EFFECTIVE REWARD SYSTEM A JUSTIFICATION FOR REDUCING EMPLOYEE TURNOVER

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ABSTRACT

The research is on effective reward system : A justification for reducing employee turnover. The  objectives of  the  study include; to  determine how  effective reward system   could reduce employee turnover,   determine the rate of turnover in organisations ,and also determine the nature of the relationship between effective reward and employee performance. Primary and secondary sources of data were used. The  population  of  the  study  was  485,  from  which  the  sample  size  of  220  was determined using Taro Yamani’s formula. The reseach instrument used were questionnaire and interview. Chi-square was used to test the hypotheses. The findings from  the  study  reveals  that;  Good  salary,  bonuses,  promotion,  training  and  job security could reduce  employee turnover; the rate of turnover in the organisations is low, and that there is a significant positive relationship between effective reward system and employee performance. Based on the findings, the researcher recommends that; Organisations should reward their employees adequately to avoid employee turnover ; and that in addition to financial rewards, organisations should also include non-financial reward such as autonomy, recognition,training, improved equipment, flexible working hours,gifts,praise etc when rewarding employees.

CHAPTER ONE INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Employees don‘t work for free. Most businesses are not volunteer services, so you  have  to  compensate  them in  some  way  for  their  time  and  effort.  The relationship between production and performance is a function of reward which leads to job satisfaction. One of important attributes of work

organization is the ability to give reward to their members. Pay, promotions, fringe benefits, and status symbols are perhaps the most important rewards. According  to  Bratton  and  Gold  (2007),  Reward  system  refers  to  all  the monetary, non-monetary and psychological payments that an organisation provides  for  its  employees  in  exchange  for  the  work  they  perform.  They maintain that rewards schemes may include extrinsic and intrinsic rewards. Extrinsic rewards are items such as financial payments and working conditions that the employee receives as part of the job. Intrinsic rewards relate to satisfaction that is derived from actually performing the job such as personal fulfilment, and a sense of contributing something to society.

A reward system comprises financial rewards (fixed and variable pay) and employee benefits which jointly is the total remunaration (Agulanna and Awujo,

2005:192). They maintain that   the system also incorporates non-financial rewards ( recognition, praise, responsibility and personal growth) and in many instances, performance management processes.

Because these rewards are important, the ways they are distributed have a profound effect on the quality of work life as well as on the effectiveness of organization.

According  to  Merchant  and  Van  der Stede  (2003), rewards  are important because they inform or remind employees what result areas are desired and motivate them to achieve and exceed the performance targets.

Reward system is an important tool that management can use to channel employee motivation in desired ways. In other words,reward systems seek to attract  people  to  join  the  organization  to  keep  them  coming  to  work,  and motivate  them to  perform to  high  levels.The  reward  system  consists  of  all organization  components  –  including  people  processes  rules  and  decision making activities involved in the allocate of compensation and benefits to organization. Formal reward programme which denote financial rewards such as salary, fringe benefits, bonuses, promotions or share can jeer up or influence workers to develop positive attitude towards their job and thereby increase their productivity. Rewards that an individual receives are very much a part of the understanding of motivation.

According to   Holmes et al  (2010) , Reward systems can help to boost company morale, as well as productivity levels which increase overall revenue for the company. These rewards have terrific motivational power, especially when given as soon as possible after the achievement. It‘s important for employers to say ―thank you‖ to employees for their efforts and find different ways to recognize them. Even something as simple as a free lunch can go a long way towards making employees feel valued, (Yazinski 2009).

Lack of effective reward system causes job dissatisfaction which subsequantly result to employee or labour turnover. Employee turnover (sometimes known as

‗labour  turnover, ‗wastage‘  or ‗attrition‘)  is the rate at which people leave an

organisation, (Armstrong 2009:497).

1.2 STATEMENT OF THE PROBLEM

At various organisations,  employees do complain of poor salaries and wages, lack of incentives, poor working environment, ill motivation, etc. These complaints if not adequately treated could reduce commitment and eventually lead to employees‘ turnover.

1.3OBJECTIVES OF THE STUDY

This research is intended to achieve the following objectives:

(1) To  determine  how  effective  reward  system  could  reduce  employee turnover.

(2) To determine the rate of turnover in organisations.

(3) To determine the nature of   relationship between effective reward and employee performance.

1.4 RESEARCH QUESTIONS

The study has the following research questions;

(1) How would effective reward system reduce employee turnover? (2) What is the rate of turnover in  organisations?

(3) What  is the nature of the relationship between  effective reward  and employee performance ?

1.5 RESEARCH HYPOTHESES

For the purpose of the study, the following hypotheses were formulated.

1   H1 : Good salary, bonuses, promotion,training and job security could reduce employee turnover.

Ho :Good salary, bonuses, promotion, training and job security  could not reduce employee turnover.

2   H1:  The rate of turnover in organisations  is low.

Ho: The rate of turnover in  organisations is high.

3.  H1:There  is  significant  positive  relationship  between  effective  reward system and employee performance .

Ho:  There  is  no  significant  positive  relationship  between  effective  reward system and employee performance .

1.6    SCOPE OF THE STUDY.

The study discusses the following topics; reward system and theories, types of organisational rewards, reward objectives, employee turnover, factors affecting turnover,  cost  and  measures  of  turnover  as  well  as  the  ways  of  reducing employee turnover. The study will be carried out in the following organisations: Emenite Ltd Emene, ANAMCO Motors Emene and Aqua Rapha Ltd 9th Mile all in Enugu state.

1.7  LIMITATION OF THE STUDY.

The major constraints of the study include the following;

Time Constraint:

Due to limited time given for the study, the researcher could not get all the information needed for the study.

Financial Constraint:

The researcher has not got enough money to emback on the study. Due to financial  hurdles,  the  researcher  could  not  visit  places  where  information relevant to the study could be obtained.

Attitude of the Respondents:

Some of the respondents showed negative attitude towards the stuty because they felt that they have no financial gain from the study.

1.8 SIGNIFICANCE OF THE STUDY:

The study is significant in a number of ways;

1) It will help organisations  know the best way to reward their employees so as

to reduce employees‘ turnover.

2) It will help future students to know about effective reward system and employees‘ turnover.

3) It will make the general public see the benefits of effective reward as a way of reducing employee turnover.

1.9 DEFINITION OF TERMS

Employee: somebody who works for another person or company in return of wage or salary.

Employer: A person or company who employs someone and pay him/her salary or wage.

Reward: A thing that is given or received in return for doing something good, working hard etc.

Compensation: A thing, especialy an amount of money given to somebody. Salary: A fixed regular payment, usually made every month to employee. Bonus: A payment added to what is usual or expected.

Effective Reward: A reward viewed as being adequate by the employee as well as the employer.

Employee Turnover . The rate at which employees leave a factory, company etc and are replaced.

Volunteer Service. Working for somebody or organisation without being paid.



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