Submitted From:

o Syeda Maham Waseem 170156

o Atiqa Ahmed 170237
o M. Ahsan Naseer 170201

BBA – 7A

Submitted To:
o Ma’am Fakhra Mushtaq
 Table of Contents
Introduction:.................................................................................................................................................. 1
Research Objectives: ..................................................................................................................................... 1
Theoretical Framework: ............................................................................................................................... 1
Hypothesis: ..................................................................................................................................................... 1
Research Design ............................................................................................................................................ 3
Elements of Research Design.................................................................................................................... 3
Research Strategy: ................................................................................................................................ 3
Extent of Researcher Interference:...................................................................................................... 3
Study Setting:......................................................................................................................................... 3
Unit of Analysis: .................................................................................................................................... 4
Time Horizon:........................................................................................................................................ 4
Sampling Type:...................................................................................................................................... 4
Quantitative Data Analysis........................................................................................................................... 5
1. DESCRIPTIVE ANALYSIS: ............................................................................................................... 5
FREQUENCY STATISTICS: .............................................................................................................. 5
FREQUENCY TABLE: ........................................................................................................................ 7
2. RELIABILITY CHECK: ................................................................................................................... 11
3. CORRELATION ANALYSIS: .......................................................................................................... 14
4. Descriptive Analysis: ........................................................................................................................... 17
5. REGRESSION ANALYSIS: .............................................................................................................. 18
CONCLUSION:........................................................................................................................................... 21
RECOMMENDATIONS: ........................................................................................................................... 21
LIMITATIONS/IMPLICATIONS OF THE RESEARCH: .................................................................... 21

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Introduction:
The globalization era requires employees to have good performance and results in order to
improve the efficiency and effectiveness of the organization. Therefore, many companies
implement compensation system. Effective compensation is expected to add value to
employee’s satisfaction which motivates employees to always perform better. This research
aim is to determine the effect of compensation (direct and indirect) on employee
performance.

Research Objectives:
The overall objective of the research is:
 To investigate the impact of salary on the performance of employee
 To investigate the impact of indirect compensation on the performance of an
employee.

 To investigate the impact of reward system on the performance of an employee.

Theoretical Framework:
There were 3 Independent variables and 1 Dependent variable involved.
Independent: Salary, Rewards and indirect compensation.
Dependent Variable: Employee Performance

Hypothesis:
Based on the research objectives, following hypothesis was developed:
 There is a significant impact of salary on employee performance.
 Rewards have significant impact on employee performance
 There is a significant impact of indirect compensation on employee performance.

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 SALARY

EMPLOYEE
REWARDS
PRFORMANCE

INDIRECT
COMPENSATION

1- Theoretical Framework

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 Research Design

Research design is a plan for the collection, measurement, and analysis of data, which has
been created to answer the research questions.
This research was designed carefully by choosing the appropriate design according the
research objectives. Decisions regarding many research elements were made which are
discussed below.

Elements of Research Design

Research Strategy:

A research strategy is developed to set the path for achieving research goals. The research
strategy used for this research was “Survey Research”. The survey strategy is most
commonly used in business research, because it allows the researcher to collect quantitative
and qualitative data on various types of research questions. As the research was Descriptive,
questionnaire was used to collect data about people, their experience and situations.

Measurement of Scale:
A 5-point Likert scale was used to examine how strongly subjects agree or disagree with
statements of variables salary, indirect compensation, and employee performance whereas for
reward variable a mix of different types of scale was used to get the desired results from our
respondents .

Extent of Researcher Interference:

The extent of interference was “Minimal Interference”. As the study was Correlational (the
impact of compensation system was being studied on employee performance) and a
correlational study is performed in a natural environment. Only descriptive analysis was done
and none of the variables were manipulated.

Study Setting:

This study setting of this descriptive study was “Non-contrived” because it was done with
normal flow of events without disturbing the natural settings. It was also a “Field study”
because no experiment was performed during the research.

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Unit of Analysis:

It refers to the collection of the data which has to be studied during the data analysis stage of
the research. As the objective was to study the impact of compensation on employee
performance, the researcher’s interest was on employee of different sectors. Hence the unit of
analysis was “Individuals”.

Time Horizon:

As it was a one-time study, the data was gathered at one point in time. So the time horizon
was “Cross-sectional” and 60 responses were collected from employee of different
government and private sector especially banking sector, in the span of 7 days.

Sampling Type:

In the investigation, Random sampling method was used because it is not complicated, and
is very economical. It involves picking the desired sample size from the large sample with
equal probability. The respondents were selected randomly without any criteria. The sampling
size was 60 employees. We sent the electronic form link to the employee who were available
and were willing to participate in the research.

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 Quantitative Data Analysis

In quantitative data analysis we are expected to turn raw numbers into meaningful data
through the application of rational and critical thinking. Quantitative data analysis may
include the calculation of frequencies of variables and differences between variables. A
quantitative approach is usually associated with finding evidence to either support or reject
hypotheses you have formulated at the earlier stages of our research process.

We performed Quantitative Data Analysis of the data gathered through questionnaire.

Following analysis was performed using SPSS software.

1. DESCRIPTIVE ANALYSIS:

FREQUENCY STATISTICS:

VALIDITY:
From statistics table we identified that the total number of respondent for the Gender
demographic were 60 all of the responses are valid without any missing value.
Similarly, for other remaining demographics that are age, work experience and position
responsibility all 60 responses are valid without any missing value.

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RANGE:

1. Gender
From the descriptive analysis we identified that the range for gender is 1 to 2 that is from
male to female.
 1 as male
 2 as female
 3 as prefer not to say

2. Age
From descriptive analysis we identified that the range for age lies from 1 to 3 where:
 1 as 18-30
 2 as 31-40
 3 as Above 40

3. Work experience
From descriptive analysis we identified that the range for work experience lies from 1 to 4
where:
 1 as Less than 2 years
 2 as 2-5 years
 3 as 6-10 years
 4 as Above 10 years

4. Position responsibility
From descriptive analysis we identified that the range for position responsibility lies from 1 to
4 where:
 1 as Top level management
 2 as Middle level management
 3 as Clerical staff
 4 as Non clerical staff

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AVERAGE:

1. Gender:

From the above description table, we identified that the average respondents are male with
the median and mode value of 1, which means that we have majority proportion of male out
of 60 responses who has filled the form.

2. Age:

The average respondents’ age lies between 18 years to 40 years with the mean value of 1.6
that lies between 1 and 2.

3. Work experience:
The average respondent work experience lies between 2 to 10 years with the mean value of
2.45 that is between 2 and 3.

4. Position responsibility:
The average respondent position responsibility is Middle level management with the mode
and median value of 2.

FREQUENCY TABLE:

1. Gender :

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From the frequency table we identified that out of 60 respondents 45 are male and 15 are
females. In percentage 75% were male and 25% were female.

2. Age:

Out of 60 respondents the age of 35 respondents lies from 18 to 30 years (58.3%), 12 are of
31 to 40years (25%) and 13 are of above 40 years (21.7%).

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 3. Work experience:

Out of 60 respondents 19 respondent have experience of less than 2 years i.e. (31.7%) ,15
respondents have 2 to 5 years i.e. (25%), 6 respondents have 6 to 10 years i.e. (10%) and 20
respondents have experience above 10 years i.e. (33.3%).

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 4. Performance responsibility :

Out of 60 respondents 2 respondents are of post top level management i.e. (3.3%), 51
respondents are of middle level management i.e. (85%), 2 are of clerical staff i.e.(3.3%), and
remaining 5 respondents are of non-clerical staff. i.e. (8.3%).

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 2. RELIABILITY CHECK:

The reliability or consistency of a measure shows the extent to which it is without any kind of
biasness and thus ensures consistent measurement across the different items in the instrument.
The consistency of the measurement was examined through “reliability test”.

Reliability Test/ Statistics:

Reliability test measures the consistency of respondents’ answers to all the items in a
measure. The most dominant test of inter item consistency reliability is Cronbach’s
coefficient alpha which is used for multipoint-scaled items. We run this test using SPSS and
results of all the variables were gathered. The higher the Cronbach coefficients, the better will
be the measuring instrument used on the research.

Cronbach Alpha Values:

The general rule of thumb for Cronbach’s alpha is:

 0.6 to 0.7 is acceptable level of reliability

 0.70 and above is good,
 0.80 and above is better, and
 0.90 and above is best.

Cronbach’s alpha does come with some limitations: scores that have a low number of items
associated with them tend to have lower reliability, and sample size can also influence your
results for better or worse.

Item Total Statistics:

In this table we are given “Cronbach’s Alpha if item deleted” against every question. So that
we would know that which questions are the most relevant one. For example, I am pasting
one of the tables of this item total statistics against salary variable.

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 Item-Total Statistics
Scale Mean if Scale Variance if Corrected Item- Cronbach's Alpha
Item Deleted Item Deleted Total Correlation if Item Deleted
The physical conditions in whic 11.5833 19.501 .711 .863
h you work
I enjoy working for the 11.7667 20.351 .750 .857
organization
I understand the measures used 11.6333 20.473 .616 .878
to evaluate my performance
The best workers receive the 11.4000 21.058 .590 .882
highest evaluation scores.
I feel my work adds value to the 11.9000 19.549 .825 .845
organization
I try to achieve my goals by 11.9667 19.931 .713 .862
satisfying customers

 Salary questions:

According to the table, the number of questions that were asked for the salary variable were 5.
From the summary we can see that all the values are valid no value has been excluded than
means 100% validity.
For the number of questions, the value of Cronbach alpha is 0.838 that is 83.8%. As our
value is above 0.7 or 70% our instrument used is reliable that the questions to determine the
impact of salary on employee performance are reliable.

 Rewards:

Reliability Statistics
Cronbach's Alpha N of Items
.635 10

According to the table the number of questions that were asked for the salary variable was 10.
From the summary we can see that there are some missing values in it. And these are because
of the type of questions asked. For example; some questions asked are that HAVE YOU
BEEN REWARDED BEFORE? And you have to reply in YES or NO. And those whose

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response would be no, will not be able to attempt the next question. So that’s why some
responses are missing.
For the number of questions, the value of Cronbach alpha is 0.635 that is 63.5%. A general
accepted rule is that α of 0.6-0.7 indicates an acceptable level of reliability. Our instrument
used is reliable that the questions to determine the impact of rewards on employee
performance are reliable.

 Indirect compensation:

According to the table the number of questions that were asked for the salary variable was 7.
From the summary we can see that all the values are valid no value has been excluded i.e.
100% validity.
For the number of questions, the value of Cronbach alpha is 0.927 that is 92.7%. As our
value is above 0.7 or 70% our instrument used is reliable that the questions to determine the
impact of indirect compensation on employee performance are reliable.

 Employee performance:

According to the table the number of questions that were asked for the salary variable was 6.
From the summary we can see that all the values are valid no value has been excluded i.e.
100% validity.
For the number of questions, the value of Cronbach alpha is 0.885 that is 88.5%. As our
value is above 0.7 or 70% our instrument used is reliable.

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 3. CORRELATION ANALYSIS:

The word Correlation is made of Co- (meaning "together"), and Relation. In statistics,
correlation or dependence is any statistical relationship, whether causal or not, between two
random variables or bivariate data.
We can say that correlation is any statistical association, though it commonly refers to the
degree to which a pair of variables is linearly related. When two sets of data are strongly
linked together we say they have a High Correlation.
Correlation is Positive when the values increase together, and correlation is Negative when
one value decreases as the other increases..

1. Pearson Correlation:

Pearson coefficient is a measure of the strength of the association between two continuous
variables. It represents the relationship between two variables that are measured on the same
interval or ratio scale. These numbers measure the strength and direction of the linear
relationship between the two variables.
The correlation coefficient can range from -1 to +1, with -1 indicating a perfect
negative correlation, +1 indicating a perfect positive correlation, and 0 indicating
no correlation at all.
Anything above 0.7 has strong correlation, between 0.5 and 0.7 is a moderate correlation,
and anything less than 0.4 is considered a weak or no correlation.

2. Significance (2- tailed):

To determine whether the correlation between variables is significant, compare the p-value to
your significance level. Usually, a significance level (denoted as α or alpha) of 0.05 and less
works well.

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  Correlations Table:

Correlations
SAL_MEAN RW_MEAN IC_MEAN EP_MEAN
SAL_MEAN Pearson Correlation 1
Sig. (2-tailed) .
N 60
RW_MEAN Pearson Correlation .262* 1
Sig. (2-tailed) .043
N 60 60
IC_MEAN Pearson Correlation .309* .286 1
Sig. (2-tailed) .016 .054
N 60 60 60
EP_MEAN Pearson Correlation .493** .410** .721** 1
Sig. (2-tailed) .002 .050 <.001
N 60 60 60 60

Correlation between Employee Performance and Salary:

From the correlation table we can see that:
 Pearson Correlation: 0.493
 Significance: 0.002
Pearson correlation value denotes that there is moderate positive correlation between these
two variables i.e. Salary and Employee Performance. And the correlation between these two
variables is significant because their significance is less than 0.05. It means that if there is an
increase in salary then employee performance will also increase moderately. So there is a
direct relationship between these two variables.

Correlation between Employee Performance and Rewards:

From the correlation table we can see that:
 Pearson Correlation: 0.410
 Significance: 0.05
Pearson correlation value denotes that there is moderate positive correlation between these
two variables i.e. Rewards and Employee Performance. And the correlation between these
two variables is significant because their significance is less than 0.05. It means that if there is
an increase in rewards then employee performance will also increase moderately. So there is a
direct relationship between these two variables.

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Correlation between Employee Performance and Indirect Compensation:

From the correlation table we can see that:

 Pearson Correlation: 0.721
 Significance: <0.001
Pearson correlation value denotes that there is strong positive correlation between these two
variables i.e. Indirect Compensation and Employee Performance. And the correlation between
these two variables is significant because their significance is less than 0.05. It means that if
there is an increase in indirect compensation then employee performance will also increase
strongly. So there is a direct relationship between these two variables.

Correlation between Salary and Rewards:

From the correlation table we can see that:

 Pearson Correlation: 0.262
 Significance: 0.043
Pearson correlation value denotes that there is weak positive correlation between these two
variables i.e. Salary and Rewards. And the correlation between these two variables is
significant because their significance is less than 0.05. It means that if there is an increase in
salary then rewards will also increase but increase will be minor. So there is a direct
relationship between these two variables.

Correlation between Salary and Indirect Compensation:

From the correlation table we can see that:

 Pearson Correlation: 0.309
 Significance: 0.016
Pearson correlation value denotes that there is weak positive correlation between these two
variables i.e. Salary and Indirect Compensation. And the correlation between these two
variables is significant because their significance is less than 0.05. It means that if there is an
increase in salary then indirect compensation will also increase but increase will be minor. So
there is a direct relationship between these two variables.

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Correlation between Rewards and Indirect Compensation:
From the correlation table we can see that:
 Pearson Correlation: 0.286
 Significance: 0.054
Pearson correlation value denotes that there is weak positive correlation between these two
variables i.e. Salary and Rewards. It means that if there is an increase in salary then rewards
will also increase but increase will be minor. So there is a direct relationship between these
two variables.

4. Descriptive Analysis:

Mean is used to describe the sample with a single value that represents the center of the data.
The standard deviation is the "average" degree to which scores deviate from the mean. More
precisely, you measure how far all your measurements are from the mean, square each one,
and add them all up. The result is called the variance. Take the square root of the variance,
and you have the standard deviation.

Descriptive Statistics
Mean Std. Deviation N
SAL_MEAN 2.9867 .93000 60
RW_MEAN 1.9777 .53471 60
IC_MEAN 2.3476 .95429 60
EP_MEAN 2.3417 .88747 60

According to the descriptive analysis the answer of salary, rewards, indirect compensation
and employee performance show agreeableness. Hence it means that all the independent
variables will increase the employee performance. The Results of Standard deviation shows
the variation in data.

So in the above table we can see that Rewards Standard Deviation is closer to 0, which means
that that most of the numbers are close to the average. While high standard deviation of
Indirect Compensation denotes that the numbers are more spread out.

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 5. REGRESSION ANALYSIS:

Regression analysis is a reliable method of identifying which variables have impact on a topic
of interest. This process determines which factors matter most, which factors can be ignored,
and how these factors influence each other.

(i) MODEL SUMMARY:

The model summary table reports the strength of the relationship between the model and the
dependent variable. R, the multiple correlation coefficients is the linear correlation between
the observed and model-predicted values of the dependent variable. Its large value indicates a
strong relationship.
 If R-squared value 0.5 < r < 0.7 this value is generally considered a Moderate effect
size
 If R-squared value r > 0.7 this value is generally considered strong effect size.

Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate
a
1 .745 .655 .631 .50777
a. Predictors: (Constant), IC_MEAN, RW_MEAN, SAL_MEAN

From the model summary table, we can access that the R-square value of our model is 0.655
or 65.5% which means that the variables are Moderately Positively Correlated to each
other.

(ii) ANOVA ANALYSIS:

Analysis of variance (ANOVA) is a statistical technique that is used to check if the means of
two or more groups are significantly different from each other. ANOVA checks the impact of
one or more factors by comparing the means of different samples. Anova table tells us about
the fitness of the model.
Significance of model should be less than 0.05. As from the table given below, we can say
that the Significance value of our model is less than 0.001 which means that our research
model is fit.

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 ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 25.782 3 8.594 23.266 <.001b
Residual 20.686 56 .369
Total 46.468 59
a. Dependent Variable: EP_MEAN
b. Predictors: (Constant), IC_MEAN, RW_MEAN, SAL_MEAN

(iii) REGRESSION COEFFICIENT ANALYSIS:

The table shows the impact of the independent variables (salary, rewards, indirect
compensation) on dependent variable (employee performance). This table tells us about the
significance value of each variable. The standard acceptable significance value or Cronbach’s
alpha value should be equal or less than 0.05.. The impact of these variables is given below:

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .145 .379 .302 .464
SAL_MEAN .169 .092 .177 1.838 .050
RW_MEAN .138 .147 .052 .560 .278
IC_MEAN .611 .088 .657 6.963 <.001
a. Dependent Variable: EP_MEAN

Salary:

H1.There is a significant impact of salary on employee performance.

As table shows that value of significance for the variable job salary is 0.050 which is equal to
Alpha. So result is significant and hence the hypothesis is accepted. So we can say that Salary
has positive significant impact on performance of the employees.

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Rewards :

H2.Rewards has significant impact on employee performance.

The value of rewards is greater than alpha (0.278>0.05) therefore the results are insignificant
and hypothesis is rejected. So from the regression results it can be concluded that rewards has
positive and insignificant impact on employee performance.

Indirect Compensation:

H3. There is a significant impact of indirect compensation on employee performance.

The value of indirect compensation is less than 0.01, that is lesser than Alpha. So the results
are significant and hypothesis is accepted. The regression results also show significant impact
of indirect compensation on employee performance. So, indirect compensation has positive
impact on employee performance.

o Regression Equation:
Employee Performance = 0.145 + 0.169 Salary + 0.138 Rewards + 0.611 Indirect
Compensation.

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 CONCLUSION:

o It is concluded from different results that Compensation has positive impact on

employee performance.
o It is proved from correlation analysis that all the independent variables have weak or
moderate positive relationship to each other.
o Regression analysis shows that the independent variable rewards have insignificant
and (salary and indirect compensation) have significant and positive impact on
employee performance.
o Descriptive analysis also reveals that all the independent variables have positive
impact on employee performance.
o ANOVA results reveal that our model is fit.

RECOMMENDATIONS:

o From regression analysis we’ve analyzed that Salary and Indirect compensation have
significant impact on employee performance. So, there should be more research
conducted on these sectors.
o Many other variables impacting employee performance could be studied further.
o It should be implemented in working institutions as the result predicted that along with
salary or direct compensation, management should also work on indirect
compensation that would impact the employee performance.

LIMITATIONS/IMPLICATIONS OF THE RESEARCH:

o The major limitation of this research is that the study doesn’t cover a single sector or
industry but targets almost all employees working somewhere preferably in banks of
Islamabad and Rawalpindi.
o Another limitation is that it excludes many variables of compensation due to shortage
of time.
o Funds were also another limitation.
o Apart from these limitations this research may provide insights to the managers to
enhance the employee performance of their subordinates.

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