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.