Varied impacts of compensation on employee performance in the public sector : a case of the Premier Medical Aid Society of Zimbabwe

Abstract

Compensation administration in a highly inflationary environment has proved to be a major challenge to most organisations. While employees need reasonable amounts of disposable income on their side, organisations need super profits for their sustenance hence the paradoxical nature of compensation administration. This study is meant to ascertain the relationship between compensation and employees’ performance. The study hypothesises that satisfactory compensation enhances employee performance. A case study approach was used to ascertain this relationship. Interviews with key informants in a sample drawn from a population of the parastatal’s employees were administered. This article presents the following arguments. Compensation can only have a positive impact on employee performance if it is not only linked to employee performance but democratised to incorporate the input of employees, properly installed and maintained. The influence of compensation administration on employee performance can be applicable to those who derive their motivation from it. Therefore, to say that compensation drives employees to perform may be an overstatement and fictitious. Human needs are dynamic in nature let alone complex. For the sake of sustainability, a remuneration strategy should also clarify the relationship between salaries, wages and benefits to the key success factors of the organisations. Issues of equity and fairness of compensation should be adhered to for compensation to achieve desired results. For remuneration to drive the performance of employees it should clearly portray those behaviors that need to be rewarded.