Project on Fringe Benefits

Study to determine the impact of fringe benefits on job satisfaction

Project Title: Study to determine the impact of fringe benefits on job satisfaction

MBA - HR

ABSTRAT

The The stud study y addr addres esse ses s the the impa impact ct that that frin fringe ge bene benefi fits ts have have on the the leve levels ls of job job satisfaction and engagement of the employees of Galaxy Mining Services. Galaxy is a global explosives company that serves the mining and construction industries all over the world. The remuneration of employees differs from country to country within the orga organi niza zati tion on and this this can can lead lead to conf confro ront ntat atio ions ns when hen empl employ oyee ees s comp compar are e

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remu remune nera rati tion on pac! pac!ag ages es amon amongs gstt

one one

anot anothe herr. To dete determ rmin ine e

the the

appr approp opri riat ate e

compensation for the value of the wor! becomes even more difficult when dealing with a glob global al orga organi niza zati tion on.. This his matt matter er beco become mes s even even more more comp compli lica cate ted d when hen an organization"s boundaries stretch across country borders. The study aims to compare job satisfaction satisfaction and engagement engagement of Galaxy employees employees wor!ing wor!ing in #ndia. $ survey research design was used with a specifically specifically developed %uestionnaire as the data gathering gathering instrum instrument. ent. The particip participants ants represent represent the total total of all employe employees es of Galaxy& a global mining services company. Management supported the study and made particip participatio ation n compulso compulsory ry.. $ total total of '( employe employees es complete completed d the %uestio %uestionna nnaires ires.. )mploye )mployees es from differe different nt areas& areas& gender gender&& age& age& academic academic levels levels and income income groups groups participated. The majority of the respondents were in the age group *+ , - /20.1. )ducational levels revealed that the majority /+0.-1 of participants have a Grade 2 and3or higher %ualification. 4ecause all the %uestionnaires represented the population and not just a sample& only a test to determine practical correlation was performed. 5or the purpose of the correlation test& the 6onparametric Spearman"s correlation coefficient /r was used. The statistical analysis indicated a highly important correlation between 7ob Satisfaction and and )ngag )ngageme ement nt.. Thus Thus a high high level level of job satis satisfa facti ction on will will imply imply a high high level level of engagement and vice versa. #t has also indicated that 7ob Satisfaction and 5ringe 4enefits shows a low practically practically significant correlation. The test for correlation correlation between 7ob 7ob Satis Satisfa facti ction on and and 8emun 8emuner erati ation on indic indicate ated d that that the the level level of job job satis satisfa facti ction on an employee experiences in the organization is influenced by his remuneration pac!age. The The test test for for corre correlat lation ion betwe between en )nga )ngage gemen mentt and and 5ring 5ringe e 4enef 4enefits its show shows s a low practica practically lly signifi significan cantt correla correlation tion.. The test for correlat correlation ion between between )ngage )ngagement ment and 8emuneration shows a low practically significant correlation. The limitations of the study were the limited number of employees in Galaxy #ndia for particip participatio ation n in this comparat comparative ive study study. The The structur structure e of remunera remuneratio tion n pac!ages pac!ages is treated as confidential and therefore employees might be hesitant to answer %uestions regarding fringe benefits and remuneration. The study was conducted within Galaxy and therefore its outcome can only be released with the permission of Galaxy #ndia.

2



remu remune nera rati tion on pac! pac!ag ages es amon amongs gstt

one one

anot anothe herr. To dete determ rmin ine e

the the

appr approp opri riat ate e

compensation for the value of the wor! becomes even more difficult when dealing with a glob global al orga organi niza zati tion on.. This his matt matter er beco become mes s even even more more comp compli lica cate ted d when hen an organization"s boundaries stretch across country borders. The study aims to compare job satisfaction satisfaction and engagement engagement of Galaxy employees employees wor!ing wor!ing in #ndia. $ survey research design was used with a specifically specifically developed %uestionnaire as the data gathering gathering instrum instrument. ent. The particip participants ants represent represent the total total of all employe employees es of Galaxy& a global mining services company. Management supported the study and made particip participatio ation n compulso compulsory ry.. $ total total of '( employe employees es complete completed d the %uestio %uestionna nnaires ires.. )mploye )mployees es from differe different nt areas& areas& gender gender&& age& age& academic academic levels levels and income income groups groups participated. The majority of the respondents were in the age group *+ , - /20.1. )ducational levels revealed that the majority /+0.-1 of participants have a Grade 2 and3or higher %ualification. 4ecause all the %uestionnaires represented the population and not just a sample& only a test to determine practical correlation was performed. 5or the purpose of the correlation test& the 6onparametric Spearman"s correlation coefficient /r was used. The statistical analysis indicated a highly important correlation between 7ob Satisfaction and and )ngag )ngageme ement nt.. Thus Thus a high high level level of job satis satisfa facti ction on will will imply imply a high high level level of engagement and vice versa. #t has also indicated that 7ob Satisfaction and 5ringe 4enefits shows a low practically practically significant correlation. The test for correlation correlation between 7ob 7ob Satis Satisfa facti ction on and and 8emun 8emuner erati ation on indic indicate ated d that that the the level level of job job satis satisfa facti ction on an employee experiences in the organization is influenced by his remuneration pac!age. The The test test for for corre correlat lation ion betwe between en )nga )ngage gemen mentt and and 5ring 5ringe e 4enef 4enefits its show shows s a low practica practically lly signifi significan cantt correla correlation tion.. The test for correlat correlation ion between between )ngage )ngagement ment and 8emuneration shows a low practically significant correlation. The limitations of the study were the limited number of employees in Galaxy #ndia for particip participatio ation n in this comparat comparative ive study study. The The structur structure e of remunera remuneratio tion n pac!ages pac!ages is treated as confidential and therefore employees might be hesitant to answer %uestions regarding fringe benefits and remuneration. The study was conducted within Galaxy and therefore its outcome can only be released with the permission of Galaxy #ndia.

2



!"TR#$%T!#" This mini-dissertation mini-dissertation focuses on a comparative study to determine the impact of fringe benets on job satisfaction satisfaction and engagement.

Fringe benets, or that part of the total compensation package other than pay for time worked provided to employees in whole or in part by employer payments, play a major role in the structuring of compensation packages (illiams, !""#$!%"&'.

f asked about their organi)ation*s organi)ation*s compensation programs, most managers critici)e them them as not worki working ng (+ens (+ensen en  cull cullen, en, %%&$ %%&$'. '. This This statem statement ent re/ec re/ects ts the opinion of various managers in the corporate world, as they are powerless with regar regards ds to the compe compensa nsatio tion n of their their employ employees ees and the limita limitatio tions ns which which are are placed placed by the laws laws of the organ organi)a i)atio tion n on the the struct structuri uring ng of their their employ employee* ee*s s remuneration packages.

anagers have the authority to make major business decisions sometimes worth millions of 0upees, but they don*t always have the authority to change the structure structure of their their employees employees** remuner remuneration ation packages packages (+ensen (+ensen  cullen, cullen, %%&$'. ost remuneration packages are based on market related information, and one can ask the 1uest 1uestion ion 2 do these these marke markett relat related ed rewa reward rds s re/ec re/ectt the contr contribu ibutio tion n that that a specic employee makes to an organi)ation3 organi)ation3 (+ensen  cullen, %%&$'. Today*s Today*s managers do not believe that their organi)ation*s organi)ation*s compensation programs are e4ective in getting the desired results for which they are held accountable

*



(+ensen  cullen, %%&$'. For most managers, compensation is their largest controllable operating e5pense. f it is successfully managed, the compensation o4ered to employees gives them a great tool to achieve the best possible business results. hen managers or employees critici)e the organi)ation*s remuneration packages or reward structures, it is often assumed that money is the reason. 6ut people or employees are motivated by more than just money. 7ccording to +ensen and cullen (%%&$#', some people say that money is not a motivator for them at all.

7ccording to c8a4ery and 9arvey (!""&$!', there are si5 key reasons why remuneration packages need to be structured, and why fringe benets will not be eliminated.

!t&s the la' $ 8ertain fringe benets are re1uired by law. n the :nited ;tates ;ocial

;ecurity, edicare, and Family and edical
$uty to bargain 'ith unions $ =irtually every conceivable employee benet 1ualies as

a >mandatory subject for bargaining? under federal labour law. This means that in collective bargaining, employers cannot ignore union proposals or eliminate benet coverage unilaterally.

ompetition$ @ven most small employers now sponsor some benet plans for their

employees 2 if only paid-time-o4 allowances and employee-pay-all coverage. 7 company opting for an >all cash? compensation program certainly would be disadvantaged competitively in the employment marketplace.

Benefits are ta(-ad)antaged$ :nlike pay, which is subject to federal and state ta5es,

most benets enjoy either a ta5-e5empt or ta5-deferred status. This enables employers to take current-year ta5 deductions for e5penditures without directly or immediately increasing employees* ta5able income.

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*mployees 'ant benefits $ @mployees are accustomed to receiving benet coverage

as part of their total compensation. They reali)e that because of ta5 advantages and economies-of-scale, they are better o4 having their employers provide benets. This is evident especially in /e5ible (cafeteria' plans where most employees forego cash pay-outs for benet choices.

Benefits support employer strategies $ 8ompanies nd that certain benets are often

more e4ective than pay in helping to achieve objectives related to recruitment, retention and motivation of employees, cost management, and social responsibility. @5amples of this are prot-sharing plans, work-and-family programs and /e5ible benet plans.

The bottom line is every organi)ation is di4erent 2 di4erent employees with di4erent cultures, di4erent needs and di4erent objectives (+ensen  cullen, %%&$!#&'. @4ective benets will align employee needs with the organi)ation*s goals, and this is based on careful research into what employees want what the organi)ation o4ers, what it wants to o4er, and ultimately what it can a4ord to o4er.

PR#B+*M STAT*M*"T

The study addresses the impact that fringe benets have on the level of job satisfaction and engagement of the employees of Aala5y ining ;ervices. Aala5y is a global e5plosives company that serves the mining and construction industries all over the world. The remuneration of employees di4ers from country to country within the organi)ation and this can lead to confrontations when employees compare remuneration packages amongst one another. The study aims to compare job satisfaction and engagement of Aala5y employees working in ndia. To determine the appropriate compensation for the value of the work becomes even more diBcult when dealing with a global organi)ation. This matter becomes even more complicated when an organi)ation*s boundaries stretch across country borders. t is therefore important to compensate employees according to the market value in each individual country as well as keeping in mind cultural diversities when remuneration packages are structured. +ob satisfaction can only e5ist when the interests of both the employee and the

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organi)ation are in e1uilibrium. The organi)ation relies on the manager to evaluate the value of the work performed by an employee, and with the interest of the s at heart, to determine the appropriate remuneration for this work. n order to o4er the employee compensation which is competitive with other companies* and appropriate for the employee*s duties, the manager needs to have an in-depth understanding of the real value of the work.

R*S*ARH #B,*T!*S

The research objectives are divided into general objectives and specic objectives.

.eneral objecti)es

The general objective of this research is to determine the impact of fringe benets on job satisfaction and engagement for employees working for Aala5y in ndia. Specific objecti)es

The specic objectives of this study are$

• • • •

To determine the importance of fringe benefits amongst employees To determine the impact of fringe benefits on employee engagement To determine the impact of fringe benefits on job satisfaction To gain better !nowledge of the structuring of remuneration pac!ages

R*S*ARH M*TH#$

The research method consists of a literature review and an empirical study.

+iterature re)ie'

The literature review focuses on the structuring of remuneration packages, fringe benets and their impact on job satisfaction and engagement.

+



Research design

Cne of the most popular and e4ective measurement tools to determine the impact that fringe benets have on job satisfaction and engagement is a research survey. Therefore, a 1uestionnaire was designed specically for Aala5y employees to obtain information regarding their perceptions on job satisfaction, engagement, remuneration and benets. 7 1uestionnaire of four sections was developed. ;ection 7 consisted of fteen 1uestions regarding job satisfaction. ;ection 6 consisted of fteen 1uestions regarding engagement. ;ection 8 comprised of fteen 1uestions about fringe benets and remuneration. ;ection D consisted of seven 1uestions regarding the participant*s biographical information. The participants, all Aala5y employees, were informed that the purpose of the 1uestionnaire was to gather responses on how they perceived the impact that remuneration packages and fringe benets have on job satisfaction and engagement. Participants of sur)ey

The participants represent the total of all employees of Aala5y, a global mining services company. Earticipation was supported by management and made compulsory. 7ll #& employees completed 1uestionnaires that were collected for analysis. @mployees from di4erent areas, gender, age, academic levels and income groups participated. The majority of the respondents were in the age group G 2 H% (I.!J'. @ducational levels revealed that the majority (GI.HJ' of participants have a Arade ! andKor higher 1ualication. Measuring instrument

Luestions were answered based upon the ve-point agreement-disagreement Meither agree nor disagree?.
(



The statistical analysis was carried out with the assistance of the ;tatistical 8onsulting ;ervices of the Morth-est :niversity (Eotchefstroom 8ampus'. The ;tatistical =ersion ".! (;tatsoft, %%#', ;E;; (;E;; nc. %%"' and ;7; (;7; nstitute nc., %%#' programmes were used.

R*S*ARH PR#*$%R*

0esponses were gathered from participants on all the items of the 1uestionnaire. Earticipants consisted of employees of Aala5y who are working in umbai, Delhi and Delhi. 7ll responses were used for data and statistical analysis. +!M!TAT!#"S

t was anticipated that a limited number of employees in Aala5y ndia would be available for participation in this comparative study. The structure of remuneration packages is condential and therefore employees might have been hesitant to answer 1uestions regarding fringe benets and remuneration. The study was conducted within Aala5y and therefore the outcome of the study could only be released with the permission of Aala5y ndia. The level of literacy in ndia di4ers immensely and therefore the completion of 1uestionnaires by certain individuals might have been problematic, and could re1uire the services of a translator. $!!S!#" #/ HAPT*RS

The chapters in this mini-dissertation are presented as follows$ 8hapter !$ ntroduction, problem statement and objectives 8hapter $
This chapter discussed the problem statement and research objectives. The measuring instruments and research method used when doing the research were e5plained. 7 brief overview of the chapters followed.

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+!T*RAT%R* ST%$0 7 thorough literature

study

needs to be conducted to form

a complete

conceptuali)ation of the terms job satisfaction, engagement, fringe benets and remuneration. For the purpose of clarication the following denitions will be apply to this study. $*/!"!T!#"S

For the purpose of this research, terms used in the chapter are dened as follows$

Basic Salary $ This is the cash compensation that the employee receives for the

duties that he performs. This component normally re/ects the value of the work that is performed and does not re/ect the e5perience or performance of the individual.

ar Allo'ance$ This includes the benet to the employee of a cash component in his

salary for the purpose of buying and maintaining a vehicle suitable for performing his duties, or the use of a company vehicle that would assist him in performing his duties, or the use of a pool vehicle that would assist him in performing his duties.

ontract *mployee$ Dened in the Aala5y 8onditions of ;ervice as employees

engaged for a stated period of time with or without an option for renewal.

*mployee $ Dened in the Eractical Auide to 0emuneration Eackaging as$

i'

7ny person (other than a company' who receives any remuneration or to whom any remuneration accrues.

ii'

7ny person who received remuneration or to whom any remuneration accrues by reason of any services rendered by such person to or on behalf of a labour broker.

*mployer $ Dened in the Eractical Auide to 0emuneration Eackaging as any person

who pays or is liable to pay to any person any amount by way of remuneration, and

9



any person responsible for the payment of any amount by way of remuneration to any person under the provisions of any law.

/amily of an employee $ Dened in the Aala5y 8onditions of ;ervice as the employee,

one spouse and a ma5imum of four unmarried children or dependants until they are no longer dependant. These, however, must be registered with the company. 8hildren or dependants who have o4spring of their own will be automatically e5cluded from any benets.

.ross income$ Dened in the Eractical Auide to 0emuneration Eackaging as in

relation to any year or period of assessment means$

!' n the case of any resident, the total amount, in cash or otherwise, received by or accrued to in favor of such residentN or ' n the case of any person other than a resident, the total amount, in cash or otherwise, received by or accrued to or in favor of such person from a source within or deemed to be within the 0epublic.

.roup +ife !nsurance $ This includes the contribution that the employer pays

on behalf of the employee for the purpose of life insurance or disability insurance of the employee whilst the employee is performing his duties. Housing Allo'ance$ This includes the cash component that the employee

receives

for

the

purpose of contributing

to the

rental

of suitable

accommodation, or the contribution to paying for his own accommodation. Medical Aid ontribution$ This includes the contribution that the employer pays on behalf of the employee for the medical aid cover of the employee as well as his immediate family members that are also covered by this medical aid cover. Pension$ t is dened in the Eractical Auide to 0emuneration Eackaging as an

annuity payable under any law or under the rules of a pension fund or provident fund or by an employer to a former employee of that employer or to the dependant or nominee of a deceased person who was employed by 



such employer. Pension /und ontribution$ This includes the contribution that the employer

pays on behalf of the employee for the purpose of having a pension fund or provident fund, or any fund or insurance that has the same intend, for the employee. Permanent *mployee$ Dened in the Aala5y 8onditions of ;ervice as

employees

engaged

with

a

view

to

long-term

employment

in

the

organi)ation. Remuneration$ The term >remuneration? as e5plained in the Eractical Auide to

0emuneration Eackaging, includes salary, advances to directors, leave pay, allowances, overtime pay, bonuses, ta5able section I7, I6 and I8 share options, disposals and gains, commissions, gratuities, pensions, annuity and retirement payments and any of the special ta5able benets described in the ;eventh ;chedule. The term >remuneration? e5cludes amounts or benets received in a trade carried on independently, that is, with no control or supervision of the manner in which the duties are performed or of the hours of work, provided payment is made at irregular intervals. 7 director of a company is specially deemed to be in receipt of remuneration for the purpose of fringe benet ta5. Salary$ dened in the Eractical Auide to 0emuneration Eackaging as salary,

wages or similar remuneration payable by an employer to an employee, but does not include any bonus or any other amount. Temporary *mployee$ dened in the Aala5y 8onditions of ;ervice as employees engaged for relatively short periods of time, for particular jobs or assignments, the duration of which is not stated, and whose services may no longer be re1uired on the completion of the particular job or assignment.

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,#B A"$ B*"*/!T SAT!S/AT!#"

7s a manager in the modern organi)ation, one must be fully aware of the diverse cultures in the organi)ation as well as the human resources practices needed to establish the best workable solutions for an optimal reward strategy. f one has all these aspects successfully implemented in the organi)ation, it would ultimately lead to better individual and organi)ational performance (+ensen  cullen %%&$I'.

9ow can a manager reward individuals within the guidelines of a company without jeopardi)ing

the

company*s reward

guidelines3

There is

not

one

suitable

remuneration structure that is suitable for all industries and all organi)ations across a broad spectrum of businesses. hat works for a certain company would not necessarily work for another company.

The manager cannot force people to perform nor can he satisfy all their needs, but he is, however, able to create a motivating climate in which his employees are motivated to perform well and to e5perience job satisfaction (8oetsee, %%$#I'.

7ccording to ilkovich and Mewman (%%#$&', some of the advantages of a successful compensation structure are$

• • • •

:eople join a firm because of pay structures :eople stay in a firm because of pay structures :eople agree to develop job s!ills because of pay :eople perform better on their jobs because of pay

Most well;!nown theories on the principle of motivation revolve around the idea that an employee"s needs influence his motivation. $n employee"s needs could be characterized as physiological or psychological deficiencies that trigger specific behavior from the employee. The needs of employees could vary over time and place and are subject to the influence of external and environmental factors. This implies that people will react to satisfy those needs that are not fully satisfied / 2*+. Maslo' 1 Her2berg&s Theories of "eeds

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?ne way to understand and motivate the employee is to revisit $braham Maslow"s @ierarchy of 6eeds /Maslow& 9'-. Maslow created a visualization of his hypothesis in the shape of a pyramid that is divided into five levels& starting from the bottom upwards& and the needs could be described as> Physiological. The most basic need& having enough food& air and water to survive. #n

the business context this could imply the employee"s salary& air conditioning in the office& or the availability of a cafeteria at the wor! place. Safety. The need to be safe from physical and psychological harm. #n the business

context this could mean the possibility of a salary increase& a pension plan& hospital and medical plans or disability insurance. +o)e. The desire to be loved and to love. #t contains the need for affection and

belonging. #n the business context this could mean employee;centered supervision& personal and professional friends& office parties or social gatherings. *steem. The need for reputation& prestige and recognition from others. This includes

the need for self;confidence and strength. #n the business context this could mean the employee"s job title& office furnishings or deserved salary increase. Self-actualisation. The desire for self;fulfillment ; to become the best one is capable of

becoming. #n the business context this could mean advancement for the employee& challenging assignments& development opportunities& or opportunities to use one"s s!ills.

asloww*s Meeds 9ierarchy is illustrated in Figure ! below$

*



9er)beerg (!"&##' suggested a two-step framework to understand employee motivation and satisfaction. 9is theory was developed too e5plain employee reaction to their work and the work environment. 9er)beerg highlighted that all factors could be categori)ed in two groups. The rst group is called 9ygiene or aintenance factors, and thee second group is called the otivating factors. 9er)beerg theory is illustrated in Figure  below$

Moti)ating /actors:

otivating factors could lead to an individual*s need for personal growth.

-



hen in e5istence, motivating factors could easily contribute to job satisfaction. hen it is most e4ective, it could motivate an employee to perform

above

average

and

above

e5pectations.

9er)berg*s

(!"&#'

motivating factors could include$

• • • • • •

Status ?pportunity for advancement Gaining recognition 8esponsibility Ahallenging 3 stimulating wor! Sense of personal achievement = personal growth in a job

@erzberg /9(' proposed that when hygiene factors are lac!ing in the wor!place& the employee will experience dissatisfaction or unhappiness. @owever& when these factors are present& the employee does not necessarily experience satisfaction. The employee simply does not feel dissatisfaction. Bhen motivating factors are present& the employee feels satisfied.

Hygiene /actors:

9ygiene factors are based on the needs of the organi)ation in order to prevent unpleasantness in the working environment. hen employees are under the impression that these factors are inade1uate, it could lead to dissatisfaction in the work place. 9er)berg*s (!"&#' hygiene factors could include$ • • • • •

'

8ompany policy and administration ages, salaries and other nancial remuneration Luality of supervision 5 Luality of interpersonal relations orking conditions 5eelings of job security



There are certain similarities between @erzbbergCs and MaslowCCs theories. 4oth suggest that certain needs have to be satisfied before an employee can be motivated. 5igure * below illustrates the comparison between Masloww"s and @erzbeerg"s theories>

/igure 3 - Maaslo' Hierarchy of "eeds )s Her2berg&s Moti)ation Hygiene Theory

Aiven these need theories, the 1uestion could be asked$ 9ow does the manager motivate his employees with the in/uence allocated to his authority3 The answer would lie in his ability to make employees feel secure, needed and appreciated.

These models of aslow and 9er)beerg present a means to understand the needs of the employees. 7ccording to these theories, every employee could react di4erently to his remuneration package, depending on the specic phase he is in his life, as well ass the conditions he e5periences at work. Di4erent employees have di4erent e5pectations from the remuneration given by the employer. These e5pectations are guided by the customary remuneration packages paid by organi)ation in the country and the cultural ethnics of thee employees. Moti)ation of employees

@mployers tend to utili)e default remuneration styles despite the histAala5yl failure of the tried and true solutions that have been used to address conditions in the new

+



organi)ation (Tropman, %%!$!I'. t is worth noting that organi)ations depend on the commitment and motivation of their employees. Cverloading them, stressing them, micro-managing them, or letting work spill over into their private lives does not develop the engagement and loyalty organi)ations need to succeed (8ooper, %%I$!I'.

7ccording to Tropman (%%!$!I', repeated attempts are sustained in part by false theories about the employees, which form an integral element in the resistance to change.

These false theories theories are are e5plained by Tropman (%%!$!I' (%%!$!I' as follows$ follows$

• • • • • • • •

Misunderstanding of the motivational component of performance Misunderstanding of the importance of Theory D Misunderstanding of job structures and the order of satisfaction with wor! and the completion of good wor! Misunderstanding of job satisfiers and job dissatisfies Misunderstanding of the motivational structure of the employee Misunderstanding of the cultural conflict between achievement and e%uality in the wor!place

5or the purpose of this paper& the importance of these theories can be explained as follows>

•

The empl employ oyer er*s *s obli obligat gatio ion n towa towarrds the the ompon omponents ents of perform performanc ance e$ The organi)ation is not only limited to recruiting the suitable employee, but also to develop e5isting employees. @mployers regularly underestimate thei theirr own own respo espons nsib ibil ilit ity y towa towarrds empl employ oyee ees s and and thei theirr perf perfor orma manc nce. e. @mployees with lesser ability can be motivated in order to achieve their performance targets whereas those employees with greater ability do not have ave to be motivate ated as much to achieve or e5ceed the same

(



performan performance ce targets. targets. @mployer @mployers s often often overesti overestimate mate the importance importance of trai traini ning ng,, whic which, h, in turn turn can can cont contri ribut bute e imme immens nsel ely y to the the apti aptitu tude de of empl employ oyee ees. s. t is also also an inte integr gral al role ole of the the empl employ oyer er to crea create te an organi)ation where employees want to come to work and understand the importance importance of their work towards towards the performance performance of the organi)at organi)ation ion (Tropman, (Tropman, %%!$!I'.

•

7ccording to Tropman (%%!$!"', management styles can be divided into either Theory O or Theory P styles. The Theory O managers believe that employees are la)y and do not want to work and that it is the obligation of the employer to either reward or punish such employees to ensure that they show up and shape up. Theory P managers believe the opposite in that that empl employ oyee ees s want want to work work and and that that they they will will get get ulti ultima mate te job job satisfaction from doing a good job. The purpose of the employer is not to control the employee, but to provide him with the necessary resources to perform his duties. 7ccording to Tropman (%%!$!"', one of the biggest problems is that organi)ations have Theory O mindsets in a Theory P environment. environment. Cld compensation systems are still, in many ways, driven by Theory O thinking.

•

Structure of the job$ @mployers tend to believe that satised employees

produce good work, hence they try to create an improved improved morale with the e5pectati e5pectation on that it will lead to improved improved 1uality. 1uality. The employer employer should inst instea ead d impr improv ove e the the stru struct ctur ure e of the the job, job, whic which h will will lead lead to satis satise ed d employees, which in turn lead to higher 1uality and improved productivity productivity.. @lements that contribute to employee satisfaction are meaningful work, successful completion of a task, variety by using di4erent skills, ability to work on his own and responsibility (Tropman, %%!$%'.

•

the com common mistak stake es made ade by Satisfi Satisfiers ers and dissati dissatisfi sfiers ers$ Cne of the employ employers ers is that that they they believ believe e that that satis satisers ers and dis dissat satis isers ers are are the same thing. hen an element is present, it can act as a satiser, but if the same element is missing, it does not necessarily mean that it is a

0



diss dissat atis ise err and and vice vice vers versa. a. Table able ! prov provid ides es a list list of elem elemen ents ts that that employees like and dislike, as proposed by (Tropman, %%!$!'.

T#P SAT!S/!*RS

T#P $!SSAT!S/!*RS

7chievement

8ompany policy and management

0ecognition

;upervision

ork itself

0elationship with supervisor

0esponsibility

ork conditions

7ttachment

0elationship with peers

Arowth

0elationship with sub-ordinates sub-ordinate s

Table 4 - Top Satisfiers and $issatisfiers according to Tropman 567748

t can be noted that the list of top dissatisers is largely based on relationships within the organi)ation.

•

Moti)ational structures $ 9arvard economist Thomas ;chelling came up with a two-

self model. This implied that every employee embodied two di4erent preference schedu schedules les$$ money money now (cash in hand' hand' and money later later (cash (cash put put aside aside for retirement'. The employer needs to pay both of these selves, in the form of a monthly salary for the here-and-now and the retirement contribution of the thenandand-th ther ere e self self.. This This impl implie ies s that that the the empl employ oyer er need needs s to cate caterr for for two two compensation targets$ the employees* present and future selves. The needs of the two selves must be balanced in the compensation system.

•

9orplace culture in conflict $ 7 manifestation of this con/ict is the continuous

battle between the view of the individual employee and the view of the team player. player. The 1uestion can thus be asked whether to compensate the employee or the team3 Tropman (%%!$' asks$ >;hould rms pay top dollars to optimi)e employee recruitment and retention, or should they pay the going market rate3 Do they give rewards to those who deserve it or those who need it3 Do they promo promote te based based on merit merit or on senior seniority ity3? 3? The organ organi)a i)atio tion n could could have have an achievement culture based on elements such as market base, here and now,

9



solo workers and fair play. Cn the other hand, the organi)ation could have an e1uality culture made up of elements such as team base, then and there, team workers and fair share. n reality, all organi)ational cultures are a blend of achievement and e1uality cultures (Tropman, %%!$ '.

•

The hierarchy of needs $ The needs of an employee can be e5plained by aslow*s

hierarchy of needs as illustrated in Figure ! of this chapter. There are two key elements of aslow*s work that a4ect the remuneration structure. The rst element is that the needs are a hierarchy - it is diBcult to address higher level needs when lower level needs are not fullled. The second element is that the hierarchy provides employers with a checklist which can be used to review the total compensation package.

n essence, these seven misunderstandings of Tropman (%%!$!I', tend to mean that employers have a rigid, over administered, and undermanaged compensation system. n the modern organi)ation, these perceptions need to be amended, especially given the structure, needs and e5pectations to the modern-day employee.

6reaking with the idea that engagement is merely the opposite of burnout, ;chaufeli et al. (%%$&H', dened engagement as a persistent and positive a4ective 2 motivational state of fulllment in employees, characteri)ed by vigor, dedication and absorption.

Benefit Satisfaction

6asic benet satisfaction can be dened as an employee*s attitude towards organi)ational benets focusing on employee safety and security-related needs (6lau et al., %%!$G&!'. 6enets included under basic benet satisfaction can be classied as$ • •

2

=acation ;ick


•

0etirement
•

Eisability

•

Health ( Maternity;/amily lea)e 8areer enrichment satisfaction was dened by 6lau et al. (%%!$G&!' as >an employee*s attitude towards organi)ational benets focusing on employee employability and skill development needs.? The benets included under career enrichment satisfaction can be classied as$

• • • •

8elease time for continuing education or professional meetings )ducational assistance or reimbursement for tuition Special wor! schedules 8ewards for advanced degrees or certification

$ccording to Billiams /99'>90& benefit satisfaction is important for two reasons>

•

The costs of employee benefits are high to companies and because costs increases and generally exceed inflation& therefore companies have implemented changes in benefits programmes to control costs.

•

4enefit satisfaction is of theoretical importance because of its potential lin!s with other important constructs.

4enefit satisfaction may be related to various behavioral attitudes such as organizational commitment. $ccording to Billiams /99'>90& employee attitudes towards benefits have been found to be significant determinants of pay satisfaction and have been lin!ed to behavioral outcomes such as absenteeism and turnover. Therefore& an understanding of benefit satisfaction may lead to an increased understanding of other important employee attitudes and behaviours. In a study conducted by Lust (1990:92) the findings about benefit satisfaction were no surprise: employees who are more satisfied with their pay are also more satisfied with their benefits. It

2



goes hand in hand and mae up the total compensation pacage. *".A.*M*"T

The origin of the term >employee engagement? lies in research into the e5tent to which people employ, or leave out, their personal selves when performing their work roles. hen people are engaged, they tend to e5press themselves physically, cognitively and emotionally during role performances (Qahn,!""%$G"'.

@ngagement is a controversial subject and there are various denitions for this term. 7ccording to ;chneider et al. (%%"$', some of the denitions are$

•

•

The individual*s involvement and satisfaction as well as enthusiasm for work

7 result that is achieved by stimulating employees* enthusiasm for their work and directing it towards organi)ational success

•

The e5tent to which people value, enjoy and believe in what they do

•

The capability and willingness to help the company succeed, i.e., discretionary performance

•

7 heightened emotional and intellectual connection that employees have for their job, organi)ation, manager or co-workers that in turn in/uences them to apply additional discretionary e4ort to their work

@mployee engagement is the key to human capital management because it focuses on managing employees to produce for the organi)ation rather than focusing on what the organi)ation does for the employees. @mployee engagement is di4erent from employee satisfaction with the latter connoting satiation and the former connoting energy (;chneider et al., %%"$&'. 7n engaged employee is aware of business conte5t, and works with colleagues to improve performance within the job for the benet of the organi)ation. The organi)ation must work to develop and

22



nurture engagement, which re1uires a two-way relationship between employer and employee. Therefore, employee engagement will be the barometer that determines the association of a person with the organi)ation (=a)irani, %%&$'.

0eward is a hygiene factor and getting it wrong results in disengagement, but getting it right does not create engagement (0obinson, %%I$#&'. t is commonly perceived that engagement a4ects the bottom line of an organi)ation$ engaged employees identify with their organi)ation, co-operate with their co-workers and work productively in a team. They also fully understand the business conte5t of the organi)ation.

7ccording to =a)irani (%%&$G', the advantages of engaged employees are$

• • • • •

• • • • •

)ngaged employees stay with the company They normally perform better and are more motivated There is a significant lin! between employee engagement and profitability They form an emotional connection with the company #t builds passion& commitment and alignment with the organization"s strategies and goals #ncreases employee"s trust in the organization Areates a sense of loyalty in a competitive environment :rovides a high;energy wor!ing environment 4oosts business growth Ma!es the employees effective brand ambassadors for the company

8esearch has shown that higher employee engagement is associated with gains in employee retention and performance& customer service and satisfaction& and business performance /Biley& 29>'0.

*ngagement challenges

7ccording to 0obinson (%%I$#&', the potential challenges facing the theory 2*



behind engagement include$

•

@ngagement typically goes down as length of service goes up

•

@5perienced people are an asset, so how can organi)ations engage people who have been with them for a while and may have had disappointments, such as not being promoted3

•

Erofessionals usually owe their engagement to their profession, not their organi)ation

7ccording to Truss (%%"$H&', high levels of engagement create a statistically signicant improvement to personal well-being, loyalty, job satisfaction and performance as well as a reduction in likelihood of leaving. Truss (%%"$H&' also states that it is of utmost importance to focus on the employee job t, management style, involvement and communication in order to increase levels of engagement. t should be noted that engagement strategies should vary depending on the conte5t. 7ccording to iley (%%"$#I', research has shown that higher employee engagement

is

associated

with

gains

in

employee

retention

and

performance, customer service and satisfaction and business performance. Eollitt (%%#$#' found that environments that foster inclusion (of which e1uity is a large part' were found to$ • • • • •

Eromote innovation 8reate a safer work environment Drive employee engagement, commitment, and pride Eositively impact customer satisfaction 6enet nancial performance

*ngagement measurement

7ccording to ;chneider et al. (%%"$', the most common measure of employee 2-



engagement used by companies contains four traditional survey items, namely$

• • • •

@ow satisfied are you with wor!ing for this organizationF Eo you plan on wor!ing for this organization a year from nowF @ow proud are you that you wor! for this organizationF Bould you recommend to a friend that he or she come wor! for this organizationF

These %uestions are normally as!ed in order to form an index of engagement. These %uestions are more inclined to measure the satisfaction that a person experience when he or she wor!s for an organization. $ccording to Schneider et al. /29>2*& these %uestions measure the following three aspects> •

The level of satisfaction with the job security

•

The level of satisfaction with fringe benefits

•

The opportunities

6o one can argue that the level of satisfaction is not important& but it does not indicate the level of engagement of the employees. #t is important to measure and manage the level of engagement& as it is the engagement of the employees that costs the organization money. Bhen the employee is not fully engaged& the organization still needs to pay his full salary& even though he has not earned it. #n organizations with only average levels of employee engagement& between *1 and '1 of their payroll is going down the drain /$yers& 2(>+. The level of engagement is important for the organization because it needs to maximize the output it gets from employees& thus maximizing their engagement. !easures of engagement need to be different from measures of satisfaction found in the typical employee opinion sur"ey. #mployee feelings of engagement and beha"ioral engagement relate significantly to maret and financial performance$ and a measure of engagement targeted on customer ser"ice is significantly related to customer satisfaction (%chneider et al.$ 2009:2&). 'he latter suggests that focused engagement measures may be uite useful as a tactic for assessing

2'



engagement in relation to important organiational outcomes such as customer satisfaction$ but also perhaps for other outcomes such as inno"ation and safety (%chneider et al.$ 2009:2&).

*ngagement dri)ers

;chneider et al. (%%"$' dened engagement as having two major components$

•

/eelings for engagement - this implies the heightened state of energy and

enthusiasm associated with work and the organi)ation.

•

*ngagement beha)iours - this implies the demonstration in the service of

accomplishing organi)ational goals.

t is obvious that employee engagement feelings and behaviours are di4erent from job satisfaction - they address di4erent kinds of issues and have di4erent drivers.

7ccording to ;chneider et al. (%%"$', the three strongest drivers for feeling of engagement are$

5eeling that there is full utilization of one"s s!ill and abilities Seeing that there is a lin! between one"s wor! and the objectives of the organization 4eing encouraged to innovate $ccording to Schneider et al. /29>2*& the three strongest drivers for engagement behaviours are>

•

uality of relationships with co;wor!ers

•

5eeling trusted and respected

•

Supervisor credibility

#n a research study done by Biley /29>'0& the top ten drivers of employee

2+



engagement are> •

•

Aonfidence in the organization"s future $ promising future for the employee x Support for wor!;life balance x Safety is a priority

•

)xcitement about wor!

•

Aonfidence in the organization"s senior leaders

•

Satisfaction with recognition

•

Aorporate responsibility efforts that increase overall satisfaction

•

Satisfaction with on;the;job training

•

$ manager who treats employees with respect and dignity

5rom the list of drivers mentioned above& it could be concluded that offering praise for a job well done is a simple and inexpensive way to encourage employee engagement.

$ccording to 4lizzard /2*H& the various job categories also differ with regards to the drivers of wor!ers" satisfaction and engagement ; or the lac! thereof. )ach category faces challenges specific to the type of wor! involved. 4lizzard /2*>2 illustrated the employee engagement hierarchy as follows>

/igure < - *mployee *ngagement Hierarchy

2(



7ccording to c6ain (%%GG$!', the employee engagement concept has emerged st

as perhaps the most useful idea for 900 practitioners in the ! century. ndeed, such engagement is tithe >ultimate pri)e? for employers, according to one consultancy which has done much research into the area (Towers Eerrrin, %%$'. ts emergence stems, at least in part, from the way the concept seems to integrate so many di4erent aspects of 90, such as employee satisfaction, commitment, motivation, job design, and involvement (;tairs, %%##'.

>Aiven the clear relationship found between employee satisfaction with diversity and employee engagement, the future focus should hinge on increasing employees* perceptions of diversity e4orts, thus leading to increased levels of employee engagement and reduced turnover,?? (;heridan, %!%$!''. >8hief @5ecutive CBcers and Aeneral anagers who have discounted the importance and value of diversity e4orts can no longer a4ord to do so.?

ncreasing evidence suggests employee engagement can make a di4erence to the performance of employees and teams within organi)ations. The

employee

engagement theory re/ects change in the organi)ational environment, and the mutual e5pectations of employees and employers in the >physiological contract? mirror changing patterns of motivation$ many individuals are seeking greater personal fulllment in their working lives and are not solely motivated by nancial rewards. n addition, changes in the business landscape will re1uire more /e5ibility, collaboration, project-based activities and talent-led teams (c6ain, %%G$!'.

;uBcient evidence e5ists to indicate that employee engagement has signicant potential to assist managers in improving team and organi)ational performance by improving the daily e5perience of employees within the organi)ation. There are however, more

issues remaining, like the precise denition of >employee

engagement? and the distinguishing between engagement, satisfaction and commitment. The truth is, there is no 1uick 5, no more than there is a 1uick 5 for cancer. 6ut if diagnosed early, both can be cured (7yers, %%&$!G'. The conclusion is that employee engagement is the key to successful use of an

20



organi)ation*s human capital. 9owever, employee satisfaction has not become an irrelevant measure. f it is used appropriately within the larger framework of engagement, employee satisfaction measures can provide useful insight for the organi)ation (6li))ard, %%$'. STR%T%R!". #/ R*M%"*RAT!#" PA=A.*S

hy does the remuneration package have to be structured with the aid of fringe benets3 8onsidering the growing comple5ity of remuneration packages, and the cost of structuring, administering and nancing them, this 1uestion is even more important.

f

all

of

these

fringe

benets

were

eliminated,

compensation

management would become much easier and simpler, but not necessarily cheaper, although administration costs would decrease (c8a4ery  9arvey, !""&$!'. 8ompensation is an important factor in the design, implementation and maintenance of organi)ations. 9owever, compensation includes not only wages paid to employees but also non-wage benets such as medical insurance and a retirement plan (eathington  +ones$ %%G$"'. ages and benets together are often the biggest e5pense incurred by organi)ations.

The >#ld Pay? System

Tropman (%%!$&' argued$ >8ompensation is the >elephant in the living room? of most organi)ations - large, oppressive, and un-addressed. 7ttention to pay systems is often non-attention. t falls into what 9arvard*s 8hris 7rgyris called >defensive routines? - they are not discussible, and their non-discussibility is not discussibleR?

This era of thinking included Tropman*s (%%!$&' comment that$ >one si)e ts all? philosophy where every employee must be satised with the remuneration package that is chosen for him by management. This phenomenon is called >the old pay system?.

omponents of the >#ld Pay? System

29



7ccording to Tropman (%%!$I', the typical >old pay? system consists of ve parts$

• • • • •

4ase pay $nnual merit raise 4enefits $ few per!s ?ccasional gratuities

These five elements together form the compensation pac!age& which could be described as a return received in exchange for the employee"s performance and ideas in the organization. This exchange relationship is summarized in the terms and conditions of the employment contract& which along with the unstated exchange agreement forms the implicit contract. $ccording to Mil!ovich and 6ewman /2'>2& the implicit contract can be explained as> Ian implicit contract is an unwritten understanding between employers and employees over their reciprocal obligations and returnsH employees contribute towards achieving the goals of the employer in exchange for returns given by the employer and valued by the employee.J Problems arising from the >#ld Pay? System

@mployers often reali)e that old pay systems create certain problems in the organi)ation. These problems might include employees feeling that they are entitled to their pay every month. This situation can be compared to that of runners with a stone in their shoeN it irritates them to the edge, but they can*t seem to nd time to stop and change the situation. 7ccording to Tropman (%%!$"', there are inherent problems in the way the old pay system is conceptuali)ed$

•

Pay becomes entitlement dri)en $ n old pay, employees feel they are

entitled to their pay, and to raises in pay, unconnected with any accomplishments they produce.

*



•

!ncreases cap out$ ith old pay, increases are cut o4 when the

employee reaches the top of a job*s range. @mployers thus >bump? workers to higher job classications solely to give them more pay.

•

/ailure to moti)ate $ Cld pay does not motivate because it is mostly

unlinked to the employee*s production and contribution. To begin with, base pay (before >merit? adjustment' is fre1uently unconnected to any results or accomplishments. t is almost as if one is paid a salary just to show up.

•

Annuiti2ed$ ith old pay, each raise goes into the base. 9ence

employees pay year in and year out for last year*s accomplishments. This means that employee investments keep costing more without any parallel increase in productivity.

•

•

•

ost of li)ing increase $ This increase comes every year. !ncrease attached to base $ That is, raises are added to the employee*s base pay. !ncrease largely based on seniority $ 0aises are greater for those who

have been with the organi)ation for longer, sometimes because length of service is directly gured in and sometimes because, using a percentage increase model, those who have been there longer make more money and hence receive a bigger base increase.

•

.rade-based promotion$ Eromotion to higher salary grades (based on

seniority' carries employees to higher pay potential, both in salary and bonus. (6onuses are typically calibrated as a percent of salary so in this model the more you make, the more you are paid'.

•

Trophies$ 7t various anniversary dates of employment (ve years, ten

years, and so on' employees are given mementos of their association with the company. Trophies are, of course, more meaningful if they are

*



given for some actual accomplishment rather than just for hanging around.

•

Holiday gifts $ 7t holiday time, especially 8hristmas, the company gives

employees a gift. Bonuses$ Eeriodically, but often unconnected or connected only ha)ily to

anything the employee can gure out, a bonus is provided.

The Total ompensation Pacage

omponents of the Total ompensation Pacage

Tropman (%%!$H' asked$ >6ut is pay all there is3 The answer is no, because pay is often badly congured and other things besides pay are needed to attract, retain, and motivate employees.?

The total compensation packages consist of various forms of compensation that the employee receives, and sometimes even e5pects to receive from the employer. This total compensation package can be categori)ed into total remuneration and relational compensation. The relational compensation consists of work factors that have a psychological impact on the employee. These factors are often categori)ed as motivating factors according to 9er)berg*s (!"&#' motivational hygiene theory. hen these motivating factors are present, the employee will e5perience job satisfaction. hen the motivating factors are absent, the employee will e5perience dissatisfaction.

The total remuneration consists of hygiene factors that will contribute to the motivation of the employee. hen these factors are absent, the employee will not necessarily feel dissatised, but not fully satised. These factors can be categori)ed into the cash component and the fringe benets. The cash component typically

*2



consists of components like the basic salary along with the merit increases that the employee receives. The fringe benets can be a combination of various components like the car allowance, housing allowance, medical aid insurance, pension fund contributions, etc. The layout for the Total 8ompensation is illustrated in Figure # below$

/igure @ - Total ompensation illustration

The total compensation package consists of many elements which act as important rewards for the employee. These elements overlap, relate to and sometimes integrate with the total compensation package, but are often less tangible. 7ccording to Tropman (%%!$&', the ve key elements of the work e5perience are$

**

•

7cknowledgement, appreciation and recognition

•

6alance of workKlife

•

8ulture

•

Development



•

@nvironment

Tropman /2>*( also argues that it is the Icollective impact of the componentsJ that matters as much as the individual elements. $ccording to Tropman /2>-& there are several differences between the I?ld :ayJ system and the Total Aompensation system. Some of the differences are explained by him as follows>

•

*mployees ha)e to earn the right to competiti)e pay $ Mo

more

entitlement. Mo one necessarily is guaranteed anything. Eersonal pay is driven primarily by performance, which takes into account not only individual contributions but also group and company performance.

•

Self-funded at the unit le)el$ The prot is shared by prot centers within

the organi)ation. @mployees may have several sources of pay, and what they get depends on the performance of the various units. •

•

ariable pay$ 7t the individual level, pay (or salary' becomes somewhat variable. @mployees are not entitled to their entire pay unless they meet certain benchmarksN however, if they e5ceed the benchmark, they can make more than their agreed-upon base. +ine of sight $ ost organi)ations have tried to adopt approaches with a

stronger line of sight between the pay individuals receive and the performance results they most directly in/uence. 7s a result, many variable-pay arrangements are tied to business-unit results.

•

%nit gain-sharing$ The bonus pool is gured on the gain the unit makes

above market average, minus costs and scrap.

•

/irm gain-sharing $ This portion of the bonus comes from the overall rm

performance, again, looking at the amount above market.

*-



•

Maret adjustment to base$ 6ase pay is adjusted, overall and for

individuals, depending on the market forces, not seemingly random acts of the human resources department. These di4erences are critical in the total compensation system. 7ccording to Tropman (%%!$!#', these di4erences are indeed the basis of, and the drivers for, the total compensation solution. The Philosophy of Total ompensation

The organi)ation needs a clear, logical and consistently e5pressed compensation philosophy. There are three common problems that are fre1uently associated with the philosophy of an organi)ation. Firstly, no philosophy is often present, secondly, the wrong philosophy is applied to the compensation structure and thirdly, there are signicant gaps between the desired philosophy and the implementation of the philosophy to the compensation structure. The ideal compensation philosophy involves ve key components as described by Tropman (%%!$I'$

• • •

•

•

7 clear understanding of what we pay employees for 7n understanding of what accomplishments we want from employees

$n understanding that employee compensation consists of both investments and awards $s self;explanatory as these points may seem to be& most organizations fre%uently stumble over them. #t is worthwhile to consider the merit of each of these points. $n understanding of the need to articulate the compensation philosophy in a compensation policy $ compensation distribution matrix

=ey steps to formulate a Total ompensation Strategy

7ccording to ilkovich and Mewman (%%#$G', the development of a total compensation strategy involves four simple steps. These steps might seem simple and easy, but their e5ecution is comple5. The implementation process involves trial and error, e5perience and insight. Step 4: Assess total compensation implications *'



This involves the consideration of the organi)ation*s past, present and future. 7ll factors that might in/uence the business environment of the organi)ation must be considered as well as their contribution to the organi)ation*s success. ;ome of these factors are$ ompetiti)e dynamics$ The key is to have a clear understanding of the

industry in which the organi)ation has to compete. Factors such as changing customer needs, changing labour markets, regulations and competitive action are important to determine the business environment in which the organi)ation needs to function. ulture;alues$ The compensation strategy re/ects the values that the employer will use as a guideline to manage its employees. The compensation strategy must mirror the company*s image and reputation. Factors of importance include personal satisfaction in work accomplished, security, growth opportunities and rewards for company*s success. Social and Political onte(t$ anagers fre1uently e5pect that a diverse

workforce and a diverse form of pay may contribute to the value of the organi)ation and would be diBcult for competitors to imitate. The social conte5t includes a wide range of factors such as legal and regulatory re1uirements,

cultural

di4erences,

changing

workforce

dynamics

and

employee e5pectations. *mployee "eeds$ The implementation of a compensation strategy often

ignores the di4erences between employees. The individual needs of an employee are often overlooked when formali)ing a compensation package, which is limited by the contemporary pay system. The importance of Pay in #)erall HR strategy $ The compensation strategy is

often in/uenced by other 90 systems in the organi)ation. 7n e5ample is that when the organi)ation is decentrali)ed an emphasis is placed on /e5ibility, and then the organi)ation cannot make use of a condential pay system controlled by a few employees at a central business unit.

*+



Step 6: Map a total ompensation Strategy

The total compensation strategy consists of the following ve factors$ #bjecti)es$ hat is the importance of the total compensation system in the

overall 90 strategy3 s the total compensation system a catalyst, playing a major role in the 90 strategy3 Cr is it used with less importance, playing a subordinate role in the 90 strategy3 Alignment$ 9ow well does the total compensation package support career

growth in the organi)ation3 This will depend on the level of the hierarchy in the organi)ation and the /e5ibility of the 90 strategy in the organi)ation. ompetiti)eness$ 9ow does the total compensation package compare relative to what a similar organi)ation would o4er in the market3 This is also in/uenced by the value the employee would place on fringe benets compared to basic salary. 7 secondary factor to consider is the balance of work and life for the employee. ontribution$

The

preference

of

the

organi)ation

between

employee

contribution and group contribution. Management$ The impact that an employee can have in terms of ownership,

transparency, technology and customi)ation of organi)ation structures. Step 3: !mplement the Strategy

This step involves the formulation of a process that would enhance the implementation of the total compensation strategy in practice. $esign system to translate strategy into action$ The basic principle of

implementing a strategy is to align the total compensation structure to the business strategy. hoose techniues to fit strategy $ 7 supporting compensation system places

*(



less emphasis on evaluating skills and jobs and more emphasis on incentives designed to encourage innovations supporting the overall business strategy.

Step <: Re-asses the Strategy

This step involves continuous assessment of the compensation strategy to t changing conditions. Realign as conditions change$ 8hanging market conditions emphasi)e the

need for a /e5ible compensation strategy. Realign as strategy changes $ 7 change in business strategy would imply the management of the di4erent links between the compensation strategy and people*s perceptions of market related pay strategies. /actors !nfluencing Benefit hoice

ilkovich and Mewman (%%#$H%"' provide the following list of factors which they believe will in/uence the benets chosen both by employees and employers depending on their di4erent preferences.

These factors are outlined in Table  below.

*0



Table  indicates that there are a number of factors in/uencing employer preferences when it comes to the selection of fringe benets for the employee. t is of utmost importance for the employer to consider the costs of employee benets as part of the total compensation costs for the organi)ation. Fre1uently employees are under the impression that when a certain fringe benet is fashionable, it should be included into their compensation package, despite the ta5able implication of this inclusion. Table  also indicates that the factors in/uencing employee preferences are mainly based on two groups of factors. Cn the one hand are the needs of the particular employee, and on the other hand is the perception of that employee about the fairness of his total compensation package. The fringe benets perceived to best satisfy an unfullled need are the most desired benets at that moment. The second important aspect to consider is the factor of e1uity or ine1uity. Mo matter how condential their total compensation packages are, they always surface in conversations between employees. They in turn then discuss and compare their compensation packages and form their own opinion about e1uity or ine1uity based on their perceptions. These perceptions can be either a motivating factor for the employee that feels he is suBciently compensated for his contribution or a de-motivating factor when the employee feels he is not suBciently compensated.

%+T%R*S

7 cultural system can be dened as people sharing similar beliefs, customs, norms and >mental programming? (6rislin

*9

et al .,

%%#$II'. ost denitions about culture



emphasi)e human-made elements that are shared through communication, which increase the probability of survival resulting in greater satisfaction for those in the community. n this section, the focus will be mainly on the impact of cultural diversity on the job satisfaction created by remuneration structures. The importance of certain fringe benets to the employee may be determined by the economic situation in the country and availability of certain lu5ury items.

R*S*ARH M*TH#$#+#.0

!"TR#$%T!#"

The main objective of this comparative study is to assess whether there is a denite correlation between the type of fringe benets that are included in the remuneration package of an employee and the level of job satisfaction that the employee e5periences at the workplace, as well as the level of engagement the employee displays towards his position and the organi)ation.

R*S*ARH $*S!."

Cne of the most popular and e4ective measurement tools to determine the impact that fringe benets have on job satisfaction and engagement is a research survey. Therefore, a 1uestionnaire was designed specically for Aala5y employees to obtain information regarding their perceptions on job satisfaction, engagement, remuneration and benets. 7 1uestionnaire was developed consisting of four sections. ;ection 7 consisted of fteen 1uestions regarding job satisfaction. ;ection 6 consisted of fteen 1uestions regarding engagement. ;ection 8 comprised of fteen 1uestions about fringe benets and remuneration. ;ection D consisted of seven 1uestions regarding the participant*s biographical information. The participants, all Aala5y employees, were informed that the purpose of the 1uestionnaire was to gather responses on how they perceived the impact that remuneration packages and fringe benets have on job satisfaction and engagement.

-



Sur)ey $istribution

The survey distribution is limited to the employees of Aala5y in ndia. 7ll the employees completed 1uestionnaires, thus representing the full population. The population distribution is as follows$

• •

$ll the employees wor!ing in the regional office in Mumbai& #ndia $ll the employees wor!ing in the factory in Eelhi& #ndia

Population description

For this study, all employees across all levels in the organi)ation were re1uested to complete a 1uestionnaire. n ndia, the population was divided into two groups$ •

The employees in the regional oBce in umbai

•

The employees in the factory in Delhi

The population of the employees in the regional oBce in umbai consists mainly of middle management and senior management employees. This group of employees are sub-divided into two groups. The rst sub-group is the majority and consists of ndian, who support the sales and after-sales service of the products in ndia. The second sub-group consists of foreign employees who represent several countries from all over the world. These employees are involved in the administrative support of the 7sian business for the organi)ation. The regional oBce in umbai consists of highly educated employees who are specialists in their eld of e5pertise and who are brought to this oBce for specic functions. The population of the employees in the factory in Delhi mainly consists of local employees from that area who are employed in junior positions in the organi)ation.

-



The employees build components for the construction of electronic detonators and control e1uipment, and have limited education. @5cept for the three people in management positions, these employees do not have any formal tertiary 1ualications. The population could also be characteri)ed by some permanent employees and some contract employees who are employed on a si5 month contract period.

Research instruments

The following research instruments were used.

• •

•

uestionnaires Structured interviews to assist non )nglish spea!ers in completing a %uestionnaire. $ local employee from Galaxy #ndia& capable of translating )nglish into the native languages& assisted with the interviews.

6o unstructured interviews were re%uired for employees wor!ing in #ndia as all employees completed the %uestionnaires. $ %uestionnaire was given to every employee in the Mumbai office for completion. The %uestionnaire was e;mailed to the factory in Eelhi& where it was printed by the secretary and handed to all employees for completion. The completed %uestionnaires were scanned and e;mailed bac! to the author. * uestionnaire was e+mailed to the regional office in *ccra to be printed and distributed to all the employees in India. 'he author "isited offices to assist all the employees with the completion of the uestionnaires$ and to ensure that all employees completed a uestionnaire.

%*ST!#""A!R*

Determining the impact that fringe benets have on job satisfaction and engagement needs to be more than just speculation. 7 common measurement tool to determine the impact that fringe benets has on job satisfaction and engagement is a research survey. To nd an e5isting 1uestionnaire that comprises of 1uestions consisting of all three criteria, job satisfaction, engagement and fringe benets, was virtually impossible. Therefore, a 1uestionnaire was designed -2



specically for Aala5y employees to obtain information regarding their perception and opinions on these subjects.

The 1uestionnaire consisted of four individual sections$

• • • •

Section $ , 7ob Satisfaction Section 4 , )ngagement Section A , 5ringe 4enefits and 8emuneration Section E , :ersonal and Eemographical #nformation

uestions were chosen and constructed with particular purpose for this paper. Several %uestionnaires were studied for bac!ground information that assisted with the structuring of the %uestions. $ll %uestions in Section $& 4 = A were measured on a Ki!ert scale& where  indicated strongly agree& 2 indicated agree& * indicated disagree and - indicated strongly disagree. * copy of the uestionnaire is pro"ided in the *ppendi, *. STAT!ST!A+ A"A+0S!S

7 total of #& 1uestionnaires were distributed to three di4erent demographical areas. Aala5y management participated in this study and made it compulsory for every employee to participate and complete a 1uestionnaire. 7ll the 1uestionnaires were submitted to the ;tatistical 8onsulting ;ervices of the Morth-est :niversity 2 Eotchefstroom 8ampus for analysis. The ;tatistica =ersion ".! (;tatsoft, %%#', ;E;; (;E;; nc. %%"' and ;7; (;7; nstitute nc., %%#' programmes were used.

The statistical analysis was divided into si5 sections$ 5 Fre1uency distribution and descriptive statistics of the individual items 5 8ronbach*s 8oeBcient 7lpha for each section 5 Descriptive statistics for the

-*



selected sections 5 Test for correlation between sections 5 Test for di4erences between demographical areas Tests for di4erences in gender, age, e5perience, academic 1ualications and level in the organi)ation

/reuency $istribution and $escripti)e Statistics of the !ndi)idual !tems

7 total of #& 1uestionnaires were distributed too three di4erent demographical areas, umbai and Delhi.. 7ll the 1uestionnaires were completed and the representation for the three areas is shown in Figure G below$

/igure C - .eographic $istribution

The population was divided according to gender, and thee representation is indicated in Figure & below. The majority of the population was male, being represented by IJ against thee !GJ representation of the female participants.. There was one participant who did not indicate hisKher gender on the 1uestionnaire..

--



/igure D - .ender $istribution

7ccording to thee analysis of ;ection D of the 1uestionnaire, the representation for each oaf the sub--sections is indicated in the tables below. @ach table displays the percentage of participants who indicated the relevant criterion, as well as the number of participants who did not answer thee 1uestion.

Age $istribution 67--6@

!%.#J

#.J

6C-37

34-3@

!#..IJ

3C-<<7

.IJ

@4-@@

&.%%J

I.!J

@C-C7

C4-CC@

%.%J

%.%J

<4-<@

I.IJ

"umber Missing

!

Table < EE Age $istribution

Academic ualification $id no M ot complete omple Matri eted Matric c

I.!J

!%.#J

Post Matric ualification c n

#&.""J

"umber Missing



Table @ EE Academic ualification $istribution Table C E 0ears of Ser)ice $istribution

0ears of Ser)ice +ess than 4 0ear

.IJ

-'

4-@ 0ears

GG.&J

C-47 0ears

I.IJ

44-67 0ears

!.IJ

"umber Missing

%



,ob +e)el in the #rgani2ation *(ecuti)e

#.J

Senior Management

Middle Management

#.J

!.!J

,unior

GH."J

"umber Missing



Table D E ,ob +e)el in the #rgani2ation $istribution

;ections 7, 6 and 8 of the 1uestionnaires are summari)ed in Table I below. For each of the 1uestions, the percentages of the participants who indicated each of the criteria have been indicated, as well as the mean and standard deviation for each 1uestion. /reuency $istribution F Ans'ered Section

Strongly uestion Agree

Strongly Agree $isagree $isagree

"umber Missing

Standard Mean $e)iation

7

!

G.I

#H.H

.#

!.I



!.G"! %.G#

7



".I

G!.H

!.I

!.I



!.&H! %.#I"

7



!.!

GH."

!H.%

%.%

%

!."% %.#"

7

H

!.G

G!.H

.#

%.%



!.&%" %.#

7

#

G.

#&."

!%.#

!.I



!.I& %.GGI

7

G

!%.#

.

H&.H

.#



.HG %.&H#

7

&

G.

#%."

!".G

!.I

!

!."GH %.&I

7

I

!".

I.G

#.&

#.H

!

.GI %.IH

7

"

.I

#".G

!#.I

%.%

!

!."" %.GI

7

!%

H.G

GG.&

&.%

%.%

!

!.I! %.#H

7

!!

.I

H.!

G.

#.



.!H# %.IHI

7

!

&.%

".I

H.!

7

!

I.!

GG.&

.#

%.%

!

!.&#% %.#!

7

!H

.

G.

.#

%.%

%

!.&% %.#

7

!#

!.!

G!.H

!H.%

!.I

!

!."GH %.GG%

6

!

H&.H

H#.G

.#

%.%



!.#H# %.#&!

6



!.G

I.G

!".

I.I

!

.%#H %."H

!#.I



.&%H %.II

/reuency $istribution F Ans'ered

-+



Section

Strongly uestion Agree

Strongly Agree $isagree $isagree

"umber Missing

Standard Mean $e)iation

6



!.!

H".!

H.G

#.

%

.!H% %.I!!

6

H

.I

#H.H

!H.%

&.%

!

.%#H %.I!I

6

#

G.

#".G

!%.#

%.%



!.IG %.G%!

6

G

.

#G.!

#.

!.I



!.&H# %.GH#

6

&

!&.#

H".!

!.!

I.I



.!I %.I#H

6

I

!#.I

I.G

.I

!&.#

6

"

H.G

GH."

I.I

%.%

!

!.I" %.#G#

6

!%

&.%

#&."

G.

.#



.&I %.G#G

6

!!

!.G

H".!

!%.#

&.%

!

!."" %.I#%

6

!

!&.#

#G.!

.I

%.%



.%## %.G#%

6

!

.I

GG.&

&.%

%.%



!.IG %.#G

6

!H

!%.#

I.G

H.!

.#



.H%& %.&H%

6

!#

I.!

G&."

.G

%.%

!

!.&#% %.#!

8

!

#%."

".I

!%.#

!.I

H

!.G%H %.&GI

8



H&.H

I.!

!#.I

I.I

%

!.IG% %.""%

8



#G.!

".I

&.%

!.I



!.#!" %.&%

8

H

!.!

!%.#

HH.G

.I

!

.G"G !.%G%

8

#

.#

I.!

!.G

8

G

H.G

!.!

G.

G.

!

.##H !.!H

8

&

!H.%

#.!

G.I

!%.#



.H## %.I&I

8

I

!&.#

.

#.!

!H.%

%

.H#G %."HG

8

"

I.G

G.I

!&.#

.#



!.I## %.IHI

8

!%

#.

!.G

#.!

G.

8

!!

H."

I.!

!".

#.



!.I## %."!

8

!

".I

#.!

H.G

&.%



.%"! %."I

8

!

H%.H

G.

I.!

#.

%

!."I %."#H

8

!H

.#

I.!

H.!

8

!#

I.G

H#.G

!%.#



.



!

!.! .#

 !

.HHH %."IH

."I %.I"

.I" %.I"%

.I# %.I!% !.&IG %.&I%

Table 8 – Frequency Distribution

ronbach&s oefficient Alpha for each of the Sections

This test was performed to test for consistency in responses in the individual sections. 7 8ronbach*s coeBcient alpha value of greater than %.& indicates an internal consistency of the answering pattern of the participants in the section,

-(



which indicates reliability of the section (subscale' (Munnally, !"&I$ "#'.

nterrelated items may be summed to obtain an overall score for each participant. 8ronbachSs coeBcient alpha estimates the reliability of this type of scale by determining the internal consistency of the test or the average correlation of items within the test (Munnally, !"&I$ "#'.

;ome of the 1uestions were reversed-phrased to test if the participant actually did read and understand the implications of the 1uestion. The scores of these 1uestions needed to be reversed for the calculation of 8ronbach*s alpha coeBcient (Field, %%"$G&#'. The reversed phrased 1uestions were$

;ection 7 2 Luestions G, I and ! ;ection 6 2 Luestions I and !% ;ection 8 2 Mone

For ;ection 7, with all 1uestions included, the 8ronbach*s coeBcient alpha value was %.GH. 7fter the removal of 1uestions #, G and I, the 8ronbach*s coeBcient alpha value increased to %.&", which indicated an internal consistency within the answering pattern for the remainder of the 1uestions. t is interesting to note that 1uestions G and I were reversed phrased and therefore their scores were also reversed. The fact that these 1uestions did not show an internal consistency with the other 1uestions may indicate that respondents did not read the 1uestions well.

For ;ection 6, with all 1uestions included, the 8ronbach*s coeBcient alpha value was %.I!". This indicated an internal consistency within the answering pattern for the remainder of the 1uestionsN however, 1uestions I and !% (after reversing their scores' were negatively correlated to the remainder of the 1uestions. These 1uestions were removed and the 8ronbach*s coeBcient alpha value increased to %.IG&. Cnce again, it is interesting to note that 1uestions I and !% were reversed phrased and therefore their scores were also reversed. The fact that these 1uestions did not show an internal consistency with the other 1uestions may indicate that respondents did not read the 1uestions well. -0



For ;ection 8, with all 1uestions included, the 8ronbach*s coeBcient alpha value was %.&G. This indicated an internal consistency within the answering pattern for the remainder of the 1uestionsN however, 1uestions #, !% and !H were little or negatively correlated to the remainder of the 1uestions. These three 1uestions indicated a high correlation with one another. 7fter the e5clusion of these 1uestions, 8ronbach*s coeBcient alpha value increased to %.&"". Due to the high correlation amongst the three 1uestions, the decision was made to keep 1uestions #, !% and !H as a separate section with a 8ronbach*s coeBcient alpha value of %.IG%. ;ection 8 was thus divided into two sub-sectionsN ;ection 8 fringe benets and ;ection 8 remuneration. $escripti)e statistics for the selected sections

7fter the 8ronbach*s coeBcient alpha was calculated and the necessary 1uestions removed to obtain reliable subscales, the descriptive statistics for each section were statistically calculated as indicated in Table " below.

$escripti)e Statistics Section

"umber of participants

Mean

Standard $e)iation

;ection 7

#&

!.I&"

%.#H

;ection 6

#&

!."HI

%.HH

#&

.%G&

%.H"G

.I"&

%.&G!

;ection 8

fringe benets

;ection 8

remuneration

#&

Table G E $escripti)e Statistics

Aiven the scale used in the 1uestionnaire, ranging from ! to H, where ! indicated strongly agree,  indicated agree,  indicated disagree and H indicated strongly disagree, a mean value of !.I&" indicates a notion of agreement by participants in ;ection 7. n ;ection 6, a mean value of !."HI also indicates a notion of agreement with the 1uestions raised in the 1uestionnaire. ;ection 8 indicated a mean value of .%G&, which also indicates that the participants are mostly in agreement with the 1uestions raised about fringe benets. The mean value of .I"& indicates that participants are mostly in disagreement with the 1uestions raised about remuneration. The standard deviation gives an indication of the variability of the responses. The answers of ;ection 8 remuneration show the largest variability of all sections. Test for orrelation bet'een Sections

8orrelations were calculated for$

-9



• • • • •

7ob Satisfaction and )ngagement 7ob Satisfaction and 5ringe 4enefits 7ob Satisfaction and 8emuneration )ngagement and 5ringe 4enefits )ngagement and 8emuneration

4ecause all the %uestionnaires represented the population and not just a sample& only a test to determine practically significant correlation was performed. #n other words& exploration of statistically significant correlations /p;values is not relevant& since no generalization from a sample to the population is needed. 5or the purpose of the correlation test& the 6onparametric Spearman"s correlation coefficient /r was used. This correlation coefficient does not depend on the assumption of normality and is based on ran!s of the data /5ield& 29>0. 5or practically significant correlation& a correlation coefficient of . indicated a small& non;practically significant correlation. $ correlation coefficient of .* indicated a medium& practically visible correlation. $ correlation coefficient of .' indicated a large& practically important correlation /Steyn& 29>-. The results for Spearman"s 6onparametric correlation coefficients are shown in Table  below>

"on-parametric orrelations

;ection 7

8orrelation 8oeBcient

;ection 6

8orrelation 8oeBcient

;ection 8

fringe benets 8orrelation

Section

Section

A

B

!

Section  Section  fringe benefits

remuneration

%.G

%.!G#

%.H"

!

%.!I&

%.!II

!

-%.G!

8oeBcient

Test for dierences between demographical areas 7 test for di4erences was done between the three di4erent geographical areas and each individual section. This was done to determine whether there were any di4erences in the levels of job satisfaction, engagement, fringe benets and remuneration for the employees working in umbai, Delhi. The 7MC=7 test was performed to test for di4erences. This test consists of the

'



Cmnibus test which is an analysis of variance and tests whether all the groups are the same, as well as post hoc tests which make pair-wise comparisons between the groups. The results for the Cmnibus test are shown in Table !! below. Mote that the p-values are reported and interpreted in and below this table for completeness. 9owever, since the study was conducted on the entire population, p-values (statistical signicance' are actually not relevant (@llis  ;teyn, %%$#!'. For the post hoc tests e4ect si)es (practical signicance' are calculated and reported, which can be interpreted for a study of an entire population, where generali)ation from a sample to a population is not necessary.

7 p-value of less than %.%# indicates that the three demographic areas did not answer the 1uestions in each section in the same manner. n the conte5t of pvalues, only ;ection 8 for both the fringe benets and the remuneration indicated a statistically signicant di4erence between the three demographic areas in the answered 1uestions. Eost hoc tests will be applied to compare pair-wise the demographic areas and determine where the di4erences lie. 6ecause the 1uestionnaires represent the complete population, it will indicate the e4ect si)es of the post hoc tests will be given (i.e. p-values of post hoc tests will not be reported'. The e4ect si)e is indicated by 8ohen*s d-value. 7 d-value of %. indicates a small 2 non-practically signicant di4erence. 7 d-value of %.# indicates a medium 2 practically visible di4erence. 7 d-value of %.I indicates a large 2 practically important di4erence (@llis  ;teyn, %%$#!'.

,ob Satisfaction

'



P-alues $elhi

Mumbai

*ffect Si2es $elhi

Mumbai To'n Mumbai

'ith

'ith

'ith

%."G

%.#GG

Section A Mean

'ith

'ith

Delhi umbai

%."G

%.HG!

Delhi

%.#GG %.HG!

!." %.%I# %.%

!."#G %.HG

!.I%!

*ngagement P-alues $elhi To'n

Mumbai

*ffect Si2es $elhi

'ith

'ith

%.H%

%.!#

Mumbai To'n Mumbai 'ith

Section B Mean

'ith

'ith

Delhi umbai

%.H%

%.""G

Delhi

%.!# %.""G

.!% %.#&G %.#!!

!.IG! %.%I

!.I&#

/ringe Benefits P-alues $elhi

Mumbai

To'n 'ith

*ffect Si2es $elhi

Mumbai

'ith

'ith

To'n

Mumbai

Mean

fringe benefits

'ith

Delhi

Section 

'ith

%.IHG

umbai

%.IHG

Delhi

%.%%% %.%%%

%.%%% %.%%%

.#G %.!I"

.H

.%&I

.H&%

!.GI

Remuneration P-alues $elhi To'n

Mumbai 'ith

*ffect Si2es $elhi

Mumbai

'ith

'ith

To'n

Mumbai

 Mean

remuneration

'ith

Delhi

Section

'ith

%.GH

umbai

%.GH

Delhi

%.HH %.%

%.HH %.%

.II% %.#& %.H!"

.HG& %."I"

.!I!

Table 12 – Eect sizes for Demographic areas

hen the e4ect si)es for the job satisfaction are reviewed, it can be noted that the e4ect si)e for Delhi with umbai isN d  %.%IH, which is small, and indicates a small, non-practically signicant di4erence. This implies that the two demographical areas have answered the 1uestions in the section about job

'2



satisfaction in the same manner. hen the same e4ect si)e for Delhi with umbai is reviewed, it indicates a d-value of %.%, which is between the small and medium intervals on the scale. The value is closer to the small, non-practically signicant di4erence. For the purpose of this study, this di4erence is too small to be considered practically signicant. The e4ect si)e for umbai with Delhi indicates a d-value of %.HG. This d-value is closer to the practically visible di4erence value and can be considered practically visible for the purpose of this paper. The mean values for the three demographical areas indicate that the employees in Delhi are e5periencing an ever so slightly higher level of job satisfaction than the employees in umbai and Delhi.

Test for dierences in gender, age, experience, academic qualications and le!el in the organization "ender 7 t-test was conducted to test whether males and females responded di4erently to the sections. The p-value and d-values (e4ect si)es' of the t-test are shown in Table ! below. Cnce again, p-values are reported and interpreted for the sake of completeness. 9owever, emphasis in interpretation and conclusions should be placed on the e4ect si)es (d-values'. The 1uestionnaire was completed by H& males and " females.

• •

:eople perform better on their jobs because of pay

Aompensation is an important factor in the design& implementation and maintenance of organizations. @owever& compensation includes not only wages paid to employees but also non;wage benefits such as medical insurance and a retirement plan /Beathington = 7ones> 2(>292. Bages and benefits together are often the biggest expense incurred by organizations. The aim of this paper is to investigate and determine the correlation between the remuneration pac!age and the level of job satisfaction and engagement. This was '*



approached by focusing on the following specific objectives>

• • • • • •

To determine the importance of fringe benefits amongst employees To determine the impact of fringe benefits on the level of job satisfaction of the employee To determine the impact of fringe benefits on employee engagement To understand the cultural differences between cities To gain better !nowledge of the structuring of remuneration pac!ages in Mumbai& Eelhi

These specific objectives were investigated by means of a specifically drafted %uestionnaire that was distributed amongst all the employees of Galaxy employed in #ndia. $ total of '( %uestionnaires were distributed and returned for analysis. Galaxy management participated in this study and made it compulsory for every employee to participate and complete a %uestionnaire. This contributed to the study of a complete population and not just a sample. The statistical analysis was divided into six sections> • • • • • •

5re%uency distribution and descriptive statistics of the individual items Aronbach"s Aoefficient $lpha for each section Eescriptive statistics for the selected sections Test for correlation between sections Test for differences between demographical areas Test for differences in gender& age& experience& academic %ualifications and level in the organization

The distribution of the participants was 2( from Mumbai& * from Eelhi. The %uestionnaires were completed by -( males and 9 females from all three demographical areas. The AronbachCs coefficient alpha was calculated to determine whether there was consistency in how the participants answered the %uestions for each of the individual sections of the %uestionnaire. Some of the %uestions were reverse; phrased to test if the participants actually read and understood the implications of the %uestion. The scores of these %uestions needed to be reversed for the calculation of Aronbach"s alpha coefficient /5ield& 29>+('. These %uestions had to be removed to obtain a AronbachCs coefficient alpha of greater than .(& which was needed to determine an average mean value for the %uestion in the sections /6unnally& 9(0> 29'.

'-



Given the scale used in the %uestionnaire& ranging from  to -& where  indicated strongly agree& 2 indicated agree& * indicated disagree and - indicated strongly disagree& a mean value of .0(9 indicates a notion of agreement by participants in Section $. #n Section 4& a mean value of .9-0 also indicates an agreement with the %uestions raised in the %uestionnaire. Section A indicated a mean value of 2.+(& which also indicates that the participants are in agreement with the %uestions raised about fringe benefits. The mean value of 2.09( indicates that the participants are in disagreement with the %uestions raised about remuneration. 4ecause all the %uestionnaires represented the population and not just a sample& only a test to determine practical correlation was performed. 5or the purpose of the correlation test& the 6onparametric Spearman"s correlation coefficient /r was used. 5or practical correlation& a correlation coefficient of . indicated a small& non;practically significant correlation. $ correlation coefficient of .* indicated a medium& practically visible correlation. $ correlation coefficient of .' indicated a large& practically important correlation /Steyn& 29>-. •

,ob Satisfaction and *ngagement $ r-value  %.G, indicating a highly

important correlation. Thus a high level of job satisfaction will imply a high level of engagement and vice versa.

•

,ob Satisfaction and /ringe Benefits $ r-value  %.!G#, indicating a low

to medium correlation. Therefore, these two variables show a low practically visible correlation. This can indicate that the level of job satisfaction of an employee is not dependent on the fringe benets an employee receives from the organi)ation.

•

,ob Satisfaction and Remuneration$ r-value  %.H", indicating a

practically signicant correlation. This can indicate that the level of job satisfaction an employee e5periences in the organi)ation is in/uenced by his remuneration package.

•

*ngagement and /ringe Benefits $ r-value  %.!I&, indicating a low to

medium correlation. Therefore, these two variables show a low practically signicant correlation. This can indicate that the level of engagement of an employee is not dependent on the fringe benets ''



an employee receives from the organi)ation.

•

*ngagement and Remuneration$ r-value  %.!II, indicating a low to

medium correlation. Therefore, these two variables show a low practically signicant correlation. This can indicate that the level of engagement of an employee is not dependent on the remuneration an employee receives from the organi)ation. Mote that the p-values are reported and interpreted in and below this table for completeness. ;ince the study was conducted on the entire population, pvalues (statistical signicance' are actually not relevant (@llis  ;teyn, %%$#!'. For the post hoc tests e4ect si)es (practical signicance' are calculated and reported, which can be interpreted for a study of an entire population where generali)ation from a sample to a population is not necessary. The 7MC=7 test was performed to test for di4erences. This test consists of the Cmnibus test which is an analysis of variance and which tests whether all the groups are the same, as well as post hoc tests which make pair-wise comparisons between the groups. 7 p-value of less than %.%# indicates that the three demographic areas did not answer the 1uestions in each section in the same manner. For the purpose of this paper, only ;ection 8 for both the fringe benets and the remuneration indicated a signicant di4erence between the three demographic areas in the answered 1uestions. Eost hoc tests were applied to pair-wise compare the demographic areas and determine where the di4erences lie. 6ecause the 1uestionnaires represent the complete population, will indicate the e4ect si)es of the post hoc tests will be given (i.e. p-values of post hoc tests will not be reported'. hen the e4ect si)es for job satisfaction are reviewed, it can be noted that the e4ect si)e for Delhi with umbai is d  %.%IH, which is small, and indicates a small, non-practically signicant di4erence. This implies that the two demographical areas answered the 1uestions in the section about job satisfaction in the same manner. hen the same e4ect si)e for Delhi with Delhi is reviewed, it indicates a d-value of %.%, which is between the small and medium intervals on the scale. The value is closer to the small, nonpractically signicant di4erence. For the purpose of this study, this di4erence is too small to be considered practically signicant. The e4ect si)e for

'+



umbai with Delhi indicates a d-value of %.HG. This d-value is closer to the practically signicant di4erence value and can be considered practically signicant for the purpose of this paper. The mean values for the three demographical areas indicate that the employees in Delhi e5perience an ever so slightly higher level of job satisfaction than the employees in umbai and Delhi. hen the e4ect si)es for job engagement are reviewed, it can be noted that the e4ect si)e for Delhi with umbai is d  %.#&G, which is indicates a medium,

practically signicant di4erence.

demographical

areas

answered

the

This implies that the two

1uestions

in

the

section

about

engagement in two di4erent manners. hen the same e4ect si)e for Delhi with Delhi is reviewed, it indicates a d-value of %.#!!, which again indicates a practically signicant di4erence. The e4ect si)e for umbai with Delhi indicates a d-value of %.%I. This value is small and indicates a nonpractically visible di4erence. The mean values for the three demographical areas indicate that the employees in Delhi are e5periencing a lower level of engagement than the employees in umbai and Delhi. hen the e4ect si)es for fringe benets are reviewed, it can be noted that the e4ect si)e for Delhi with umbai is d  %.!II, which indicates a small, non-practically

signicant

di4erence.

This

implies

that

the

two

demographical areas e5perience the same level of motivation from the fringe benets on their job satisfaction and engagement. hen the same e4ect si)e for Delhi with Delhi is reviewed, it indicates a d-value of .%&I, which is e5tremely high on the e4ect si)e scale, and indicates practically important di4erence. The e4ect si)e for umbai with Delhi indicates a d-value of .HG". This d-value again indicates a high practically important di4erence. The mean values for the three demographical areas indicate that the employees in Delhi e5perience a higher level of motivation from their fringe benets than the employees in umbai and Delhi. hen the e4ect si)es for remuneration are reviewed, it can be noted that the '(


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The e4ect si)es for job engagement between Delhi and umbai indicate a medium, practically signicant di4erence. The e4ect si)e between Delhi and Delhi indicates a practically signicant di4erence. The e4ect si)e between umbai and Delhi indicates a non-practically signicant di4erence. The mean values for the three demographical areas indicate that the employees in Delhi e5perience a lower level of engagement than the employees in umbai and Delhi. These indicators can again be studied to identify the drivers behind the higher levels of engagement. These drivers can then be applied to promote higher levels of engagement in Delhi. The e4ect si)es for fringe benets between Delhi and umbai indicate a small, non-practically signicant di4erence. The e4ect si)e between Delhi and Delhi indicate a practically important di4erence. The e4ect si)e between umbai and Delhi indicates a high practically important di4erence. The mean values for the three demographical areas indicate that the employees in Delhi e5perience a higher level of motivation from their fringe benets than the employees in umbai and Delhi. These indicators can be analy)ed to determine the fringe benets that cause the employees in Delhi to be more satised. The remuneration packages of the employees in umbai and Delhi can then be amended with the fringe benets similar to that of the employees in Delhi. The e4ect si)es for the remuneration between Delhi and umbai indicate a medium, practically signicant di4erence. The e4ect si)e between Delhi and Delhi indicates a practically visible di4erence. The e4ect si)e between umbai and Delhi indicates a high practically important di4erence. The mean values for the three demographical areas indicate that the employees in umbai e5perience a lower level of motivation from their remuneration packages than the employees in Delhi and Delhi. These indicators can again be studied to determine if the employees in umbai are under the impression that they receive market related salaries. These indicators can be compared with those of the employees of Delhi and Delhi to determine if changes will be possible in the remuneration of the employees in umbai. '9


Project on Fringe Benefits

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