A STUDY ON REWARDS AND COMPENSATION OF EMPLOYEE WITH

SPECIAL REFERENCE

INTRODUCTION ABOUT THE STUDY

Each organization needs to maintain a balance between the internal sources of

personnel promotion and external sources by means of recruitment. Hence,
promotion must be based on consistent, fair and clear cut policy. The National
Institute of Personnel Management (NIPM) has suggested a promotion policy on the
following lines: Drawing up an organization chart to make clear to all the ladder of
promotion. Where there is a job analysis and a planned wage policy, such chart is
quite easy to prepare. Making the promotion system clear to all concerned who may
initiate and handle cases of promotion. Though departmental heads may initiate
promotion, the final approval must lie with the top management, after the personnel
department has been asked to check from its knowledge whether any repercussion
is likely to result from the proposed promotion. All promotions should be for a trial
period to ascertain whether the promoted person is found capable of handling the job
or not. Normally, during this trial period, he draws the pay of the higher post, but it
should be clearly understood that if ―he does not make the grade‖ he will be reverted
to his former post and former pay scale.

1.2 Reward System

Fat pay package, quicker promotions and incentives are not enough anymore.
Employers need to listen what employees want. A reward or incentive can be
anything that attracts a worker‘s attention and stimulates him to work. In the words
of Bureckm and Smith reward systems is a plan or programme to motivate individual
or group performance. An incentive programme is most frequently built on monetary
rewards, but also includes a variety of non-monetary rewards or prizes. On the other
hand French says the incentive system has a limited meaning that excludes many
kinds of inducements offered to people to perform work, or to work up to or beyond
acceptable stands. It is related with wage payment plans which tie wages directly or
indirectly to standard productivity or to the profitability of the organization or both
criteria. The use of incentives assumes that people‘s actions are related to their skills
and abilities to achieve important longer run goals. Even though many organization
by choice or by tradition or contract. In fact rewards on non performance criteria,
rewards should be regarded as a pay off the performance. Jack Zigon defines rewards
as something that increase frequency of an employee action‖. This definition points
to an obvious desired outcome of rewards and promotion: to improve performance.

An incentive plan has following important features:-

1. An incentive plan may consist of both monetary and non-monetary elements.

Mixed elements can provide the diversity needed to match the needs of individual
employees.

2. The timing, accuracy and frequency of incentives are the very basis of a successful
incentive plan.

3. The plan requires that it should be properly communicated to the employees to

encourage individual performance, provide feedback and encourage redirection.

Determinants of Rewards

These features are contingencies, which affect the suitability and design of rewards
to varying degrees. The effective use of rewards depends on 3 variables.

Individual, Work situation, Incentive plan

INTRODUCTION ABOUT THE INDUSTRY

Information technology in India is an industry consisting of two major

components: IT services and business process outsourcing (BPO). The sector has
increased its contribution to India's GDP from 1.2% in 1998 to 7.5% in
2012.[1] According to NASSCOM, the sector aggregated revenues of US$147 billion
in 2015, where export revenue stood at US$99 billion and domestic at US$48
billion, growing by over 13%.[1] India's current Prime Minister Narendra Modi has
started 'Digital India' project to give IT a secured position inside & outside India.
Information technology is playing an important role in India today and has
transformed India's image from a slow moving bureaucratic economy to a land of
innovative. The IT sector in India is generating 2.5 million direct employments.
India is now one of the biggest IT capitals of the modern world and all the major
players in the world IT sector are present in the country.

Information technology (IT) industry in India has played a key role in putting India
on the global map. IT industry in India has been one of the most significant growth
contributors for the Indian economy. The industry has played a significant role in
transforming India’s image from a slow moving bureaucratic economy to a land of
innovative entrepreneurs and a global player in providing world class technology
solutions and business services. The industry has helped India transform from a rural
and agriculture-based economy to a knowledge based economy. Information
Technology has made possible information access at gigabit speeds. It has made
tremendous impact on the lives of millions of people who are poor, marginalized
and living in rural and far flung topographies. Internet has made revolutionary
changes with possibilities of e-government measures like e-health, e-education, e-
agriculture, etc. Today, whether its filing Income Tax returns or applying for
passports online or railway e-ticketing, it just need few clicks of the mouse. India’s
IT potential is on a steady march towards global competitiveness, improving defense
capabilities and meeting up energy and environmental challenges amongst others.

IT-ITeS sector in India, with the main focus on increasing technology adoption, and
developing new delivery platforms, has aggregated revenues of USD 88.1 billion in
FY2011, while generating direct employment for over 2.5 million people. Out of
88.1 billion, export revenues (including Hardware) has reached USD 59.4 billion in
FY2011 while domestic revenues (including Hardware) of about USD 28.8 billion.
LITERATURE REVIEW

Organizations in today‘s environment seek to determine the reasonable balance

between employee commitment and performance of the organization. The reward
and promotion programs serve as the most contingent factor in keeping employees‘
self-esteem high and passionate. Oosthuizen (2001) stated that it is among the
function of managers to motivate the employees successfully and influence their
behavior to achieve greater organizational efficiency. La Motta (1995) is of the view
that performance at job is the result of ability and motivation. Ability formulated
through education, equipment, training, experience, ease in task and two types of
capacities i.e. mental and physical. The performance evaluation and rewards are the
factors that proved to be the bonding agents of the performance evaluation programs.
According to Wilson (1994), the process of performance management is one among
the key elements of total reward system. Entwistle (1987) is of the view that if an
employee performs successfully, it leads to organizational rewards and as a result
motivational factor of employees lies in their performance. Majority of the
organizations require their employees to work according to the rules and regulations,
as well as, job requirements that comply with full standards. The investigations that
have been conducted to find the relationship between compensation and individuals
were focused to increase the performance of employees (Ciscel, 1974). The highly
motivated employees serve as the competitive advantage for any company because
their performance leads an organization to well accomplishment of its goals. Among
financial, economical and human resources, human resources are more vital that can
provide a company competitive edge as compared to others. According to Andrew
(2004), commitment of all employees is based on rewards and promotion. Lawler
(2003) argued that prosperity and survival of the organizations is determined through
the human resources how they are treated. Most of organizations have gained the
immense progress by fully complying with their business strategy through a well
balanced reward and promotion programs for employee. Deeprose (1994) argued
that the motivation of employees and their productivity can be enhanced through
providing them effective promotion which ultimately results in improved
performance of organizations. The entire success of an organization is based on how
an organization keeps its employees motivated and in what way they evaluate the
performance of employees for job compensation. Managing the performance of
employees forms an integral part of any organizational strategy and how they deal
with their human capital (Drucker as cited in Meyer & Kirsten, 2005). Today where
every organization has to meet its obligations; the performance of employees has a
very crucial impact on overall organizational achievement. In a demotivated
environment, low or courageless employees can not practice their skills, abilities,
innovation and full commitment to the extent an organization needs. Freedman
(1978) is of the view that when effective rewards and promotion are implemented
within an organization, favorable working environment is produced which motivates
employees to excel in their performance. Employees take promotion as their feelings
of value and appreciation and as a result it boosts up morale of employee which
ultimately increases productivity of organizations.Csikszentmihalyi (1990) posits a
view that the state of satisfaction and happiness is achieved by the employees only
when they maximally put their abilities in performing the activities and functions at
work. In this way motivated employees are retained with the organizations thus
reducing extra costs of hiring. Flynn (1998) argued that rewards and promotion
programs keep high spirits among employees, boosts up their morale and create a
linkage between performance and motivation of the employees. The basic purpose
of reward program is to define a system to pay and communicate it to the employees
so that they can link their reward to their performance which ultimately leads to
employee‘s job satisfaction. Where job satisfaction, as defined by Lock (cited in
Gruneberg, 1979, p. 3), is a pleasurable positive emotional state as a result of work
appraisal from one‘s job experiences. The rewards include the financial rewards, pay
and benefits, promotions and incentives that satisfy employees to some extent but
for committed employees, recognition must be given to keep them motivated,
appreciated and committed. Baron (1983) argued that when we recognize and
acknowledge the employees in terms of their identification, their working capacity
and performance is very high. Recognition today is highest need according to most
of the experts whereas a reward which includes all the monetary and compensative
benefits cannot be the sole motivator for employees‘ motivation program.
Employees are motivated fully when their needs are met. The level of motivation of
employees increases when employees get an unexpected increase in promotion,
praise and pay (La Motta, 1995). In today‘s dynamic environment the highly
motivated employees serve as a synergy for accomplishment of company‘s goals,
business plans, high efficiency, growth and performance. Motivation is also required
when the organizational workforce has not a good relationship pattern. Employees‘
relation with employees and with supervisor is a key ingredient of the inner strength
of the organization. The ability of supervisors to provide strong leadership has an
effect on job satisfaction of employees (Morris, 2004). The study relates how the
impact of incentives, promotion and rewards programs drives employee motivation.
OBJECTIVES OF THE STUDY:

The general objective of the study was to determine the effect of compensation on employee’s
motivation at organization

Primary:

To study various factors relating to Rewards and promotion in State bank of India.

Secondary:

Study about Criteria for rewards and promotion.

To know about the Eligibility for rewards and promotion

To study the Impact of Rewards and promotion on behavior of employees.

To study the Benefits derived by Rewards and promotion.

To give Recommendation and Suggestions to the company.

SCOPE AND LIMITATION

This research project examined the impact of compensation schemes by examining previous studies
and literature on the issue and by conducting a study on employees. The research data was collected from
37 respondents out of 41 requests. Some of the limitations experienced included distance related in reaching
some of the intended respondents and availability of personal time to fill the questionnaire. To mitigate the
effects of these limitations, the researcher used emails to reach far respondents and individually telephoned
the respondents to explain the purpose of the study and give assurance that confidentiality would be upheld.
Through this the researcher got a response of 90%.

Limitations of study:-

Sample size: the present study is carried out for academic purpose, so sample size is
restricted.

1. No generalization: the study is restricted to an organization under study, so it

cannot be generalized for all employees in other organization.

2. Rewards and promotion are complex problem and researcher has attempted to
study most appropriate factors but chances cannot be ruled out that some areas may
have been untouched or not adequately touched.
METHODOLOGY

4.1. Title of Study

“A detailed study of promotion and reward policy of Organization”

4.2 Sample:

Sample is 50 employees from the total population.

4.3 Need and significant of study.

In today‘s business scenario promotion and rewards is most effective tool of

motivating employees. People mostly leave job because of compensation factor.

4.4 Why reward system is required?

These components will be designed, developed and maintained on the basis of

reward strategies and policies which will be created within the context of the
organizations between strategies, culture and environment: they will be expected to
fulfill the following broad aims;

1. Improve Organizational Effectiveness: Support the attainment of the

organization's mission, strategies, and help to achieve sustainable,
competitive advantage.
2. Support and change culture: Under pin and as necessary help to change the
'organizational culture' as expressed through its values for performance
innovation, risks taking, quality, flexibility and team working.
3. Achieve Integration: Be an integrated part of the management process of
the organization. This involves playing a key role in a mutually reinforcing
and coherent range of personal policies and process.
4. Supportive Managers: Support individual managers in the achievement of
their goals.
5. Motivate Employees: Motivate employees to achieve high levels of
quality performance.
6. Compete in the Labour market: Attract and retain high quality people.

QUESTIONNAIRE

STATEMENT Strongly Dis Agree Strongly Neither Agree

Disagree agree Agree Nor Disagree
1. I am aware of
various rewards
monetary and non-
monetary reward
schemes of the
company.
2.I am aware about
the basic criteria on
which various
awards are based
3.Rewards are based
on clear and
objective criteria
4.Rewards are given
as per criteria
5. Deserving people
are rewarded
DATA COLLECTION

The study used primary data and the main data collection technique used was structured
questionnaires. The questionnaire consisted of five questions seeking general information about
the respondent, these included the age, the gender, the level of education, category of employment,
the number of years they have worked at Chloride Exide and finally the general feeling of staff
motivation in the organization. The questionnaires were collected and sorted to eliminate those
with errors and the incomplete ones. Data was then analyzed using descriptive statistics like
percentages and frequencies. Descriptive statistics are methods used for describing the basic
features of the data in a study. The tools used for the analysis were first by use of Microsoft excel
and further by use of computer assisted programmer called Statistical Package for Social Sciences
(SPSS).

INTERPRETATION

The population of this study consisted of all employees of organization who are on permanent or
contract basis. For the study we refer to permanent employees as those whose letter of appointment
does not specify the duration of employment while contract employees as those whose letters
specifies the beginning and the expected last day of employment.

Population size

Category Population Percentage

Sales people 94 69%
Finance and Administration 25 18%
Technical staff 18 13%
Total 137 100%
This method was considered to give the best, due to the fact that employees in organization are
classified either into departments or pay levels. The pay level classification was two tiers only; for
junior payroll and senior payroll, which would not give a very good representation of the company
employees. The departmental classification was able to attain a good level of homogeneity within
any single department hence the sample picked from the different departments would give a better
representation of the population. Stratified sampling technique also helped reduce bias on any one
given area as departments with higher population had more respondents. The researcher divided
the sample into, sales people, finance and administration and technical department staffs and the
sample was picked randomly from the list of staff per department.

FINDINGS

This chapter presents the results and findings of the study based on the three research questions.
Part one gives the general information of the respondents. Part two covers findings on research
objective one which was to establish the methods used to determine compensations at organization.
Part three focuses on the second research objective which was to establish the extent to which direct
financial rewards affect employee’s motivations. Part four addresses the findings of the third
research objective which was to establish the extent to which benefits affect the employee’s
motivation at organization. A summary of the chapter is also given. Out of the targeted forty one
respondents, thirty seven responded to the questionnaire, this represented a 90% response rate.

Category Sample Size Response Percentage

Sales people 28 24 86%
Finance and Administration 8 8 100%
Technical staff 5 5 100%
Total 41 37 90%
General Information

This part had five questions touching on Gender, Age, Education level, Employment duration and
the general feeling on motivation in the organization.

Gender of Respondents

The findings showed that 8 of the respondents were female and 29 were male. This shows a 22%
and 78% representation of female and male respectively.

Gender Distribution

Gender Distribution

Frequency Percentage

Female 8 22%
Male 29 78%

Total 37 100%

Employee Compensation Constitutes a Significant Portion of the Company’s Costs

The employees were asked if employee’s compensation constituted a significant portion of the
organization cost. The findings showed that 11% of the respondents strongly agreed that employee
compensation is of significant importance, 62% agreed, 24% were not sure, 3% disagreed and
none strongly disagreed as illustrated in Table.
 Level Distribution

Frequency Percentage

Strongly Agree 4 11%

Agree 23 62%
Not sure 9 24%
Disagree 1 3%
Strongly Agree 0 0%

Total 37 100%

Benefits and Employee

Motivation of the questionnaire had five items which sought to establish the extent to which
benefits affect employee motivation at industries. Question one required the respondents to give
their opinions on whether they receive the listed benefits. On questions two to five the respondents
were required to give their opinions on a 1 to 5 scale, 1 being strongly Agree and 5 being strongly
disagree.

List of Benefits Entitled

When asked if they were entitled to a list of sampled benefits namely, medical, pension, paid leave,
insurance, car loans, free meals, child care and severance. The findings showed that on medical
benefits all the 37 respondents agreed so, on pension only 31 affirmed, Paid leave 33, insurance
32, car loan 16, Meals 35, Child care 14, and severance pay had 23 affirmations.
Importance of Benefits to Employees

The respondents were asked if benefits were of importance to them. Table 4.27 shows the findings.
A 16% of the respondents strongly agreed so and 46% agreed. Eight percent were not sure, 30%
disagreed and 0% strongly disagreed.
Contribution of Benefits to Staff Motivation

The respondents were asked whether they felt motivated by the benefits they received, 19% of the
respondents strongly agreed that they were motivated by the benefits they received, 62% agreed,
5% were not sure, 14% disagreed and none strongly disagreed as illustrated in Table

Recognition System Motivates

The respondents were asked if they were motivated by the system of recognition when they have
exceptionally performed. The findings are as presented in Table 4.31. A 22% of the respondents
strongly agreed that they were motivated, 49% agreed, 8% were not sure, 16% disagreed and 5%
strongly disagreed.
Correlations between Employees Benefits and Employees Motivation

A Pearson’s correlation test between employee’s benefits and employee’s motivation showed
different levels correlations on the areas tested. The results show that there were no significant
correlations between employee benefits and their motivation.
RECOMMENDATIONS

The recommendations for the specific areas covered are as follows.

The Methods of Determining Employee’s Compensation From the findings and the conclusions
made, there seems that proper methods of determining employee’s compensation in the
organization are lacking, and especially in evaluation against what the different authors advocate
for. It is with this knowledge that the researcher recommend that the Human Resources Manager
should develop systems that will ensure that there is a proper compensation plan entailing
proper job evaluation processes and pay structures in the organization. Any changes in the plan,
like salaries or process should be supported by right fundamentals like salary survey and facts on
the ground. Employees should be encouraged to take up-skills enhancement programmes and
lastly proper communication and clarification channels to be set where information is
disseminated regularly to all or is easily and readily available to all employees.

Direct Financial Payments and Employee’s Motivation In the light of the findings, of high
awareness of existence of basic and other additional payment, only a small population was
motivated with their basic pay and the overwhelming positive response on motivation improving
as a result of change in basic pay. The researcher recommended that a proper salary survey and
job evaluation vis-a-vis total rewards received to be commissioned in a bid to ensure there is
internal and external equity in the organization and that motivation is driven by the right
fundamentals. On the contingent pay, although the study did not go deep into finding out the
various forms of contingent pay in the organization, the general feeling of motivation was high.
The researcher also recommends that a further study be done even by department to determine
the specifics and take necessary actions. In the area of team work, team rewards and whole
organization reward it is recommended that further study be done to enhance it.
 Conclusion

The purpose of the study was to determine the effect of employee compensation on employee
motivation at organization. Based on the findings of the study, the following conclusions were
drawn on the three key and specific objectives of the study.

The Methods of Determining Employee’s Compensation

The fact that a good number of the respondents were not sure of the compensation plan in place
and minimum government requirements and that they disagreed that the plan achieved internal and
external equity could only mean that, the plan was either not communicated to them adequately or
it was not strongly upheld. On job well definition there was a good response of agreeing which
implies that this was well communicated to employees and employees understood what was
expected of them. Compensation for use of skills received nearly two thirds agreeing response
while a third disagreed, this could mean that the organization uses a mixture of skills and job based
pay or it could mean that some individuals are not placed in the jobs that match their skills. A two
thirds majority confirmation that compensation decision were made centrally indicates majority of
decisions were made centrally. The fact that many respondents were not sure or disagreed about
salary survey being conducted to determine salaries could mean that the system was not used and
so they were not familiar with it.

Direct Financial Payments and Employee’s Motivation

In conclusion a very high agreeing response on regular pay was review and variation within the
organization implies that employees were well aware this and that it was actually happening. The
mixed response of respondent feeling either motivated or otherwise by increase in basic could only
mean that basic pay does not fully motivate. The almost equal response of those agreeing and those
disagreeing to basic pay being well balanced with the work done means that there was no good
relationship between work done and compensation received or not enough communication was
done to help employee understand how their work contributed to pay received. A very high
responses of not being sure that there was a good balance on basic pay between fellow employees,
could mean that there was a high imbalance in salary levels or that the salary levels for each group
or level of employees was not well communicated. The overwhelmingly high response on pay for
performance implies that a there was a good communication of targets and individual
achievements. It also meant that individual people were well aware of the system. Since a high
percentage of the respondents felt motivated for being in a team and for achieving team targets,
then this meant that team work was highly encouraged and that it gave the desired results. The
negative correlation between current basic pay and motivation could mean that staffs were not
motivated.

Benefits and Employee’s Motivation

The strong response on the entitlement of benefits shows that employees were quite aware of the
benefits. It also meant communication about the benefits was better. Although there was a high
response on the value that the respondents put on the benefits, a good percentage of them felt
otherwise, this could mean that the benefits were not sold well to them or the combination of the
various benefits did not work for them. On there being a system of recognition and such a system
recognizing the respondents the high response again points out that to a high awareness on the
employee’s side and a better communication in the organization.