Compensation and Employee Retention

Compensation and Employee Retention

Generally, compensation can be defined as either a monetary reward for a person who

has either been injured or suffered loss, or a non-financial benefit awarded to an

employee by the employer as an appreciation or a motivation (Bronchetti & McInerney,

2017). Non- financial benefits such as mortgages, diverse insurance covers for workers

and allowances constitute the notion of compensation.

The main indicators of compensation as used in various organizations include

commensurate salaries and wages, overtime payments, annual bonus, equitable payments

for working during holidays (Wambugu & Ombui, 2013; Yang, 2011). Organizations

Globally, research demonstrates that compensation significantly minimizes employee

turnover and is important in enhancing employee loyalty. Brown, Bosselman and

Thomas (2016) observe that non-financial compensation in form of quality work

environment has significant influence on employee turnover intentions. Lack of

compensation exposes companies to unsatisfactory working environment. Williams,

McDaniel and Ford (2007) found out that employees remain committed where

companies communicate their compensation policies.

In Australia and Europe, both private and public firms reported how the amount of

compensation was positively correlated with hierarchical mobility and obligations of

staff. This meant that, the higher the responsibility in a hierarchical structure, the weighty

Kumur (2013) investigated employees’ benefits as a predictor for staff retention in

hospitality industry in India. The study utilized interview and analyzed documents from

exit interview recorders to collect data from 32 restaurant SMEs. It observed a strong

link between the employees’ compensation package and turnover. The study

recommended

The company’s scheme for rewarding workers is an instrumental tool for encouraging

retention and excellence. Although there is a great deal of inter-individual variation in

understanding the significance of financial rewards for employee retention, there is

enough literature that demonstrates the connection between compensation and employee

retention.

Recognition and Employee Retention

Recognition can be defined as appreciation with a show of gratitude. The principle of

positive reinforcement is founded on the principle that the actions and activities that

attract rewards are likely to recur. Hence, employees who are appreciated feel inspired to

in decision making, delegation of authority, cash rewards, recognition certificates,

recognition ceremonies, and others (Wambugu & Ombui, 2013).

Managers who appreciate that performing employees are harder to keep usually use

recognition and reward program to steer their organizations to great success. Reward

schemes can either be official or unofficial (Uddin, Das & Rahman, 2008). Formal

reward programs offer material incentives to employees, while informal programs

provide positive feedback by way of verbal praise.

Although some employers may dismiss reward programs as expensive, Wairimu and Ndeto

(2019) observes that motivation tool of rewards raise employee morale, lowers their stress

and absenteeism; and further reduces employee turnover. As such, much as employees benefit

institutions where employees included in decision making.

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