Remuneration Strategies and Employee Turnover in Private and Public Institutions

COMPARATIVE STUDY ON THE REMUNERATION STRATEGIES AND EMPLOYEE TURNOVER BETWEEN PRIVATE AND PUBLIC INSTITUTIONS: A SURVEY OF PUBLIC AND PRIVATE UNIVERSITIES IN NAIROBI COUNTY

Background of the study

Public sector employment accounts for a significant portion of wage employment in developing countries (Mizala, et al.,2011; Ramoni-Perazzi and Bellante, 2007). The ability to attract and retain highly skilled personnel is a major challenge in increasing government capacity to produce and implement good policies, including wage determination policy. In employment, a major debate revolves around public-private sector wage differentials that are significant for attracting and retaining talent. Wage determination processes within the two sectors are distinct and (have the potential to) give rise to differentials in pay rewards between comparable worker categories (Hyder and Reilly, 2005; Skyt Nielsen and Rosholm, 2001; Van der Gaag and Vijverberg, 1988). While surveys from developed countries show that public sector wages are on average higher than those in the private sector, evidence from developing countries is often limited or entirely lacking.

The general perception is that employees in the private sector, particularly the highly skilled ones, earn much higher salaries than their public sector counterparts. The former tend to negotiate for higher salaries whenever they move from the public to the private sector. These perceptions do not, however, take into consideration the fact that although salaries in the public sector may be lower, the total compensation package may include transactional and relational returns, which are not available in the private sector. The higher packages to private or public sector workers are likely to introduce wage distortions and disparities in public-private sector wage employment, while leading to low morale and output in the affected sector.

Statement of the problem

A recent survey by KIPPRA (2013) indicated that the general public sector pays slightly higher than the private sector when comparing basic salary and allowances. However, the private sector pays a higher basic salary. Further, there is a large vertical wage inequality in both the public and private sector between the lowest and highest cadres. These wage differentials have caused a distortion in the wage economy, defying the principles of wage determination. The report indicates that education and experience are no longer major considerations in wage determination. Moreover, the current employment policy seems inadequate in addressing issues around wage differentials within the public sector and between public and private sectors. The report further reveals that there is a positive correlation between wage differential and the cost of labour, as the higher the wage differential the greater the likelihood for agitation for higher wages. The report also shows that basic salaries alone are not a sufficient motivator for retaining employees. Incentives and allowances play a significant role in ensuring employee retention within the public sector. Non-monetary incentives such as working environment, challenging assignments, job security and flexible working hours have contributed to high employee motivation. In addition, motivation is upped due to the wide range of allowances available to the employee in the public sector. In most cases, the proportion of allowances accounts for at least 50% of the total take home pay across the public serve

Due to lack of an explicit Kenyan policy on wage determination, distortions exist between employees bearing similar qualifications, experience and levels of competence. According to work done by the Institute of Economic Affairs (2006), there are substantial differences in the remuneration of individual public sector workers across different departments and institutions. A comparison of wages in the public sector – across the central government, the Judiciary, Parliament, Local Authorities, Disciplined Forces, and State Corporations – shows that the basic pay in central government is substantially lower for the same educational qualifications, experience and ability. urther, the study notes that there are discrepancies across the operational pay scales.

Despite the overall implications of wage differentials, limited studies have been undertaken in the recent past to establish whether the remunerations strategies differ between public and private in Kenya, the nature and size of their distorttionary effects, and how their influence employee turnover level .

Specific objectives

1. To explore various remuneration strategies employed in both private and public institutions
2. To establish the turnover rate in both private and public institutions
3. To determine the effect of remuneration strategies on turnover rate in both private and public institutions
4. To establish the effect of employees remuneration satisfaction level on turnover rate
5. To determine the

Reasons For and Significance of the Study

The performance of the public sector workers in Kenya has been a major concern to the Kenyan people. It has been characterized by low work performance and poor service delivery. The problem indicators include: absenteeism from work, lateness, corruption, theft, a high rate of complaints, low quality work output and high turn-over of professional staff. There is need therefore to undertake research aimed at developing renumeration strategies for motivating the public sector workers in Kenya. The main objective of this research study will be to develop strategies for enhancing staff retention in order to improve the work performance of the public sector workers. Opiyo (2004, p. 18) observes that the public service wage bill is 9.6 per cent of the GDP. He states that any further increase in the wage bill could lead to negative economic consequences, such as the rise in inflation rates and general increase in price levels of goods and services. The government therefore is not in a position to spend more money in salary increases to enhance motivation. This is because at the moment the government has no resources to offer salary increase and any further increases (as indicated above) will cause negative economic impact. Therefore, a strategy that will assist in enhancing motivation of employees in the public sector without spending more resources becomes even more appealing.

Methodologies

The research will be carried out in Nairobi. As the capital city of Kenya

Research design

This study will adopt a comparative research design. A comparative study will enable the researcher to assess the difference that exists on remuneration strategies between in private universities and those used in public universities to gain competitive advantage (Orodho, 2003).

Target Population

The main target unit for analysis of the study will be both teaching and non-teaching staff and human resources top management officials of the selected universities. The non-teaching staff and other staff will serve as key informants to provide more information in regard to the remunerations strategies employed in their institutions to retain employees

Sampling Design

The study will employ stratified, simple and purposive sampling technique to select a private university and a public university and teaching and non teaching staff respectively.

Data Types and Sources

This research study will be conducted using two sources of data; primary and secondary data

Primary Data

Primary data will be collected by conducting interviews with the senior administrative staff and HR staff respectively. On the other hand, questionnaires will be issued to the non-teaching and teaching staff .

Secondary Data

Secondary data will be gathered from a variety of sources including analysis of case studies, reviewing websites, books, journals, and brochures of universities

Data Collection Instruments

The researcher will use questionnaires and interviews as the main instruments for collecting data.

Validity and Reliability

Validity and Reliability

It will be done through piloting of instruments to improve their efficiency in data collection. The researcher will issue 30 questionnaires to a university other than the ones selected for the study. Reliability, which entails the accuracy and precision of the measurement procedure, will be carried out using the cronbach’s alpha test, whereby a coefficient of 0.7 will indicate reliability of the questionnaire. Cronbach’s alpha is widely believed to indirectly indicate the degree to which a set of items measures a single uni-dimensional latent construct. Cronbach’s alpha generally increases as the inter-correlations among test items increase, and is thus known as anestimate of reliability of test scores. Because inter-correlations among test items are maximized when all items measure the same construct, that is, the higher the coefficients, the better the measuring instrument (Zinbarg et al., 2005).

Data Analysis

The data that will be collected will be analyzed using descriptive and inferential statistics with the help of statistical package of social sciences (SPSS) and Microsoft Excel package too. Descriptive statistics include frequencies, percentages, pie charts and graphs, which will enable the researcher to meaningfully describe distribution of measurements using a few indices or statistics. Inferential statistics will be important in determining the nature and magnitude of the relationship between the marketing strategies used in public university and private university for competitive advantage. The researcher will calculate a co-relation co-efficient (r) using pearson’s corelation co-efficient method, whereby a coefficient of more than +1 will indicate a positive relationship between marketing strategies and competitive advantage.

A coefficient (r) of 0 will indicate no relationship, and a coefficient (r ) of -1 will indicate negative relationship between the variables being tested.