Remuneration is an element of financial reward used to appraise employees

Remuneration is an element of financial reward used to appraise employees, which ultimately motivates them to work with zeal and enthusiasm. This topic is mainly focused on the idea that managers use remuneration as a tool for motivation. A study of a small carpentry firm in Nigeria will help to evaluate the significance of remuneration as a key motivation tool used by the employer on employees.

Introduction

Remuneration is a catalyst that accelerates productivity. It is connected to 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 (Lawler, 1983Helen Jaja2011-03-09T20:05:00

Lawler, E (1983). Pay and Organisation Development. Massachusetts: Addison-Wesley). This research study mainly focuses on the relationship between remuneration and motivation. Yermack (2004) has asserted in his study that all the business organizations act like a profit maximization institution, so they put in efforts to improve the performance of employees by motivating them. This motivation ultimately helps the organization to increase productivity level therefore work motivation is interrelated with job satisfaction.

Often, money can be determined as the means through which a man can fulfil his basic needs and requirements. Remuneration and basic income of an individual strengthen his purchasing power (Stajkovic and Luthans 2003). According to different motivation theories, such as Maslow’s Need Hierarchy, Two factor theory given by Herzberg’s, McGregor’s theory X and theory Y, Achievement Theory, Taylor’s Motivational Theory, etc. Money is a key source to persuade the behaviour of an individual towards his organization and work productivity (Wheeler 2008). Thus, it is important for the corporate executives or managers to be aware of the economic and social background of employees so as to offer good remunerations to develop their talent enhance their skills and motivate them to work. The general meaning of remuneration is the basic salary or pay of an employee, but in the broader sense, remuneration comprises salary, fringe benefits, compensation, bonus, commissions, employee stock option, etc. (Guedri and Hollandts 2008). In the current business scenario, managing and motivating human resources has become a complicated task. In this era of shifting and competitive environment, remuneration is one of the primary tools for the manager to improve the productivity of the employees, to attract competent personnel, to retain present employees, to reduce absenteeism, to diminish employee turnover, to manage job sequences, to strengthen union management relationships, to improve public image of the company, etc. (Perry, Mesch and Paarlberg 2006).

This research study would target the remuneration procedure in a small carpentry industry in Nigeria. The selected company is a private owned industry. Presently, the structure of the furniture industry has become more complicated and its success is largely depends on the talented and skilled employees, who are competent to deal with the varying demands and requirements of the clients. Competitive pressures and environmental changes have increased the significance of motivational practices for managers to boost the performance of the employees. This dissertation will focus on how managers of a small sized carpentry industry use remuneration practices to motivate the employees and create competitive advantages in the trade. Additionally, this dissertation will also discuss the interrelationship between remuneration and motivation with the support of different motivation theories.

Research Aims and Objectives

During this research work, the researcher would examine the need and importance of motivation tools for the managers and how remuneration would help the managers to motivate employees in a small carpentry industry. The main objectives emerging from this research are as follows:

First of all the objective of this paper is to discover the role of remuneration practices in the performance of the employees in the carpentry industry.

Secondly, the objective of this research study is to identify the relationship between remuneration and motivation, on the basis of different motivational theories.

Thirdly, the objective is to understand the remuneration practices and procedures used by managers in the carpentry industry situated in Nigeria to motivate the employees.

Fourthly, the objective of this paper is to compare performances of employees in the selected carpentry industry with its rival companies to identify the importance and advantages of remuneration to motivate the employees.

Finally, the main objective of this study is to suggest different strategies and practices to reward employees in line with remuneration.

Background Information

The preferred carpentry industry operates in the Federal Capital Territory of Nigeria and serves numerous customers across the country. The company manufactures and supplies furniture for workplaces, residents, dormitories, hotels, halls, and institutions. Success of the firm is highly dependent on its HRM practices and efforts put by its managers and employees. All the HR policies of the companies are defined very clearly for the benefit of all stakeholders. The main aim of the HRM department of the company is to offer best services to the customers by ensuring that the company has skilled, motivated and committed employees. Remuneration practices used by the company are also very good and effective and based on various motivational theories.

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Remuneration is not a new concept in business establishments. In the corporate world, all the members from owner to lower level employees work for money. Not only in manufacturing industries but also in retail shops, everybody wants high remuneration and financial incentives to fulfil their basic needs, thus, it is necessary to work hard to improve the productivity of the employees and earn more money (Yermack 2004). 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 remuneration practise when used by the managers creates a feeling of satisfaction among employees to fulfil their needs (Chi and Han 2008).

According to the assumptions of motivation, remuneration and incentive is a direct tool to motivate employees. Managers in this carpentry industry have taken a complete overview of this concept to motivate employees by offering good remuneration and performance incentives. Presently, companies are following the system of paying for performance. Qualification and experience are also important but work performance enables employees to get good remuneration (Perry, Mesch and Paarlberg 2006).

For example, if a marketing manager is highly qualified but he is not able to conduct a market research effectively and his working output is very low, the company would not offer a high remuneration and other financial incentives to the manager. On the other hand, if a sales executive has average qualification and serves more number of customers by showing his abilities and maintaining good relations with them; he would be definitely promoted by the company and would get monetary rewards (Wheeler 2008).

Thus, it is clear that money makes a difference to all the employees, whether they occupy high positions or belong to middle and lower levels. Remuneration is needed by all the employees to fulfil their basic needs just as monetary rewards, non-monetary rewards and compensation are given by the company to improve job satisfaction and control the rate of employee turnover (Guedri and Hollandts 2008). Thus, this research study would focus on a selected carpentry industry, which has effective HR and compensation policies to pay its employees and motivate them to put their best efforts to achieve the goals and objectives of the business.

Literature Review

Motivation is the ‘propensity of the individual to expend effort in work’ (Heery and Noon 2008). Helen Jaja2011-03-10T01:48:00

Heery, E. Noon, M. (2008). A dictionary of Human Resource Management. 2nd ed. New York: Oxford University Press.Most people work to attain specific goals and so motivation is goal-directed aimed at performance. Mathis and Jackson (2008) pointed out that need, desire; want and drive are all similar to motivation. They argued that an understanding of motivation is important for organizations to appreciate the effect of remuneration. Remuneration and motivation are directly proportional to each other (Ajila and Abiola 2004). Performance of employees, rate of absenteeism and turnover are affected by motivation and remuneration.

Managers can use different motivational tools to motivate their employees and remuneration is an important tool among all of them. Remuneration can be explained as the monetary motivation tool that influences the behaviour of employees towards work (Armstrong, Murlis and Group 2007). Perry, Mesch and Paarlberg (2006) reasoned that each employee should receive a general remuneration for their efforts, role and responsibilities in the company. Before deciding a form and amount of remuneration, several considerations such as general economic climate, specific business condition, cost-of living and worker qualification and productivity must be considered by the company (Carraher 2011). Different authors described about the relationship between remuneration and motivation. In order to support this relationship, Mathis and Jackson (2008) stated that remuneration is different from motivation and it is related with Herzberg’s hygiene factors. Remuneration includes several things such as bonuses, commission, salary, fringe benefits such as pensions, holiday entitlement.

The study of Chapman and Kelliher (2011) represent that employees motivation does not only come from decision mix (amount of pay) of an organization policy but also it comes from the understanding of individuals. The remuneration of an employee depends on several factors such as basic needs, psychological needs, social needs, performance of individual, productivity, profitability return, etc. (Khan, Farooq and Ullahb 2010). In favour of this, Kmiotek and Lewicka (2008) stated that effective motivation does not only involves proper implementation of remuneration policy but also involves some other motivators such as organization of work, HR development and training, performance management tools, performance appraisal, etc.

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According to the HR experts, creation of effective reward system is necessary to motivate employees but there is a need of good and enthusiastic managers, who can drive people towards good performance. In order to create an effective motivation process, it is necessary that there should be an appropriate remuneration policy for employees (Kubr 2002). According to Ajila and Abiola (2004) two types of rewards are very much popular in the corporate environment, which are intrinsic reward and extrinsic reward. Intrinsic rewards are related with the rewards that are natural with job. This reward is achieved by individuals when they successfully achieve their own objectives. On the other hand, extrinsic rewards are outside the job such as working condition, security, promotion, working environment and service contact.

Presently, in order to motivate employees, both intrinsic and extrinsic rewards should be a part of remuneration policy. It is also well discussed that individuals effectively work to the extent for the job, which provides them remuneration if they are intrinsically motivated. In contrast to this, if people are extrinsically motivated, they effectively work to the extent by which they can attain external rewards from the job (Chapman and Kelliher 2011). Thus, it can be concluded that if the remuneration is intrinsic to the job, desire for motivation is also intrinsic or if the remuneration is extrinsic to the job, desire for motivation is also extrinsic to the job (Ajila and Abiola 2004).

Perry, Mesch and Paarlberg (2006) stated in their research study that in this new government era, in order to increase the performance and productivity of the employees, managers should adopt good remuneration policies. This will ultimately help the business organizations to offer quality services and products to the customers (Maxwell 2008). It is the reason that most of employers now use remuneration policies to attract, motivate, retain and satisfy employees. It is founded through different research that performance-based remuneration motivates employees to work hard (Ajila and Abiola 2004).

The study of Khan, Farooq and Ullahb (2010) support the arguments of Ajila and Abiola (2004) and said that in an effective rewards system, there are several factors that influences the performance of employees such as basic remuneration, bonus, incentives, fringe benefits, monetary and non monetary rewards, commission, etc. All these factors are good sources to boost the performance of the employees. Carraher (2011) defined that remuneration helps in developing strong relationship between employers and employees.

It is founded by researchers that employees motivate through different monetary remuneration and an effective remuneration helps in reducing absenteeism, turnover intentions, provides organizational attractiveness to different job seekers and also helps in increasing employees’ job performance (Kmiotek and Lewicka 2008). It has been stated by Guedri and Hollandts (2008) in their study that managers in different organizations consider remuneration as a major factor that helps in increasing productivity of employees.

Remuneration is an important tool that focuses on motivating employees’ performance and behaviour. The study of Employee retention and organizational performance (2011) also support the views of Carraher (2011) and asserted, it is necessary that there must be appropriate rewards to motivate employees and persuade their working behaviour. In contrast to both Carraher (2011) and Employee retention and organizational performance (2011), Mathis and Jackson (2008) said that other factors such as job itself, participation, appropriate feedbacks, morale and discipline are more important than remuneration that impact on remuneration.

According to Blythe (2005), in the present competitive environment, job satisfaction is more important than money, thus, manager should concentrate on all non-monetary factors, promotions, health insurance, rewards systems, etc. Zyl (2010) has stated in his research study that relationship between labour productivity and remuneration is constructive, which is also supported by Carraher (2011). It is the reason that high remuneration enables employees to put their best efforts and enhance the extent of productivity of employees. There are numerous reasons that support this information such as if an organization adopts more differentiate remuneration, it will enhance the human efforts and a higher remuneration structure also enhances the productivity of employees (Montana and Charnov 2008).

At the same time Zyl (2010) also assesrted that if gaps between employee remuneration is regularly increase, it would ultimately increases gap and convert positive relations between employees’ performance and remuneration into negative. There are several reasons such as if it is filled by employees that their real remuneration is less than the fair remuneration, it can cause for negative relationship. Kubr (2002) Stated that an effective remuneration system does not only enhance the performance of people, who are already working well but also it is used to enhances the performance of people who are not performing well. Remuneration play an important role in motivating employees but different employees’ motivate through different factors. An effective remuneration package includes several elements. These elements are as below:

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First, element is salary that includes different things such as pay, commission, profit related pay and share dividends. Second element is related with different facilities such as insurance, healthcare schemes and pension. Other elements are availability of discounts on companies’ product and service for employees and subsidiary for meals and accommodation (Kubr 2002). Salais and Villeneuve (2004) support, Kubr (2002) and said that remuneration is a better tool to motivate employees for better performance. There are three basic remuneration components such as bonuses, basic pay and profit-sharing schemes that influence the performance of employees.

Armstrong, Murlis and Group (2007) described about the effectiveness of remuneration as a mean of motivation such as:

ƒ˜ In order to motivate employees through remuneration, it is necessary that remuneration should be equitable and externally competitive.

ƒ˜ Contribution systems and pay for performance system are created on the basis and understanding that directs that motivation is only takes place when the rewards are worthwhile.

ƒ˜ Each employee understands about the workings of financial reward system and about the benefits that is provided by it. They also know about the skills and competences of remuneration system (Murlis and Hay Group 2007).

In the fast food industry, remuneration is an important part that managers use to motivate employees and enhance their productivity level. In contrast to this statement Schlosser (2001) defined that if there are lack of secure employment and good wages in fast food organization, managers use “team spirit in order to motivate employees by saying that, if one employee is arriving late and do not work hard, it also affects the performance of their friends as well as their co-workers. It also helps in motivating employees, so that they can improve their performance”.

It has been also defined that employees work only to increase their profits and this is the motive that if organizations provide more remuneration to the employees, it helps in generating more output (Wales and Reaich 2004). Development of an employee is directly proportional to the development of the organization. If the remuneration is directly related with work performance, employee will work hard. It is the reason that most of managers use remuneration to motivate employees. Managers clearly stated in their organizations policies that if employees work hard they can earn higher profits and it is the reason that employees are motivated through this policy. Good return and high profit will allow the organizations to hare the profit with employees, thus they should work hard to get good remuneration (Yermack 2004).

Zyl (2010) has been also found in their research that if employees are motivated through remuneration, there are two positive effects of this such as it helps in reducing the labour turnover from organizations and it also helps in enhancing the more salary and good working environment.

Thus, it is fact that it helps in generating a productive team of efficient and talented people for the enterprise (Wales and Reaich 2004). According to them remuneration as a managerial tool to motivate employees is important for several reasons. These reasons are as below:

ƒ˜ Remuneration is a tool to impartial measurement of different employees. It is because if employees get more facility instead of money, it does not motivate employees to work harder.

ƒ˜ With the increment in salary, employees can maintain their honour, prestige and ensure economic security (Wales and Reaich 2004).

ƒ˜ They also argued that remuneration is a more efficient motivating factor as it can easily increase or decrease according to the proportion of work.

ƒ˜ Remuneration also helps in increasing the self-confidence of employees that further helps in improving the standard of living (Wales and Reaich 2004).

Thus, finally it has been concluded in many research studies that remuneration is an important tool that several managers use to increase the performance of their employees.

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