations based on the findings of this study on how best to apply the system in Nigerian construction industries.
1.4 Scope of the Study
The work covers compensation system in Nigerian construction firms with specific reference to Arab Contractors Engineering Limited, Enugu. It X-rays the issues involved in compensation system in the firm with a view to providing a framework for future solutions. The work lays emphasis on the following areas.
i. Compensation system in Nigerian construction firm. ii. The forces acting for and against such a system.
iii. Different ways of implementing such a system
iv. Legal issues involved in this dispensation.
v. Issues involved in wages/salary administration
vi. The scope covers direct and indirect compensation in private organizations.
1.5 Research Hypotheses
In order to facilitate date collection so as to arrive at conclusion, the following hypotheses should be used as a guide to the study.
Hypothesis I
Ho: Organization that are practicing total compensation for their employees are not likely to succeed.
Hi: Organization that are practicing total compensation for their employees are likely to succeed.
Hypothesis I
Ho: Construction companies having 50% – 60% of their workers does not need to engage in total compensation for their workers.
H2: Construction companies having 50% – 60% of their workers need to engage in total compensation for their workers.
Hypothesis III
Ho: Equitable compensation does not result in high productivity and achievement of organizational goals.
H3: Equitable compensation result in high productivity and
achievement of organizational goals.
1.6 Significance of the Study
The significance of this study will include the followings:
The study will be of great significance to various stakeholders including government, the case study establishment, employees, labour unions and the general publics on how to improve the compensation system in the Nigeria Construction industry.
The study will hopefully create awareness by exposing the construction industries in Nigeria especially Arab Contractor Nigeria Limited in Enugu metropolis to the dangers of not compensating their employees well. It will equally highlight the benefits they stand to enjoy when total compensation plan is recognized as an important pre-requisite for successful compensation of their employees. Such exposure will help the Arab Contractors take a prompt action that will yield positive results.
Also, investigating the issue could provide additional insights and perhaps evidence on the compensation system in the Nigerian construction firms. This will surely enrich the management literature on this issue.
Additionally, the results of this study would provide management of construction firms better insights on how to improve in their compensation system.
The study will serve as a springboard for present and future researchers who intends to carry on similar research work on compensation system in other sectors in Nigeria.
1.7 Limitations of the Study
During this research work a lot of constraints and limitations were encountered. Some of constraints were usual constraints encountered during the course of such academic exercise while some were unusual and boring.
Collection of primary data for this study was a major constraint, as the researcher has to be on the field personally in all the data collection processes. The company’s branches are scattered all over
the country and to make a comprehensive investigation all the sites were visited.
Financial constraints also posed a major problem/limitation during the investigation. The researcher have wanted to carry on the same type of investigation in a similar firm within the same industry but for financial constraints.
Time is another limitation encountered during the course of the study. Time constraint have forced the researcher to concentrate on compensation system instead of spreading the study to the entire personal administration.
Sometimes, secondary data collected ware not reliable, hence they were rejected. A lot of time was spent on the selection and examination of secondary data for the study.
1.8 Definitions of Terms
Compensation – This is the money and benefits that organizations give employees in exchange for work.
Wages – These refers to direct compensation received by an employee based on hourly or piece-rate.
Salaries – They are pay regardless of specific hours worked, which can be received weekly or monthly.
Total compensation – This is the process of assessing the employees contributions to the organization fairly and equitably direct and indirect rewards in exchange for his performance.
Intrinsic reward – This is known as non-monetary reward. Extreme reward – This is also known as monetary reward,
involves direct and indirect compensation.
Motivation – This is the energizing force that induces or compels and motivate behaviour.
Job satisfaction – This can be defined as a pleasurable or the appraisal of ones job or job experience.
This material content is developed to serve as a GUIDE for students to conduct academic research
COMPENSATION SYSTEM IN NIGERIAN CONSTRUCTION INDUSTRY (A STUDY OF ARAB CONTRACTORS NIGERIA LIMITED ENUGU STATE)
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