Employees’ perceptions of performance-based compensation systems at a state-owned enterprise

Abstract

Performance-based compensation is the most commonly used method in measuring productivity and more and more institutions are increasingly using this method as it attempts to link compensation with performance. The primary aim of this research study was to explore the underlying structure of the construct: employees’ perceptions of performance-based compensation (PBC) systems, and its subsequent impact on employee behaviour. This was achieved by identifying differences in the employees who received performance-based compensation and those who did not. In addition, the research also attempted to observe the impact that factors such as long-term service, job grade, gender and education may have on employees’ perceptions of performancebased compensations systems. A non-probability stratified convenience sampling method was adopted to meet the objectives of the research. A survey instrument was used to determine employees’ attitudes towards PBC systems and its overall effect on employee perceived behaviour when performing job-related tasks. The survey was administered online to the Industrial Development Corporation (IDC) employees. The latent structure of the data was explored using an exploratory factor analysis and appropriate comparative statistical methods were followed to gain sufficient evidence to either support or reject the guiding hypotheses. The study determined that it was possible to explain the main variability in the research construct by three latent factors. The results were encouraging in that there was sufficient evidence to explore the various research hypotheses. Differences in the perception of PBC systems were found between various demographic categories such as job level, gender, length of service and actually obtaining an incentive reward. Key words: Nurturing communication, objective recognition, individual motivation, intrinsic motivation, extrinsic motivation.