Effects of Incentives on Job Satisfaction and Employee Retention Reviews of Related Literature Employee incentives are designed to get

the maximum performance from your staff and help retain your most productive employees. You can consider a variety of ways to reward your staff for their work performance, but you need to consider using the best employee incentives to get the desired results. Arnold Anderson (2010) gave three examples of employee benefits the bonus money, flexible schedule and vacation time. Money is a strong motivator and using bonus money as an employee incentive is one way to get the most from your staff, according to an entrepreneur magazine. You can reward sales and non-sales staff with cash bonuses based on individual performances as measured against company-determined metrics. You can help emphasize the bonus program by paying bonus money separately from base pay, and individual incentives are often more effective than group incentives. Create a system where employees can track their daily progress toward their incentive bonus payments, and encourage employees to ask how they can improve their work habits to take advantage of the bonus pay programs. He said that the ability to create a flexible work schedule can be a strong performance incentive, according to the article 25 Ways to Reward Employees (Without Spending a Dime) published on the HR World website. Employees that meet pre-determined performance criteria can determine their own schedule for a month. Give the employees a range of work hours they can choose from, and allow them the ability to arrange their hours any way they want. If an employee that earns this incentive wants to work early in the day, take a four-hour break and then come back later in the day then that should be allowed. This kind of an incentive works well for the company as well because the employee feels like he has received a valuable incentive that costs the company nothing to administer. And also Employees can be motivated to perform at a high level with the incentive of paid time off. Offer employees that produce beyond their established metrics the ability to add an extra one or two days of paid vacation per quarter to their existing vacation time. This can work as a cash reward as well if you allow employees to cash in their unused vacation time at the end of the year. And that Employees can be motivated to perform at a high level with the incentive of paid time off. Offer employees that produce beyond their established metrics the ability to add an extra one or two days of paid vacation per quarter to their existing vacation time. This can work as a cash reward as well if you allow employees to cash in their unused vacation time at the end of the year. Job satisfaction is simply defined as how contented and happy an individual is with his or her job. There are two types of Job Satisfaction, affective job satisfaction and cognitive job satisfaction. Affective job satisfaction is frequently defined as a one-dimensional subjective construct representing an overall emotional feeling that individuals have about their job as a whole. Therefore, affective job satisfaction for individuals reflects the degree of contentment or happiness their job in general induces while Cognitive job satisfaction the more objective and logical evaluation of various facets of a job. Cognitive job satisfaction can be a one-dimensional if it comprises evaluation of just one aspect of a job, such as pay or maternity leave, or multidimensional if two or more facets of a job are simultaneously evaluated. Cognitive job satisfaction does not assess the degree of pleasure or happiness that arises from specific job facets, but rather gauges the extent to which those job facets are judged by the job holder to be satisfactory in comparison with objectives they themselves set or with other jobs. Based on the study of Manuel Raggi in 2012,Job Satisfaction is meant as the overall personal satisfaction a person has toward many different aspects of the work. Some of the main

aspects are rewards (salary, bonuses, incentives, royalties, etc.), social environment (coworkers, chiefs, location, etc.), and specific characteristics of the job (challenging, differentiated, routine, time pressure, etc.). Since every person is different, the various characteristics have different weights in the evaluation process, but after all these personal ratings the sum of the characteristics will determinate first the subjective grade of job satisfaction and second a part of the entire life satisfaction. Schultz and Schultz (2005) claimed that job satisfaction refers to the positive and negative feelings and attitudes we hold about our jobs, and that it depends on many work-related factors, ranging from our assigned parking space to the sense of fulfillment we get from our daily tasks. Personal factors can also influence job satisfaction. These factors include age, health, length of job experience, emotional stability, social status, leisure activities, and family and other social relationships3.Walker (1980)4 tried to go in depth on the Job Satisfaction and Motivation issues and developed the following scheme in which he tried to determinate all the parameters that constitute the satisfaction and motivation process. According to Brian Hill (2012) there are factors that affect job satisfaction. He said that an employee's overall satisfaction with his job is the result of a combination of factors -- and financial compensation is only one of them. Management's role in enhancing employees' job satisfaction is to make sure the work environment is positive, morale is high and employees have the resources they need to accomplish the tasks they have been assigned. Working condition is one of the important things to keep an employee satisfied since the employees spend so much time in their work environment each week, it's important for companies to try to optimize working conditions. Such things as providing spacious work areas rather than cramped ones, adequate lighting and comfortable work stations contribute to favorable work conditions. Providing productivity tools such as upgraded information technology to help employees accomplish tasks more efficiently contributes to job satisfaction as well. Another is the opportunity for advancement. Employees are more satisfied with their current job if they see a path available to move up the ranks in the company and be given more responsibility and along with it is a higher compensation. Many companies encourage employees to acquire more advanced skills that will lead to the chance of promotion. Companies often pay the cost of tuition for employees taking university courses, for example. During an employee's annual performance review, a supervisor should map out a path showing him what he needs to accomplish and what new skills he needs to develop in order to be on a track to advancement within the organization. Work level and Stress level is one more factor that affect job satisfaction, employees dealing with a workload that is far too heavy and deadlines that are impossible to reach can cause job satisfaction to erode for even the most dedicated employee. Falling short of deadlines results in conflict between employees and supervisors and raises the stress level of the workplace. Many times, this environment is caused by ineffective management and poor planning. The office operates in a crisis mode because supervisors don't allow enough time for employees to perform their assigned tasks effectively or because staff levels are inadequate. The fourth factor is respect for co-workers. A hostile work environment -- with rude or unpleasant coworkers -- is one that usually has lower job satisfaction. In an August 2011 survey published by FoxBusiness.com, 50 percent of those responding said they had personally experienced a great amount of workplace incivility. Fifty percent also believe morale is poor where they work. Managers need to step in and mediate conflicts before they escalate into more serious problems requiring disciplinary action. Employees may need to be reminded what behaviors are considered inappropriate when interacting with coworkers. Another factor is the relationship of employees to their supervisor. An effective manager knows

their employees needs recognition and praise for their efforts and accomplishments. Employees also needs to know their supervisor's door is always open for them to discuss any concerns they have that are affecting their ability to do their jobs effectively and impeding their satisfaction at the office and lastly, the most common and popular factor affecting job satisfaction is the financial rewards. Job satisfaction is impacted by an employee's views about the fairness of the company wage scale as well as the current compensation she may be receiving. Companies need to have a mechanism in place to evaluate employee performance and provide salary increases to top performers. Opportunities to earn special incentives, such as bonuses, extra paid time off or vacations, also bring excitement and higher job satisfaction to the workplace. Employee retention involves taking measures to encourage employees to remain in the organization for the maximum period of time. Corporate is facing a lot of problem in employee retention these days. Hiring knowledgeable people for the job is essential for an employer. But retention is even more important than hiring. There is no dearth of opportunities for talented person. There are many organizations which are looking for such employees. If a person is not satisfied by the job he's doing, he may switch over to some other more suitable job. In today's environment it becomes very important for organizations to retain their employees. According to Get Les Mckeown's employee retention is define as " effective employee retention is a systematic effort by employers to create and foster an environment that encourages current employees to remain employed by having policies and practices in place that address their divers needs. Also of concern are the costs of employee turnover (including hiring costs. productivity loss). Replacement costs usually are 2.5 times the salary of the individual. The costs associated with turnover may include lost customers, business and damaged morale. In addition there are the hard costs of time spent in screening, verifying credentials, references, interviewing, hiring, and training the new employee just to get back to where you started." Every company should understand that people are their best commodity. Without qualified people who are good at what they do, any company would be in serious trouble. In the long run, the retention of existing employees saves companies money. As Beverly Kaye and Sharon Jordan- Evan stated in Training and Development:Studies have found that the cost of replacing lost talent is 70 or 200 percent of that employee's annual salary. There are advertising and recruiting expenses, orientation and training of the new employee, decreased productivity until the new employee is up to speed, and loss of customers who were loyal to the departing employee. Finding, recruiting, and training the best employees represents a major investment. Once a company has captured talented people, the return-on-investment requires closing the back door to prevent them from walking out." The importance of employee retention is not only the cost incurred by a company that emphasizes the need of retaining employees but also the need to retain talented employees from getting poached. From literature review, it is recognized that human resource management play pivotal role in employees retention. Researchers founds that human resource management practices in compensation & rewards, job security, training & developments, supervisor support culture, work environment and organization justice can help to reduce absenteeism, employee retention and better quality work, (Meyer and Allen, 1991; Solomon, 1992; Snell and Dean, 1992; Arthur, 1994; Snell and Youndt, 1995; MacDuffie, 1995; Delaney and Huselid, 1996; Ichniowski, Shaw and Prennushi, 1997). According to Accenture (2001),

study on high performance issue found that organization strategy regarding employee retention primarily started from US, Europe, Asia then Australia. According to Osteraker (1999), the employees satisfaction and retention is considered the cornerstone for success of organization. Previous study divided it into social, mental or physical dimension. The grouping is based on social contacts at work, characteristics of the work task or the physical and material circumstances associated with work. The retention factors of the mental dimension are work characteristics, employees retaining by flexible tasks where they can use their knowledge and see the results of their efforts. The social dimension refers to the contact employees with each other, both internal and external. The physical dimension consists of working conditions and pay. In order to retain employees, the organization need to gain information about the dynamics that characterized the motivation to work. Van Knippenberg (2000), suggested that employee can become more loyal and stay in the organization when they identify themselves within a group and contribute to the performance as a group. This suggestion relies on work performed by Locke and developed good setting theory. The goal is team performance and the individuals feeling part of the group. The focus of Locke was on the goal, but in order to reach the goal one must associate oneself with the group and task. Glen (2006), described another framework that manager can use when communicating with its employees to know that the cause of retention consist of nine different predictors: organizational processes, role challenge, values, work, life balance, information, stake/leverage/recognition, management, work environment and product or service. Fitz-enz (1990), recognized that only one factor is not responsible in management of employees retention, but there are several factors that influence employees retention which need to manage congruently i.e. compensation & rewards, job security, training & developments, supervisor support culture, work environment and organization justice etc. Accordingly, organization utilizes extensive range of human resource management factors that influence employees commitment and retention (Stein, 2000; Beck, 2001; Clarke, 2001; Parker and Wright, 2001). The incentives of the employees from the company such as salary, bonuses, health benefits, food subsidy allowance, clothing allowance transportation allowance and the like, has an effect on employee retention as well as to job satisfaction. Once an employee is satisfied and happy with his work and feels that his effort and hard work is well paid by the company then the employee wont have any reason to leave a company and look for a new one.

Significance of the study The study about the effects of incentives on job satisfaction and employee retention can be a learning paradigm in the business world to enhance their knowledge about the incentives that the company could provide to repay the efforts and hard works of the employees for the company and to retain a talented employees as well. This is but a small contribution to the previous works of scholars that have the same study and an additional input for the future researchers. The goal of this study is to open the minds of the employers that the retention of employees and satisfaction to the job is obtained by providing a good incentive for the employees. This goal can be achieved with the help of the Human Resource department of the company that could plan and propose a good and reasonable incentive plan for each employee. The output of this study can be a source material that the companys Human Resource department could use to give them ideas on how incentives affect job satisfaction and employee retention. This section will provide brief description on the various significances of the study on Incentive, Job Satisfaction and Employee Retention. To the employees, the proposed study serves the employees as their reference or guide for a reasonable and good incentive plans that the company should provide them. It will also help the employees to have an idea on why other employees retain on their job and not. To the company, the proposed study will help the company to have a deeper understanding to the said area. By this study they will come up with easier and powerful program. To the future researcher, the proposed study will benefits and help the future researcher as their guide. The study can also open in development of this study.