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1.1 Background to the Study

Compensation has been found over the years to be one of the policies organization use to increase workers’ performance and thereby increase the organizations productivity.  Compensation is a catalyst that accelerates productivity. It is related performance where the inclination to carry out job task is determined by motivation. A clearly defined pay system is essential in improving the performance of a business by giving an incentive for the effective performance of individual employees (Eze, 2007).


Employee commitment reflects the involvement and psychological attachment that an employee has towards an organization and work which is assigned to him. Meyer and Herscovith (2001) describe commitment as a force that makes an individual stick to a course of action that is of relevance to a particular goal. Noble and Mokwa (1999) defined commitment towards an organization as level at which an employee identifies with and works towards the achievement of organizational goals. Commitment of employee to organization has no universally prescribed definition. However, despite the differences in the definitions, there is agreement between the scholars that commitment to organization influences employee’s attitude, attachment and perception towards an organization.

Corporate world has become competitive, and so, top executive and managers use management practices and motivational philosophies to enhance the skills and productivity of the employees in order to earn more money. Thus, fair compensation practice when used by an organization creates a feeling of satisfaction among employees to fulfill needs (Chi and Han 2008).

It is believed that compensation strategy accounts for one of the greatest investments an organization makes. Although a fair wage is the foundation of the contractual and implied agreements between employees and employers, the underlying assumption is that money can directly influence behaviour. Many employees and managers believe that simply increasing what people are paid makes them more motivated, productive and loyal. The influence of compensation strategy is an important ingredient in every organization and that employee performance is a critical issue for many businesses, because of the need to attract, inspire and hold on to the right talent pool for a business to succeed.

Furthermore, pay level across time communicates more to employees about their value to the firm than the information conveyed by a single change in pay which may be influenced by the above external factors It is also a reality that compensation issues are core aspects of any organization’s personnel management function. It is an area of continual change and a minefield of complexities.

Henceforth, Reilly and Williams, (2006) also states that the expansion of the business is mainly determined by the willingness of the owner to delegate supervision and the organization of an increasing labour force. As workers increase in number and the organization becomes more formalized, the company will have increasingly sophisticated methods of motivating employees.

Williams (1998) found that workers on incentive schemes earned more than eleven percent than other employees, that profit sharing was not a substitute for other forms of pay, and that the use of profit sharing was related with both higher productivity and improved performance and that goals must be accepted by the individual and participation and consultation in setting the target to be more helpful in carrying out the strategy.

1.2   Statement of the Problems

The relationship between organizational compensation scheme and workers commitment is indispensable, though some surrounding factors may determine the satisfaction one derives from the other.

Employees are bound to show less commitment than their human capacity when they are not well compensated in their workplace due to the fact that adequate compensation boosts morale. Inadequate compensation has negative effect on employees’ morale.

Lacks of motivation affect employees’ performance in an organization. When workers are not motivated, it makes them under perform in the workplace.

Workers also under perform when they do not derive satisfaction from their job. Job dissatisfaction is influenced by the factors like inadequate salary, poor working environment, ineffective communication, and lack of organizational commitment.

Reward system makes workers do things just for the sake of the reward instead doing something because it is the right thing to do. This can disrupt job performance and employees commitment to an organization.


1.3      Aim and Objectives of the Study

The aims and objectives of the study are stated as follows:

  1. Examine the effect of compensation on employees’ performance.
  2. Examine the relationship between motivational techniques and employees’ performance.
  3. Examine the relationship between levels of job satisfaction and employees’ performance.
  4. Assess the effect of reward system on employees’ performance.

1.4      Relevant Research Questions

  1. How effective is compensation on employees’ performance?
  2. What is the relationship between motivational techniques and employees’ performance?
  3. What is relationship between levels of job satisfaction of employees’ performance?
  4. What are the effects of reward system on employees’ performance?


1.5      Research Hypotheses

  1. Ho: There is no relationship between employees’ compensation and employees’ performance..

H1: There is relationship between employees’ compensation and employees’ performance.

  1. Ho: Reward system does not have positive effect on employees’ performance.

H1:  Reward system does have positive effect on employees’ performance.


1.6     Significance of the Study

The significance of the study are stated below:

Practically it assists practicing manager in understanding the motivational techniques that improves employees’ performance in an organization.

The study helps students to understand the relevance of compensation on employees’ performance through various theories of motivational incentives on employees’ performance.

The study gives an organization an in-depth insight into benefit of job satisfaction and it exponential effect on effective productivity.

1.7   Scope of the Study

The research work seeks to examine the “effects of compensation on workers productivity in Abia State with a view to UAC Food, Abia Nigeria.

The study as perceived might face some logistic challenges in term of the time and the costs involved in carrying out the research, but nevertheless, it would strive to accomplish its aims and purpose.

1.8      Limitation of the Study

Some perceived constraints may be encounter by the researcher in the course of carrying out the research work. The limitations are as follows:

  1. Inadequate material: Inadequate material constituted one of the limitations of the research work. The non-availability of materials like journals, textbooks etc the research study.
  2. Finance: The researcher also may encounter some financial constraints which will contribute in limiting the work in the sense that fund available was not enough to carry out the research to a logical conclusion.

iii. Time: Time is also another factor or limitation that may affect the research work. The limited time may not give the researcher enough opportunity to do more rigorous work.

1.9       Definition of Terms

Compensation: This is the total compensation that an employee receives in exchange for the services rendered to the employer.

Commitment: Employee commitment reflects the involvement and psychological attachment that an employee has towards an organization

Employee: A person who is hired to provide services to an organization on a regular basis in exchange for compensation and who does not provide these services as part of an independent business.

Performance: The accomplishment of a given duty measured against preset known standard of accuracy, completeness, cost, and speed.

Impact: this is the action or process of producing effects on the actions, behavior, opinions, of another or others.

Attitude: An attitude is an act of favor or disfavor toward a person, place, thing, or event (the attitude object).

Motivation: this is influences a person to act towards certain goals and behaviors in order to achieve what they desire.


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