CHAPTER ONE

INTRODUCTION

1.1      Background of the study

 An effective employee is one of the biggest challenges for most entrepreneurs. According to them, keeping employees motivated and loyal can be particularly difficult during the early stages of a startup. Argued that those employees who feel that they are cared for by their organization and managers not only have higher levels of commitment, but that they are more conscious about their responsibilities, have greater involvement in the organization, and are more innovative and productive. They suggested that managers and organizations must reward and support their employees for the work that they do because this perceived support allows for more trust and job satisfaction in the organization. These observations brings to the fore the relevance of employee motivation in ensuring productivity. It is an undeniable fact that productivity of an organization depends upon the satisfaction level of its workforce and even more, on the compensation of employees. As a result there has been a great interest in the assessment of compensation variables of employee as they impacts on productivity. According to the study, the concept of compensation has attracted considerable attention over recent years and has become a central objective of human resource management. He indicated that Human Resource Management policies are now being designed to maximize organizational integration, employee commitment, flexibility and quality of work. It is observed that compensation and employee satisfaction drive productivity, indirectly creating profit for an organization. To them, these are also prerequisites for staff retention. They also observed that organizations with higher staff retention rates are naturally better at retaining knowledge, which can lead to better performance and profit for the business. Accordingly, compensation variables improve employee satisfaction, reduce the cost of staff turnover, build brand loyalty with staff and position the company as an employer of choice that attracts talented people to the organization. It is common knowledge that most employees agitate for better conditions of service, while employers complain of low productivity. Employees are always on the lookout for advertisements on what they describe as better jobs. These employees are ready to leave their jobs for other jobs. Others use their present jobs to develop the necessary skills and experience, a requirement for most jobs. Employers also put in several enticing conditions of service and try to create healthy working conditions in an effort to gain the commitment of employees. To remain competitive in today’s market place an organization must retain its employees in order to increase productivity. Retaining employees means offering competitive compensation (both direct and indirect) which will encourage its employees to work well and increase productivity on the market. Age, education, job experience, job fulfillment, marital status and family size are all considerations that determine the attractiveness of fringe benefits. Different benefits appeal to different people. It is important for organizations to remember that the needs of employees differ. For example, a younger employee might be motivated by having the use of a company car whereas an older person may want more status like a title or a professional association membership. To achieve maximum value, organizations have to tailor the benefits to suit both the employee and the job as well as to the business requirements and financial capability. The question that one may want to ask is whether there is any relationship between compensation and productivity.

1.2      STATEMENT OF THE PROBLEM

It is sometimes assumed that there is no positive relationship between compensation and employee productivity, or that if there is at all, it is insignificant. However, in organizations where employees are content with their fringe benefit packages there seem to be high performance because employees know that when they increase their productivity they will be well compensated. They are often of the opinion that the effort they put in their work is not commensurate with the indirect compensation they receive and they therefore are not motivated to work hard. Some workers have opined that they would prefer certain benefits to what they are being offered and therefore should be given the opportunity to make choices or management should augment the benefits available. Since employees most times agitate for better fringe benefit packages a number of problems have been arising, some of which are individual disputes to register their dissatisfaction, low productivity, and low morale. it is in view of this that the researcher intends to investigate the relationship between compensation and employee productivity.

1.3      OBJECTIVE OF THE STUDY

The main objective of this study is to ascertain the relationship between compensation and employee productivity. But for the successful completion of the study; the researcher intends to achieve the following sub-objectives;

1.   To ascertain factors that determines compensation packages in an organization

2.   To ascertain the effect of compensation on employee performance

3.   To ascertain whether is significant relationship between compensation and productivity

4.   To ascertain the role of management in ensuring employees productivity.

1.4      RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H0: there are no factors that determine compensation packages in an organization

H1:there are factors that determine compensation packages in an organization

H02: there is no significant relationship between compensation and employee productivity

H2: there is a significant relationship between compensation and employee productivity

1.5      SIGNIFICANCE OF THE STUDY

It is believed that at the completion of the study, the findings will be of benefit to the management of the organizations as the study seek to elaborate on the benefit of compensation as a tool of motivation for employees productivity. The study will also be of benefit to employees of organization as they study seek to educate them on the benefit of putting in their best on the job and the benefit that accrue to it. The study will also be of great benefit to the researchers who intends to embark on research on similar topics as it will serve as a guide. Finally, the study will be of great importance to academia’s, lecturers, teachers, students and the general public.

1.6      SCOPE AND LIMITATION OF THE STUDY

The scope of this study covers the relationship between compensation and employee productivity. In the course of the study, the researcher encounters some constrain which limited the scope of the study;

a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study       

b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7      DEFINITION OF TERMS

RELATIONSHIP: A strong, deep, or close association or acquaintance between two or more people. Correlation and dependence, relationships in mathematics and statistics between two variables or sets of data.

COMPENSATION: Something, typically money, awarded to someone in recognition of loss, suffering, or injury.

EMPLOYEE: An individual who works part-time or full-time under a contract of employment, whether oral or written, express or implied, and has recognized rights and duties. 

PRODUCTIVITY:Productivity describes various measures of the efficiency of production. A productivity measure is expressed as the ratio of output to inputs used in a production process, i.e. output per unit of input..

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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