The impact of reward system on job satisfaction: a

moderation effect of age and tenure

Niloofar Solati Dehkordi

Student No.:153014011

Master Degree Thesis Paper

Supervisor: Asst.Prof.Dr.Panteha Farmanesh
Girne American University
June 2018
 Decleration

This thesis had been submitted in fulfillment of the requirements for degree of Master
Degree in Business Management at Girne American University in North Cyprus. So, I
declare that this thesis has not been previously submitted completely or partially for any
other qualifications at Girne American University or other institutions.I also declare that
this thesis is based on my own original study except citations and quotations , which
have properly acknowledged.

Niloofar Solati Dehkordi

 Abstract
This study explores the relationship and impact of company rewards and job
satisfaction with the moderating effect of age difference and tenure. It also examines
which types of rewards, financial or non-financial rewards effect the most on
employees’ job satisfaction. Direct, indirect financial reward and extrinsic and intrinsic
non-financial reward are being studied as dimensions. The impact of two moderators,
tenure and age difference has been examined. Quantitative data analyses, including
descriptive, reliability, correlation and regression test were performed. So, 200
questionnaires distributed among the employees of a private company with more than
300 employees located in Iran. Withdrawing the missing ones, 120 questionnaires were
collected for analysis. Six main hypotheses and eight sub-hypothesis tested in this study.
The study uncovered that financial and non-financial rewards will have a significant
impact on job satisfaction. The results revealed that financial rewards significantly and
positively related to job satisfaction (r = 0.251**, p < 0.05). The relationship between
non-financial rewards and job satisfaction are also significantly and positively related (r
= 0.184*, p < 0.05). Thus, hypothesis 1 and 2 were supported. The regression result has
indicated that job satisfaction is positively influenced by financial rewards (β = 0.251, p
< 0.05) and non-financial rewards (β = 0.184, p < 0.05). Comparatively, direct financial
rewards (β = 0.269, p < 0.05) has a stronger impact on employees’ job satisfaction than
indirect financial rewards (β = 0.225, p < 0.05). In other hands, Extrinsic and Intrinsic
non-financial rewards has a weak impact on employees ‘job satisfaction, (β = 0.227, p
>0.05) and (β = 0.258, p > 0.05) respectively. This implies that employees are better
satisfied by financial rewards than non-financial rewards. Hence, hypothesis 3 was
supported but hypothesis 4 is not supported. The outcome of moderation analysis
indicates that the effect of rewards in creating a favorable job satisfaction could be
stronger with more tenure. Age differences have a moderating impact on job satisfaction
with increase in age. Consequently, hypothesis 5 and 6 is supported. Useful insight will
be granted to the employers that could alter their remuneration strategy and policy by
the outcome of the study.
Keywords: Reward system, Reward management, financial reward, Non-Financial
Reward, Job Satisfaction, Tenure, Age difference
 Acknowledgement
I would like to express my special thanks and appreciation to my kind Supervisor:
Associate Professor, Dr.Panteah Farmanesh for her great support and inspiration. She
has been not only a mentor for me but also a role mother for me that inspire sme to
move on achieving my targets constantly and thoroughly in spite of so many difficulties
and stones on the way to get them .I am really grateful for her great advice in my
research process from the scratch to end as well as her friendly guidance for my
personal life problems and difficulties that I faced to during the period. I would like to
thank all of my professors who supported me during my Master period for their brilliant
comments and suggestions. Special thanks to my research method professor Dr. Feyza
Bhatti who was welcoming to me in every steps of my research and queries from my
side and she was always responded friendly and scientifically.

I would like to appreciate my family especially my mother’s help and support that
without her non-stop advice and support I could never succeed on and pass this chapter
of my life effectively.

Also I would like to be grateful for all of my friends who supported me in every
situations and hard times in my life. To be honest, I could not be succeed without their
kindness, support and help in those moments that I felt helpless and disappointed.
Contents

Decleration...................................................................................................................................3
Abstract........................................................................................................................................4
Acknowledgement........................................................................................................................5
List of tables.................................................................................................................................9
List of figures..............................................................................................................................10
1 Chapter One: Research background...................................................................................11
1.1 Introduction................................................................................................................11
1.2 Problem statement.....................................................................................................12
1.3 Significant of the study...............................................................................................13
1.4 Objectives of the study...............................................................................................13
1.5 Research Questions....................................................................................................14
1.6 Research model..........................................................................................................14
1.7 The research hypothesis.............................................................................................15
1.8 Definitions of Variables...............................................................................................16
1.9 Thesis Structure..........................................................................................................17
1.10 Chapter summary.......................................................................................................17
2 Chapter Two: Literature Review.........................................................................................18
2.1 Introduction................................................................................................................18
2.2 The concept of reward................................................................................................19
2.3 Financial Rewards.......................................................................................................21
2.3.1 Direct financial rewards......................................................................................21
2.3.2 Indirect financial rewards...................................................................................21
2.4 Non-Financial Rewards...............................................................................................22
2.4.1 Extrinsic non-financial rewards...........................................................................23
2.4.2 Intrinsic non-financial rewards............................................................................24
2.5 Tenure as Moderator..................................................................................................24
2.6 Age difference as Moderator......................................................................................25
2.7 Job satisfaction...........................................................................................................27
2.7.1 The significance of rewards on employee satisfaction........................................28
3 Chapter Three: Methodology.............................................................................................29
3.1 Introduction................................................................................................................29
3.2 Research Philosophy...................................................................................................29
3.3 Research Approach.....................................................................................................30
3.4 The research Methodology.........................................................................................31
3.5 The research population and sample..........................................................................31
3.6 Sources of data collection...........................................................................................32
3.6.1 Secondary sources..............................................................................................32
3.6.2 Primary sources..................................................................................................32
3.7 Measurements............................................................................................................33
3.7.1 Financial Direct...................................................................................................33
3.7.2 Financial Indirect.................................................................................................34
3.7.3 Non-financial Extrinsic........................................................................................34
3.7.4 Non-financial Intrinsic.........................................................................................34
3.7.5 Job satisfaction....................................................................................................35
3.7.6 Tenure and Age...................................................................................................35
3.8 The pilot study............................................................................................................35
3.8.2 Ethical consideration...........................................................................................37
4 Chapter four: Data and analysis..........................................................................................39
4.1 Introduction................................................................................................................39
4.2 Descriptive analysis.....................................................................................................39
4.2.1 Responding rate..................................................................................................39
4.2.2 Demographic data Breakdown............................................................................39
Table 1.Sample distribution by gender...............................................................................39
Table 2.Sample distribution by age.....................................................................................40
Table 3.Sample distribution by Marital Status....................................................................40
Table.4 Sample distribution by educational level...............................................................41
Table 5. Sample distribution by Tenure..............................................................................41
Table 6.Sample distribution by received salary..................................................................42
4.3 Normality Test............................................................................................................42
4.3.1 Financial Reward distribution Normality Test.....................................................43
Table 7.Financial reward normality test.............................................................................43
 Figure1.Histogram..............................................................................................................43
Figure2. Normal Q-Q plot of Financial reward....................................................................43
Figure3. Plot........................................................................................................................44
4.3.2 Non-financial Reward distribution Normality Test..............................................45
Table 8.Non-Financial Normality Test.................................................................................45
Figure4. Histogram of non-financial reward.......................................................................45
Figure5. Normal Q-Q plot of non-financial reward.............................................................45
Figure6.Plot........................................................................................................................46
4.3.3 Job satisfaction distribution Normality Test........................................................46
Table 9.Job satisfaction normality test...............................................................................47
Figure7.Histogram of job satisfaction normality test..........................................................47
Figure 8.Normal Q-Q Plot of job satisfaction......................................................................47
Figure9. Plot........................................................................................................................48
4.4 Reliability analysis.......................................................................................................49
Table .10 Reliability analysis...............................................................................................49
4.5 Correlation analysis.....................................................................................................49
4.5.1 Financial reward and Job satisfaction.................................................................49
Table 11. Pearson Correlation 1..........................................................................................49
4.5.2 Non-financial rewards and Job satisfaction.........................................................50
Table 12: Pearson Correlation 2..........................................................................................50
4.5.3 Non Parametric Correlation................................................................................50
4.6 Regression Analysis.....................................................................................................51
4.7 Moderators’ Analysis..................................................................................................52
5 Chapter Five: Conclusion....................................................................................................54
5.1 Research limitations....................................................................................................55
5.2 Future studies.............................................................................................................55
References..................................................................................................................................57
List of tables
Table 1.Sample distribution by gender

Table 2.Sample distribution by age

Table 3.Sample distribution by Marital Status

Table.4 Sample distribution by educational level

Table 5. Sample distribution by Tenure

Table 6.Sample distribution by received salary

Table 7.Financial reward normality test

Table 8.Non-Financial Normality Test

Table 9.Job satisfaction normality test

Table .10 Reliability analysis

Table 11. Pearson Correlation 1

Table 12. Pearson Correlation 2

Table 13. Non Parametric Correlation

 List of figures
Demographic features contains:

1. Gender
2. Age
3. Marital Status
4. Educational Level
5. Tenure
6. Salary received
1 Chapter One: Research background
1.1 Introduction
One of the main management’s tools within the organizations is the reward
system that helps the efficiency of the employees and motivate them at work (Lawler
and Cohen, 1992). Moreover, in order to provide the employees’ satisfaction, it is
considered one of the most desired factors. To organization success, the relationship
between rewards, job satisfaction, are very important and it can be a resource for
competitive advantage and it helps to establish an exclusive and vibrant organization’s
level of competencies (Schuler and Jackson, 1987; Khalid, Salim, and Loke,2011).

Organizations concentrate mainly on financial rewards and non-financial

rewards are being gradually ignored (Chiang and Birtch, 2008). Motivators for each
employee are different. Therefore, managers should assign suitable rewards based on the
employees’ needs. Some of the staff is motivated by salary and money while some
motivate by recognition and job promotion which is not direct and instant items. So it is
not correct to admit everyone has the same needs and motivator (Lai, 2009). Both
financial and non-financial rewards affect employees’ job satisfaction according to
many researchers (Gerald and Drorothee, 2004; Clifford, 1985; Kalleberg, 1977;
Rehman, Khan, Ziauddin and Lashari, 2010). A poor reward management can de-
motivate and affect the satisfaction and influence final performance of the employees.

A study finding by Farah Liyana Bustamam and Sze Sook Teng and Fakhrul
Zaman Abdullah (2014) revealed that there is a strong relationship between financial
and non-financial reward and job satisfaction but the financial reward has a stronger
influence on job satisfaction as compared to the non-financial reward. Rehman, Khan,
Zaiuddin and, Lashari (2010) previously uncovered that an increase in awards could
actually increase job satisfaction but the financial reward has a higher impact on job
satisfaction.According to the results of the analysis by Ali Erbaşıand and Tugay Arat
(2012), a significant association is monitored between the financial and non-financial
rewards and the job satisfaction of employees. The result is that the attitudes towards
financial rewards affect stronger on job satisfaction than the viewpoint towards non-
financial rewards.

The research study performed by Samina Nawab and Komal Khalid Bhatti
(2011) reveals that reward management can effect Job satisfaction and employees’
organizational commitment. “Pay has been considered as the major factor for job
satisfaction however other related factors like promotion, recognition, job involvement ,
and commitment are also taken into account”(Yasir Kamal and Fawad Hanif,2009)

1.2 Problem statement

Lately, one of the main items of the management system is an organizational
rewards system that enhances employees’ satisfaction and the expectations of
employees have been high. A study by Snyder, Osland, and Hunter(1996) revealed that
public sector employees are more dissatisfied than private sector employees, because of
performance-based rewards of the private sector. So in order to retain the employees, the
public sector should provide rewards as attractive as private sector’ rewards. Therefore,
weak rewards system leads to dissatisfaction and it affects turnover consequently. The
issue will lead to dropping off the efficiency of the organization and also revenue in
long-term. Subsequently, not attractive rewards system will finally affect employees’
turnover (Rudzi Munap & Muhammad Izwan Mohd Badrillah & Baharom Abdul
Rahman, 2013).

Organizations by providing weak reward package system lead to employee job

dissatisfaction and low motivation (Shafiq and Naseem,2011). Thus, the unsatisfactory
environment frequently decreases the level of performance and employee self-esteem
(Quible, 2005). So low psychological condition has a large effect on lower productivity,
higher absents, and employees’ delays. No matter how an organization provides a good
psychological environment, employees will not do their best if they are not happy with
their job. It is mentioned by an official website that employees will leave their work
place because of dissatisfaction of their salary and they will talk about it to others as
well that shows the power of word of mouth. According to Rudzi Munap &Muhammad
Izwan Mohd Badrillah &Baharom Abdul Rahman (2013), there are just
telecommunication companies that adopted an appropriate reward system and their
employees’ satisfaction is under investigation.

1.3 Significant of the study

This research will identify the concept and framework of the reward system and
take in to account the nature and its mechanism and show how it works in different
environments. It also provides benefits for HRM in companies by considering the
importance of the reward system management. The study will uncover the factors that
affect employee satisfaction and job satisfaction consequently. It will provide evidence
for HRM to understand the requirements needed to enhance job satisfaction.

Since this study uncover the finding from a private international organization,
the finding of this research will pave the way for more valuable contributions to job
satisfaction and reward system in other sectors likes public sector, financial,
manufacturing, maintenance and so on.

1.4 Objectives of the study

Longtime work experience in diverse multicultural companies as well as small,
local enterprises and institutions, bestowed a great opportunity to learn a lot about
working professionally with different people around the world with different cultures
and feedbacks under one ceiling. However, I have been coming across with a large load
of job dissatisfaction and discontents among the colleagues and co-workers. The
dissatisfaction was not limited to the employees working in small companies with low
level of salary and reward management system but also it was observed in international
multicultural companies with a considerable level of payment and updated reward
management system. So, finding out the main reason for this load of dissatisfaction and
its relation with companies ‘rewards were my initial purpose to start this research.

In fact, the main objective of this study is to investigate the relationship between
financial and non-financial rewards and their dimensions on job satisfaction and also
investigate the impact of two moderators on job satisfaction .It also explores the types of
rewards that specifically affect the employees’ job satisfaction. Based on the research’s
finding and by learning the relationship between them and impact of rewards on job
satisfaction, organizations’ authorities will get a clue to improve employees’ higher
satisfaction, mecontent and retention by possible strategies

1.5 Research Questions

1. What is the impact of financial reward on job satisfaction?
2. What is the impact of non-financial reward on job satisfaction?
3. Which types of rewards affect most the job satisfaction?

1.6 Research model

The conceptual model of research consists of two independent variables (Financial
and non-financial rewards) and one dependent variable (Job satisfaction).Moreover, the
research assumes that having a tenure and age will have a significant role, either
strengthen or weaken the relationship between company rewards and job satisfaction. In
other words, tenure and age both will play a moderating role in this research.
1.7 The research hypothesis
H0.1.There is no significant relationship between financial reward and job
satisfaction
H1. There is a significant relationship between financial reward and job satisfaction.
H0.2.There is no significant relationship between non-financial reward and job
satisfaction.
H2. There is a significant relationship between non-financial reward and job
satisfaction.
H0.3.There is no significant impact of financial reward on job satisfaction
H3. There is a significant impact of financial reward on job satisfaction.
H0.3.1There is no significant impact of direct financial reward on job
satisfaction
H3.1. There is a significant impact of direct financial reward on job satisfaction.
H0.3.2. There is no significant impact of indirect financial reward on job
satisfaction
H3.2.There is a significant impact of indirect financial reward on job satisfaction.
H0.4.There is no significant impact of non-financial reward on job satisfaction.
H4. There is a significant impact of non-financial reward on job satisfaction.
H0.4.1 There is no significant impact of extrinsic non-financial reward on job
satisfaction.
H4.1. There is a significant impact of extrinsic non-financial reward on job satisfaction.
H0.4.2. There is no significant impact of intrinsic non-financial reward on job
satisfaction.
H4.2.There is a significant impact of intrinsic non-financial reward on job satisfaction.
H5.Tenure moderates the relationship between company rewards and job
satisfaction.
H6: Age moderates the relationship between company rewards and job
satisfaction.
1.8 Definitions of Variables
Financial and non-financial rewards are the main independent variables of the
study while job satisfaction is the dependent variable.

Independent variables

variables Definitions examples sources

Direct financial Represent an employee's Basic salary ,bonuses,

reward fixed and variable income profit sharing
Adrian Wilkinson, Tom
Pensions, medical
consists of a range of Redman, Tony Dundon
Indirect insurance, paid
benefits and services (2017)
financial vacations, housing
provided to the
Reward allowance, company car,
employees
club membership
job security, recognition,
Extrinsic non- status, work
externally attached to
financial relationship, training
the job Hackman and
reward opportunities, flexible
Lawler(1971);Herzberg
work schedules
et al.(1959);Lawler
job meaning, feeling of
Intrinsic non- related to the actual and Hall(1970)
accomplishment,
financial attributes and content of
competency and
reward the job
personal growth
Refers to the length of
Below one year to more
time individual spent in OECD, n.d.; Ram &
Tenure than 7 years studied in
current job or with Prabhakar, 2011
the research
current employer
The age differences have
a moderating effect on Employees between 20 Muhammed zia Ur
job satisfaction as it to more than 50 years Rehman, Muhammad
Age difference
increases with the rise in are being studied in the Riaz Khan, Ziauddin
age research and Javed Ali Lashari

Dependent Variable

job satisfaction as any combination of

psychological, physiological and environmental
Job satisfaction Hoppock (1935)
circumstances that cause a person truthfully to say
I am satisfied with my job
1.9 Thesis Structure
This section outlines the thesis structure, which contains five chapters as below:
Chapter 1: Introduction, Chapter 2: literature Review, Chapter 3: Methodology
and Research Design, Chapter 4: Data Analysis and Chapter 5: Discussion and
Conclusion.
Chapter 1: It offers a background about the research, problem statement,
significant of the study, study objectives, research questions, research model and
research hypothesis, variable definitions and finally thesis structure.
Chapter2: the literature review enhances the thesis with existence data available to
the thesis objective by review financial management rewards, non-financial
management rewards, job satisfaction and tenure as the moderator.
Chapter 3: Describe the methodology that is used in this thesis, research
philosophy, research approach, research methodology, data sampling, and data
collection procedure, measurement and pilot study.
Chapter 4: Includes the data analysis using SPSS analysis the data collection of
this study.
Chapter 5: Summarize the conclusion and findings of quantitative data which
interpreting regarding the previous study, also theoretical and practical implication of
this study, limitation of the study and future research direction.

1.10 Chapter summary

In this section, the researcher provides a summary for chapter one that is the
introduction. It starts with research background which enriches the thesis development.
The problem related to choose this topic and where to apply it. The significant and
objective of the study to the field of business and the private sector as one of the sectors
confront changes and challenges over time. Research questions of the thesis try to be
answered, research model and hypothesis and definition of variables are presented and
explained in detail. At the end of the chapter, the researcher summaries the thesis
structure and chapter description.

2 Chapter Two: Literature Review

2.1 Introduction
The reward has a comprehensive meaning and consists of anything an employer
tends to offer in exchange for employees’ contributions and efforts (Chiang and Birtch,
2008).Poor rewards may push employees to withdraw and diminish work effort and also
it leads to creating an unpleasant work environment. The most important purpose of
rewarding is to attract, retain and motivate employees in a way to lead to employees’
desired behavior.

“Organizations often use financial rewards to prevent employee dissatisfaction

and to motivate employees, although it may not be the best motivator for the long term”
(Mossbarger and Eddington, 2003).In spite of the fact that the presence of money is not
considered as a suitable motivator, however,the lack of money can act as a strong de-
motivator (Deeprose, 1994). So, rewards in not only considered as a value and means of
exchange but also it is considered as tools for identifying worth of the individuals,
promoting self-esteem and representing the achievement and status
(Armstrong,1996).Consequently, the organizations can use financial rewards to support
the strategy of organization’s human resource.

“Non-financial rewards are tangible rewards provided and controlled by a firm:

which do not necessarily benefit employees in a monetary sense” (Chiang and Birtch,
2008).Today, people look for more than monetary rewards for their work (Millmore et
al, 2007). It means that they are pursuing something else in exchange for their
contribution rather than money which has value and meaning to them (Johnson and
Welsh,1999).Non-financial rewards are being used increasingly to motivate employee
performance and to increase employee satisfaction (Chiang and Birtch,2008).

Job satisfaction is vital in the employees’ work life and for helpful use of them in
organizations (Koeske, Kirk, Koeske and Rauktis, 1994). Employees ‘evaluation of the
work climate, level of organizational support and employment situation can forecast the
employees’ job satisfaction (Patah, Zain, Abdullah and Radzi,2009).A satisfied
employee is more productive, stable and committed to the goals of organizations
(Jessen,2011).Job satisfaction has an effective and major role and defined as a part of
the work roles occupying by the individuals (Kalleberg 1977).Job dissatisfactions result
from the appraisal of various aspects of work that a person experiences while job
satisfaction is the collecting of a range of specific satisfaction (Locke,1976 cited in
Rehman, Khan and Lashari,2010).The appraisal of the various aspects of the job
contains the work itself, management, payment, promotion policies and colleagues
(Efraty and Sirgy,1990).When people talk about their job even positive or negative, they
show their satisfaction or dissatisfaction (Pool,1997). “So, Job satisfaction implies a
subjective and emotional reaction towards different aspects of the job, perceived as an
emotional state resulting from the appraisal of one’s situation, linked with the
characteristics and demand of one’s work”(Jessen,2011).

2.2 The concept of reward

Economics, psychology, and management are the areas that play a role in the
knowledge of reward management. Rewards are considered as a means of exchange in
economic school and it is regarded as utility, expense and control implication. It is
measured as the cost of production and should be given to the employees who
participate in the profit of the company. “Marginal productivity theory claims wages
paid to an employee should equal to the extra value of productivity that the employee
aids to total production” (Sidney and Tarascio, 1971).Payment should be equal to an
employees’ productive efficiency according to wage efficiency theory. According to
agency theory, if managers(principals) who want to maximize their return, ignore to
check the self-interested and risk-averse employees (agents), they may attempt to do
some actions to maximize employees’ awards and minimize their job efforts
(Eisenhardt,1989). In order to better alignment between employer and employee
interests, wages is suggested to be paid based on the performance because of the high
cost of monitoring and principal and agent disproportionate conflicts. (Jensen and
Meckling, 1976).Thus financial incentives may contribute to control of the costs related
to malfunction and unprincipled behavior of the employees. (Abelson and Baysinger,
1984, Jensen and Meckling, 1976).Psychology similar to economic perspective also
view reward as utility and instrument but sees it as a motivational tool whereas
economic perspective looks at the cost and control aspect of reward. According to
Maslow’s need model, the reward is a tool to satisfy the individuals’ range of needs and
preferences. Expectancy, reinforcement, equity and goal setting theories, all motivate
employees to accomplish a preferred performance (Skinner 1969, Adams 1963, Locke
1968).These theories connect reward to performance in different ways. In expectancy
theory, achievement of reward after the performance is expected; however, in
reinforcement theory learns from the outcome of the previous reward. Equity theory
improves the feeling of equality in workplace and goal setting theory help to form a goal
and connect reward to motivation and performance.

Management theory investigates the reasons and circumstances that influence

awards. The basic of the theory assumes the various situational and appropriate factors
that affect the reward efficiency. The human capital theory emphasizes that the
characteristics and outlook of each employee like experience, education, and skill
identify the level of reward. However, the internal market theory asserts that the firm
demand in contrast to the supply of labor market, categorize the reward. Maximizing
reward resources and capabilities lead to the competitive advantage of the firm based on
the resource-based theory. In order to be affected, the reward should be paralleled with
the strategy of the organization and its environment.(Gomez-Mejia and Balkin,
1992).This perspective asserts the reward’s strategic role.
2.3 Financial Rewards
In order to prevent employees’ disgruntlement and to provoke them, organizations
often use financial rewards, although it is not considered as the best motivator for the
long run (Mossbarger and Eddington,2003).Although the presence of money is not
considered as a proper motivator but the lack of money can act as a strong de-motivator
(Deeprose,1994).So, rewards in not only considered as a value and means of exchange
but also it is considered as a tools for identifying worth of the individuals ,promoting
self-esteem and representing the achievement and status (Armstrong,1996).
Organizations utilize different range of financial and non-financial rewards to
compensate the employees. Tangible rewards can be direct or indirect.

2.3.1 Direct financial rewards

Direct financial rewards are those that an employee receives in the form of salary,
incentives, wages, bonuses, merit pay and stock options. In other word, it can be base
and variable payment.Base payment received by the employees are influenced by
external and internal factors. The former conclude the labor market condition,
government policies and market rate, while the latter includes job evaluation, bargaining
with the employees and personal agreements (Shanks,2007,p30).This rewards are paid
based on the time spent on the job and the compensation of the majority of the
employees (Mathis and Jackson,2004;Schuler,1998).

Consequently, organizations can use direct financial rewards to support the

strategy of organization’s human resource. Moreover, financial incentives may help
control of the costs caused by demotivated employees and inappropriate behavior of the
employees (Abelson and Baysinger, 1984, Jensen and Meckling, 1976).

2.3.2 Indirect financial rewards

Indirect financial rewards includes benefit and services. Fixed income is basic
salary that is the main part of employees ‘reward while variable income is depending on
the performance of the employees and can be short or long term such as bonuses or
profit sharing respectively. Indirect rewards includes pensions, medical insurances, paid
vacations, housing allowance, company cars and club membership.
 Each employee has his or her unique needs and motivators. Therefore, managers
should pick out the proper rewards in line with the employees’ requirements. Some of
the personnel are motivated by salary and some by recognition and job promotion which
does not have direct and instant benefit. So it is not accepted that everyone has the same
desires and motivator (Lai,2009).

Most of the studies explored a strong relationship between customer satisfaction,

service quality, loyalty and financial outcomes rather than focusing on the employee
satisfaction and its effect on the rest of the string. This study not only identifies a link
between financial rewarding and job satisfaction but also implies the employees’
insights of job satisfaction factors..

2.4 Non-Financial Rewards

Organizations shouldn’t just emphasize on financial rewards itself, they should
cover non-financial aspects in order to increase the employees’ satisfaction. So creating
a balance between financial and non-financial rewards system makes organizations to
get a better undrestanding about the employees’ needs as well as promoting
performance and efficiency of the employees as well as improving customer service
quality (Chiang and Birtch,2008).
If supervisors give credit and recognize the contribution of the employees , they
will be satisfied and will be more committed to their job (Dartey-Baah,2010).According
to him, recognition is the most current cause of satisfaction and dissatisfaction of the
employees. Long and Shilds (2010) revealed that in order to recognize and reinforce the
desired behaviors ,organizations should allocate social recognitions that is a kind of non-
monetary ,non-financial rewards. Most of the empirical researchers confirm that social
recognition has a significant impact on the performance of the employees (Stajkovic
and Luthans,2003).Recognition should be given to the employees for motivation and
appreciation (Danish &Usman,2010).Recognition and rewards keeps the spirit of the
employees high, promote the morale and increase the relationship between employees’
performance and motivation (Flynn,1998).So defining a system of compensation
employees and make them associate their performance with reward and job satisfaction
consequently is the major goal of reward and recognition program. Based on Baron
(1983) studies, recognition and appreciation will increase work capacity and
performance. Herzberg (1966) posits that recognition nowadays are much more
important according to the most researchers, because just monetary and financial
benefits cannot merely motivate the employees. Likewise, the recognition through
appreciation and assignment can adore employees motivation (Danish
&Usman,2010).According to Barton (2002),the most important factor that distinguishes
companies from each other is the reward system. Therefore, the employees are attracted
by their job because it is the major factor of their satisfaction by receiving rewards and
recognition. Employees will be motivated and satisfied when all their need such as
intrinsic and extrinsic will be met.When an employee will get an unexpected praise and
recognition will be motivated highly (La Motta,1995).In today competitive business
environment ,employees act is like an interaction and competitive advantage for the
company’s targets ,high performance ,excessive efficiency and business plan.
Non-financial rewards are categorized as extrinsic that is external and intrinsic
that is internal. They do not have a monetary meaning to the employees. Extrinsic
incentive differs in terms of independence and thus can either demonstrate external
control or self-control. However, intrinsic incentive keeps an important structure,
reflecting the natural human tendency to learn and adjust. However in this study
explores the relationship between these two incentives in terms of basic human needs
for autonomy, competence and understanding (Richard M. Ryan and Edward L.
Deci,2000).

2.4.1 Extrinsic non-financial rewards

Extrinsic motivation is a concept that includes an activity to be done in order to
pertain some separable outcome. In contrast to intrinsic motivation that refers to doing
an activity simply for the enjoyment of the activity itself, extrinsic motivation refers to
contributory value. However, unlike some perspectives that view extrinsically behavior
as non-autonomous, however self-determination theory believes that extrinsic
motivation is autonomous and different in the degree.
Extrinsic rewards are tangible one containing job security, work relationship,
training opportunities and flexible time schedule.
 Those tangible rewards provided and controlled by a firm which do not
necessarily benefit employees in monetary sense are called extrinsic non-financial
reward (Chiang and Birtch,2008).Today, people look for more than monetary rewards
for their work (Millmore et al,2007).It means that they are pursuing something different
in exchange for their contribution rather than money which has value and meaning to
them (Johnson and Welsh,1999).Non-financial rewards are being used increasingly to
motivate employee performance and to increase employee satisfaction (Chiang and
Birtch,2008).

2.4.2 Intrinsic non-financial rewards

Intrinsic non-financial rewards related to the job itself. In other words it contains
job meaning, competency and personal growth and has psychological aspect (Hackman
and Lawler, 1971; Herzberg et al., 1959; Lawler and Hall, 1970). Kalleberg, 1977
showed that the intrinsic rewards have a positive effect on job satisfaction. Accroding to
him,no extrinsic rewards were significantly related to job satisfaction.

2.5 Tenure as Moderator

The main factor affects employees’ job satisfaction is demographic differences
(Donald and Abdullah, 1987; Kleberg and loscocco, 1983; Dougles, 1991).

Tenure refers to the length of time individual spent in current job or with current
employer (OECD, n.d.; Ram & Prabhakar, 2011). Previous studies reported varied
relationships among the variables of reward, Tenure, and job satisfaction.

A study is done in two Malaysian universities by Wong and Teoh (2009) to

probe the factors that affect job satisfaction. Their findings suggested that faculty
members, who have been in their job for more than 10 years were the least satisfied with
their salary compare to their colleagues, who have shorter tenure. Faculty members with
more than 10 years of service was the most unsatisfied employees and it might related to
the fact that the majority of the Associate Professors and other employees have been
idled in their job for quite sometimes.
 Moreover, telecommunication employees in Pakistan who were working for
more than two years were considerably less motivated and satisfied with their monetary
rewards than those who were working less than one year (Zaidi and Abbas,2011) He
explained that in developing countries such as Pakistan, employees were highly
enthusiastic to satisfy their physiological needs by earning their own money.

In contrast, Sokoya (2000) reported that longer-experienced managers in the

Nigerian public sector were significantly more satisfied with their job. Sokoya offered
two explanations for the positive relation of job satisfaction and tenure. This might be
because of committing of managers to the organization and their jobs as soon as they
have fully adapted and settled into their jobs. The other possible explanation for the
indication of contentment is that managers who spent longer time in the organization
tended to be satisfied with the existing situation. Comparably, the effect of financial
rewards on employee job satisfaction raised with tenure at multicultural for-profit
institutions of higher learning across the US (Adeogun ,2008).

However, tenure did not significantly influence on job satisfaction among

Ugandan academics level, in spite of predicting of high level of job satisfaction
(Ssesanga and Garrett,2005).They reasoned that their study outcomes were expected
because Ugandan academics were not known for being attracted by remuneration.

As follows, there is a weak effect of tenure on the relationship between monetary

motivation and employees’ job satisfaction at O&G offshore production facilities in
Malaysia

Outcomes of the previous studies are mixed but there are more empirical
evidences to support the view that job satisfaction increases with tenure, and reward as a
motivator for job satisfaction increases with tenure.

2.6 Age difference as Moderator

contradictory outcomes have conceded from previous studies among the
relationship between age and job satisfaction (Ghazzawi, 2011). For example, Adeogun
(2008) studied the effect of monetary motivation on job satisfaction and performance of
employees at multicultural for-profit institutions of higher learning in the US, and she
understood no effect of age difference in job satisfaction. Ghazzawi (2011) examined
the effect of age on job satisfaction of Information Technology (IT) professionals in the
US. He surveyed 132 IT professionals in various Southern California organisations
using the short-form 20-item Minnesota Satisfaction Questionnaire. He also achieved
that age has important role in job satisfaction among IT professionals in the US.
Ssesanga and Garrett (2005) found that, age has no significant effect on remuneration
satisfaction among university academics in Uganda although older ones were more
likely to express satisfaction with their pay than their younger counterparts.

However, there are empirical evidences that indicate positive association between
age and job satisfaction. For example, Sokoya (2000) studied 350 Nigerian managers in
public sector and found that age show a relationship significantly with job satisfaction
that is, younger managers were more disatisfied than their older counterparts. Similarly,
Okpara (2006) found that older managers in Nigeria oil industry were significantly more
satisfied with their job than their younger counterparts .More recently, Bashir et al.
(2011) in a study among 674 academic faculties across 23 public universities of
Pakistan, found that age group below 30 years was the least satisfied while age group
46-50 years was the most satisfied. Elsewhere, Zaidi and Abbas (2011) investigated the
effect of rewards on motivation of telecommunication employees in Pakistan, and found
that older employees were highly motivated and satisfied with their monetary reward
compared with their colleagues of younger age.

Generally there are more empirical evidences that support the view that older
employees are more satisfied than younger ones though contrary outcomes from a
number of research done. According to Eskildsen et al. (2004), other studies also found
positive correlation and it is often observed that age differences are more than gender or
education affects job satisfaction. Also, there is a significant moderating effect of age on
the relationship between monetary motivation and employees’ job satisfaction at oil and
gas offshore production facilities in Malaysia. According to Kalleberg (1977) .Older
workers are more satisfied with their jobs than younger workers .Kalleberg and loscocco
(1983) argued that since older worker mostly have good jobs, job satisfaction will
increase with proportional rise in age. They achieved that intrinsic reward relationship
becomes almost flat for the employees between 41 - 60, because levels of satisfaction of
intrinsic rewards seems to rise before age of 40 and it will increase again after age 61.

2.7 Job satisfaction

Locke (1969) defines job satisfaction in a way that is much more acceptable
among other definitions. He describes it as “a positive emotional feeling, a result of
one’s evaluation towards his job and his tenure by comparing between what he expects
from his job and what he actually gets from it”. Job satisfaction is considered as the
result of the crossing point of the employees ‘insight concerning his job and work
environment (Locke, 1976). A large number of factors affects job satisfaction, such as
work values, one’s instability, work rewards, ethics, personal attributes, hours of work,
emotions, performance, threat to job steadiness, work environment, organizational
social concern. Ronald and Steade (1976); Fisher (2000); Ravinder and Browne
(1977);Sekaran (1989); Clifford and Macue (1997); Eyupoglu and Saner (2009) and
others studied by different scholars. In these different dimensions the rewards structure
have strong relationship on job satisfaction (Clifford, 1985).

Satisfaction is a term explained as the approach of liking or disliking

(Ivancevich, 2004). Job satisfaction has a positive feedback that results from job
satisfaction’s evaluation. Dissatisfaction occurs when a person’s expectations are not
met about the job. Job satisfaction is something to do with the expectation and also the
rewards they receive in return for their job (Mathis &Jackson,2004).Locke (1976) as
cited in Gruneberg,( 1979,p.3), defines job satisfaction as a state of positive emotion that
results from the assessment of tenure.

For the effective use of employees in organizations, job satisfaction is considered vital
for them (Koeske,Kirk,Koeske and Rauktis,1994).”Employee’s job satisfaction can be
foreseen by employees’ evaluation of the work ,employment situation and level of
organizational support” (Patah,Zain,Abdullah and Radzi,2009).A satisfied employee is
more creative, secure and loyal to the organizations’goals (Jessen,2011).Job satisfaction
has an affective and major role for the job they are performing (Kalleberg 1977).Job
dissatisfactions results from the evaluation of various aspects of work that a person
experience while job satisfaction is the gathering of a range of specific satisfaction.
(Locke,1976 cited in Rehman,Khan and Lashari,2010).The evaluation of the various
aspects of the job contains the work itself,management, payment,promotion policies and
colleagues (Efraty and Sirgy,1990).When people talk about their job even positive or
negative,they show their satisfaction or dissatisfaction (Pool,1997). Accordingly, job
satisfaction is a kind of reaction of against various dimensions of job obtaining from the
assessment of the characteristics ,situation and demand for the job (Jessen,2011).

2.7.1 The significance of rewards on employee satisfaction

Incentives are extra payment to those who completed certain job requirements
and it is used as communication tools for the organization. Snyder, Osland, and Hunter
(1996) found that forty- four specific reward tools are used as employees’ incentives.
Managers should understand the preferences and implications of the differences in order
to attract and retain employees. “Types of incentives do not convey same tax advantages
to the individual but can be used to lock individuals into companies and it is also easier
to bind bonuses to actual actions of individuals and remove short-term transitory stock
market effects” (Keasey, 2006).

So profit sharing and gain sharing system as a non-financial incentive leads to

quality improvement, satisfaction, and productivity. (Miller & Schuster, 1993 as cited in
Rudzi Munap and Muhammad Izwan Mohd Badrillah and Baharom Abdul Rahman,
2013). Long term and short term incentives will motivate loyalty of the employees,
promote teamwork and facilitate the culture of knowledge sharing (Milne 2007).Reward
and recognition system embrace the activities rewarded by a reason not because of
doing the routine job (Deci,1971).So practitioners should examine well the employees’
characteristics in advance to understand whether incentives would work out in their
organization (Iyer and Ravindran 2009).Nonetheless, when a teamwork job is necessary,
incentives may generate arguments, discontent and ultimately reduce the motivation of
the group to perform well.(Hoffman and Rogelberg,1998).
3 Chapter Three: Methodology
3.1 Introduction
According to the literature of the study, the aim of this research is to finalize the
impact of rewards, financial and non-financial or recognition on employees of a private
company as a representative of a private sector in Islamic Republic of Iran. The main
reason to choose this subject is the researcher’s personal experience while working in
private companies in Iran and observing huge dissatisfaction among the employees. This
intimate the researcher to do a study to understand the main reason of this tremendous
discontent among the colleagues and find out the elements that encourage them to be
more effective in the workplace. The reason to choose this company is related to the
systematic and updated management system that is implemented in this organization.
The company totally has almost 400 employees located in two main offices but the mid-
level employees are favorable for this study. Managers and supervisors excluded from
the research. The research is benefited from quantitative method of methodology.

3.2 Research Philosophy

Philosophy means finding the knowledge, truth and the systematic way through
using an organized way for conducting research (Sanuders et al., 2012).The research
should adopt the best philosophy which best suited to achieve aims and objectives of the
research . By applying the best philosophy regarding the design, identification and
structure as the research requirement, the philosophy of research leads to some
advantages that could enhance the research results and findings

There are four assumption for research philosophy; Pragmatism, Positivism,

Realism, and Interpretivism. For pragmatism “recognize that there are many different
ways of interpreting the world and undertaking research, that no single point of view can
ever give the entire picture and that there may be multiple realities” (Saunders et al.,
2012).Positivism believes that reality is independent of the research and the goal is the
discovery of theories based on empirical research such as observation and experiment
(Sanders et al., 2012).According to Saunders et al. (2012),direct realism can be
described as “what you see is what you get”. On the other hand, critical realism
“sensation and images of the real world can be deceptive and they usually do not portray
the real world “(Novikov &Novikov, 2013).Interpretivism philosophy assumes that
access to reality can only be achieved through social construction (Creswell, 2009, Berg,
2009)

For the purpose and objectives of this study the researcher applied quantitative
method and the nature of the thesis requires choosing this method. The researcher used
to apply the positivism philosophy, the philosophy has their own points of advantages
and disadvantages which lead to makes the thesis enrich of findings.

Research Paradigms adapted from Sanders et al.2012.

Pragmatism Positivism Realism Interpretivism

Popular data Mixed or Highly Methods Small samples,

collection multiple structured, chosen must fit in-depth
methods method large samples, the subject investigations,
designs, measurement, matter, qualitative
quantitative quantitative quantitative or
and qualitative but can use qualitative
qualitative

3.3 Research Approach

There is three main approaches used in conducting the researches; induction,
abduction, and deduction (Wilson, 2014, Saunders et al., 2012).

Deductive research tends to explain the casual relationship between variables by

using quantitative data. In the first phase of the research, the researcher posits a set of
principles or ideas that are then tested through empirical observation or experimentation
(Berg, 2012, Wilson, 2014, Saunders et al., 2012).The concepts of this approach need to
be operationalized so that the facts to be measured quantitatively and large samples are
used to the results can be generalized statistically. In this sense, the approach involves
testing theory; hence it falls under the positivism paradigm (Bryan, 2008).

Inductive researchers deal with a small sample of subjects and theory is developed
as a result of the data analysis. Hence, this approach is exploratory, unlike the
explanatory nature of deductive research. It works well under the interpretvism
paradigm (Creswell, 2009). To achieve the goals of the study research apply the
quantitative method, deductive approach. In quantitative method which deal with self-
administered questionnaire which distribute and used to test the hypothesized model.

3.4 The research Methodology

SPSS software is being used to analyze the data from the questionnaire. The
following data analysis is implemented:

1. The descriptive analysis that measures the demographic data, dependent and
independent variables. I am confident that useful information will be obtained from the
basic information.

2. Reliability analysis measures all the scales used in the study. Computing the
statistics makes sure that the instruments are reliable.

3. Pearson’s correlation analysis investigates the relationship between two

variables and relationship between job satisfaction and reward.

4. Standard Leaner regression analysis will investigate the type of reward and
its effect on job satisfaction.

5. Standard leaner regression analysis will find out the strength and weakness
impact of moderators, tenure and age, on job satisfaction.

3.5 The research population and sample

Population means simply a group of subjects like human beings, animals and objects that
have a particular specification that is interesting for specialists to work on them. Actually,
resource has some limitations in terms of financial, time and target that this matter has a
considerable effect on the scholars’ abilities to achieve all constituents in the target population a
lot.
Sampling is a procedure used to select a presentable number of population,
moreover it gives a set of population that can describe the characteristic of the desired
population (Hair et al., 2007, Sekaran, 2003).
 Contemporary researchers tackle with a lot of different approaches to gather the
data in a more effective way from the target population which consist of a symbol of the
interest population.

For this purpose, a simple random sampling technique is used for analyzing the
responses of almost 200 respondents. This method of sampling method is chosen
because every individual is selected entirely by chance and populations’ member has the
same chance of being included in the sampling.

3.6 Sources of data collection

3.6.1 Secondary sources
The collection of information has been implemented from several secondary
resources such as published books and articles.

3.6.2 Primary sources

A questionnaire has been distributed to each participant to fill with the
supervision of the human resource manager of the company during the specified time
period of one or two weeks. The questionnaire has been provided by combining two
separate questionnaire that is received from Professor Dr. Fakhrul Zaman Abdullah , the
professor of the UNITAR International University, Malaysia as well as Dr.
Rizwan Qaiser Danish, Assistant Professor of Hailey College of Commerce in
university of the Punjab at Lahore, Pakistan separately. The researcher contacted the
professors and they cooperated generously with the researcher and sent their
questionnaires acknowledged to help in any other related issues. A pilot study
implemented in advance in order to find out the defects and evaluate the feasibility of
the test and design the full-scale experiment which then can be adjusted. In order to do
that, the researcher did a pretest with 6 people of the sample. A number of confusing
questions discovered and necessary adjustments applied then again the revised version
had been tested with a new sample and the outcome illustrated that the participants had
no specific problem with the context of the questionnaire and the reliability test proved
that as well.
 So, after researcher completely made sure that the questionnaire had no specific
problem, the distribution began among the main participants by the supervision of the
Human resource manager of the company. The required arrangements had been done
with the human resource manager in advance and the importance of the study had been
explained and also it is clarified what the company can learn from the outcome of the
study. The researcher also assured them that all the information will be kept confidential
and will not be revealed and they will be destroyed after the analysis will be performed.
Then the human resource manager agreed to cooperate after convincing the CEO and
other top managers of the company. Participation was on voluntarily basis, which
participant were free to withdraw without loss of benefits. Participants were instructed
not to write anything that could unveil their identity. So after the completion of
forms ,participants can seal their responses in the envelope before submission in order to
keep their responses anonymous. This is used in most empirical works to diminish the
threat of common method bias (Podsakoff et al, 2012).Consequently, the total number of
150 completed questionnaires collected after the mentioned period. After disregarding
the non-completed questionnaires, the useful remaining questionnaires finally
documented and analyzed accordingly.

3.7 Measurements
3.7.1 Financial Direct
The financial direct rewards is the first variable in the model and it has been measured
by ten items. Scale options are from 1=Strongly disagree to 5=Strongly agree.
Please indicate how much you agree or disagree with the following statements about your organization
1 and
I amwork.
satisfied with the size of my base salary
2 I am satisfied with my past salary increment.
3 I am satisfied with my recent salary raise.
4 Raises are too few and far between.
5 I am satisfied with how my raises are determined.
6 Pay increases are handled fairly
7 I believe additional pay to basic salary would encourage higher level of performance and satisfaction.
8 Those who do well on the job stand a fair chance of being promoted (receiving higher pay increases)
9 There are few rewards for those who work here.
10 I don't feel my efforts are rewarded the way they should be
3.7.2 Financial Indirect
The second variable is financial indirect rewards that has been measured by 7 items.
Please indicate how much you agree or disagree with the following statements about your organization
11 and work.
Benefit and services are fairly distributed to the employees
12 I am satisfied with medical insurance
13 I am satisfied with pensions
14 I am satisfied with paid vacation
15 I am satisfied with housing allowance
16 I am satisfied with company car or transportation‫م‬
17 I am satisfied with entertainment or club membership

3.7.3 Non-financial Extrinsic

The third variable is non-financial extrinsic rewards that has been measured by 15 items.
Please indicate how much you agree or disagree with the following statements about your organization
18 I receive appropriate recognition for my contribution.
19 When I perform “above and beyond”, I receive informal praise directly from my supervisor (well done,
20 thank you)
When I perform “above and beyond”, I receive formal praise from my supervisor (certificate).
21 I am satisfied with the amount and frequency of recognition from my supervisor.
22 I understand the types of behavior that lead to receiving recognition
23 There is really too little chance for promotion on my job
24 Those who do well on the job stand a fair chance of being promoted
25 I am satisfied with my chances for promotion
26 I like the people I work with and enjoy working with them
27 I find I had to work harder at my job than I should because of the incompetence of the people I work with.
28 There is too much bickering and fighting at my work
29 The amount of job security I have
30 How secure things look for me in the future in this company
31 The degree of support, respect and fair treatment I receive from my manager
32 The amount of personal growth and development I get in doing my job

3.7.4 Non-financial Intrinsic

The forth variable is non-financial intrinsic rewards that has been measured by 9 items.
Please indicate how much you agree or disagree with the following statements about your organization
33 I sometimes feel my job is meaningless
34 I like doing the things I do at work
35 I feel a sense of pride in doing my job
36 My job is enjoyable
37 I am very much involved personally in my work
38 The major satisfaction in my life comes from my job.
39 The amount of independent thought and action I can exercise in my job
40 The amount of challenge in my job
41 The sense of achievement I get from doing my job.
3.7.5 Job satisfaction
The fifth variable is job satisfaction that is measured by 20 items.

Please indicate how much you agree or disagree with the following statements about your organization and
work

42 The responsibility of my job.

43 The working condition.
44 Being able to do something worthwhile.
45 Being able to stay busy.
46 The amount of pay for the work I do.
47 My salary is comparable to others performing in the similar position.
48 The chances for salary increase.
49 The praise and recognition I get for doing a good job.
50 The way I am noticed when I do a good job.
51 The way my supervisor treats me.
52 The chance to work by myself.
53 The chance to try something different.
54 The routine in my work.
55 The chance to do different things from time to time.
56 The way my supervisor provides help on difficult problems.
57 The way my co-workers get along with one another.
58 The feeling of accomplishment I get from the job.
59 The chance to do something that makes use of my abilities.
60 The chance for advancement on this job.
61 The way my job provides for steady employment.

3.7.6 Tenure and Age

Tenure and age are moderators and being measured by questions in Section one of questionnaire
that is demographic section. They are quantitative questions.

3.8 The pilot study

The measurements employed in the study were adopted from the existing
literature. A multi items scale approach was used to assess the respondent’s answers
regarding the underlying variables. This was in order to provide a comprehensive and
accurate evaluation of the constructs and overall model (Zikmund et al.2012; Dillman
smyth and Christian 2014). Due to the cultural and contextual differences of the original
measurements, several modifications were being done for the measurements in order to
capture the cultural and contextual differences. Moreover, as the target population is
non-English native speakers, the researcher translated the proposed measurement in to
the native language used by the target population. That is the Farsi language.

Afterward the researcher spent considerable efforts in order to ensure the

reliability and validity of the research instrument. This include the extent to which the
adapted instrument items are appropriate, clear, understood correctly by the actual
respondents. Typically, researchers should test the instrument and conduct a pilot study
in order to examine and resolve the aforementioned issues prior the actual data
collection start. However, a pilot study is a mini version of a full-scale study that tests in
advance a particular research instrument such as questionnaire. It offers an opportunity
to identify, in a real manner, the ambiguity and clarity of the employed instrument from
the actual respondents (Sekaran and Bougie, 2010; Zikmund et al., 2012).this
information can be used later to polish and to refine the instrument items in order to
obtain the required data successfully and confirm that respondents have no problem with
answering the questions.

Therefore the researcher conducted a pilot study to examine the validity and the
reliability of the adapted instrument. The pilot study was performed in two stages.in the
first stage, the researcher evaluated the content and face validity. Content validity
examines the extent to which the items of a construct are doing their job effectively and
they measure the construct with highest adequacy and representivenss. This was
achieved by distributing the questionnaire among 6 people working in the company.
They were requested to evaluate the adequacy and the representiveness of all items to
their corresponding construct. They were also asked to inspect the readability of the
items, if there is any replication, or if there is any under or over representation of
measures. Some of the experts remarked to resolve minor wording issues in order to
improve the readability of the questions. All remarks and comments suggested and
offered by the experts were considered and the instrument was refined accordingly.

In the second stage, the researcher run at small scale, a trial version study to
examine the validity and reliability of the instrument. Many researchers suggest the
respondents in a pilot study should be similar those who will receive the final version of
the questionnaire .they also suggest the sample size of the pilot study should be between
10 to 30 respondents. The valid responses were being used to examine the validity and
reliability of the instrument. Reliability refers to the extent to which there is consistency
among several items ascertained for a construct (Hair et al., 2010).typically, cronbach’s
alpha is considered a common technique used by researchers to examine the instrument
reliability (Hair et al., 2010).Cronbach’s alpha value shows the extent to which items
related to a construct hang together as a set which implies that similar results would be
obtained if the items are used exchangeable. The cronbach’s alpha of all constructs has
been estimated using the ship’s software package.

From a theoretical view of point, Cranach’s alpha values should be greater than
0.709.a higher Cranach’s alpha value implies a higher consistencies among items related
to a construct (Hair et al.2010; Sekaran and Bougie 2010).because the Cronbach’s alpha
value is greater than theoretical threshold suggesting that all constructs involved in the
instrument reflect an adequate level of internal consistency.

3.8.1.1 Data collection procedure

Data collection done in three weeks which first step by distributing the
questionnaire takes two weeks and one week for collecting the data. The researcher
distribute 200 questioner for the workers of a private company, the return was
153,which mean that the response rate was 76.5%. The valid responses were 120 in
number which is used in this study. It is to be declared that missing data was excluded
from the study in advance.

3.8.2 Ethical consideration

Ethical principles have been practically classified by Diener and Crandall (1978)
into four main areas:

• whether there is harm to participants: it is the responsibility of the researcher to

assess carefully the possibility of harm to research participants, and the possibility of
harm should be minimized to the extent that it can be. This means that the identities and
records of individuals and organizations should be maintained as confidential.
 • whether there is a lack of informed consent: It is increasingly common for
researchers to gain written, rather than verbal, consent from research participants by
asking them to fill out and sign a form, particularly if the research involves the
collection of personal data This is typically accompanied by an information sheet,
which explains what the research is about and how the researchers plan to use the data.

• whether there is an invasion of privacy: researcher treat each case sensitively and
individually, giving respondents a genuine opportunity to withdraw.

• whether deception is involved: respondents should be told at the beginning of an

interview if observation techniques or recording equipment are to be used.
4 Chapter four: Data and analysis
4.1 Introduction
Since the utilized dataset is certainly quantitative, the researcher choose to use Statistical
Package for Social Sciences, SPSS, for analysis. Frequency analysis is being applied to
show the distribution of the demographic data of the study with the help of tables.The
researcher used Pearson correlation analysis to make sure the linear dependency
between variables of the model of the measurement. Regression analysis is being used
to determine the impact of a dependent and one or more independent variables.

4.2 Descriptive analysis

4.2.1 Responding rate
A total of 200 questionnaires have been prepared and distributed among the mid-level
workers of an international company, with the total of almost 400 workers located in
two main offices. The company’s activation is in telecommunication area and provide
productions and services to two main Iran telecom customers.At the end of the survey
only 153 filled questionnaire were returned resulting in 76.5% rate response rate. Out of
them 33 had missing information, so they were not valid for further investigations. In
total 120 questionnaires were valid for analysis. According to Collier and Bienstock
(2007), we also can assess non-response bias because it does not affect the dataset.

4.2.2 Demographic data Breakdown

Tables from 1 to 6 demonstrate demographic information assembled from the
respondents in regard to gender, age, marital status, education, tenure, salary payment.
The tables were created by the frequency analysis. Table 1 presents that 57.5% of
participants are male and 42.5% are female.

Table 1.Sample distribution by gender

Gender Frequency Percent

69 57.5
Male
51 42.5
Female
 120 100.0
Total

Table 2 represents that 53.3% of the participant are from 21-30 of age and 0.8% are
above 51.The researcher conclude that the company workers mostly are in young age
between 21 to 40 that is 85.8%. The population of youngsters are visibly observable in
the first impression. It seem like that the policy of company employment is focused on
hiring the young cheap workers.

Table 2.Sample distribution by age

Age Frequency Percent

18-20 2 1.7

21-30 64 53.3

31-40 39 32.5

41-50 14 11.7

51 and above 1 .8

Total 120 100.0

Table 3 shows the percentage of married and single workers in the company that is 52.5
and 47.5 consecutively.

Table 3.Sample distribution by Marital Status

Marital Status Frequency Percent

Single 57 47.5
Married 63 52.5
Total 120 100.0
Table 4 shows that 41.7 percent of participant are undergraduate and total of 50 percent
has higher degree and the rest has high school diploma that is only 8.3%. This manifests
that the company’s cravings to employ high degree and high qualified workers .It can
also prove that how much education is valuable to Iranian families and people.

Table.4 Sample distribution by educational level

Educational Level Frequency Percent

Highschool diploma 10 8.3

Undergraduate 50 41.7

graduate 39 32.5

Phd 21 17.5

Total 120 100.0

Table 5 represents that 51.7% has tenure between 2 to 3 years and 0.8% of the sample
have under one year tenure. The low rate of employees with more than 3 years tenure,
25.8 %, shows the fact that employees are not retained thoroughly for a long time in the
company.

Table 5. Sample distribution by Tenure

Tenure Frequency Percent

Below one year 1 0.8

Between 1-2 years 26 21.7

Between 2-3 years 62 51.7

Above 3 years 31 25.8

 Total 120 100

Table 6 disclose that 41.7% of the employees receive between 10,000,000 to 30,000,000
IRR and 8.3% receive below 10,000,000 IRR

Table 6.Sample distribution by received salary

Received Salary Frequency Percent

Below 10,000,000 IRR 10 8.3

Between 10,000,000 to 30,000,000 IRR 50 41.7

Between 30,000,000 to 60,000,000 IRR 39 32.5

Above 60,000,000 21 17.5

Total 120 100

4.3 Normality Test

Statistical errors are popular in the management texts, so the researchers suppose the
chosen sample are normally distributed, but it is not actually happened. The assumption
of normality is very important while shaping the reference intervals for variables.
Normality and other assumptions should be considered seriously, for these assumptions
do not hold ,it is impossible to draw accurate and reliable conclusions about reality
(Field,2009).

According to Ghasemi and Zahediasl (2012), the major test for evaluation of the
normality is Kolmogorov-Smirnov (K-S) ,Shapiro-Whilk and Kurtosis test.

When N≤100,Shapiro Wilk test is applied as a source while N>100, Kolmogorov-

Smirnov (K-S) is used. In my study because the number of data is 120,so Kolmogrov-
Smirnov is used.
4.3.1 Financial Reward distribution Normality Test
Based on the statistics of Kolmogrov-Smirnov test equal to 0.252 and degrees of
freedom,120 and significant value,0.000 and comparing the sig value with 0.05 ,the
researcher conclude that the financial reward distribution is not normal.

Table 7.Financial reward normality test

Kolmogorov-Smirnov
Statistic df Sig

Financial Reward 0.252 120 0.000

Figure1.Histogram

Figure2. Normal Q-Q plot of Financial reward

Figure3. Plot
4.3.2 Non-financial Reward distribution Normality Test
According to the statistics of Kolmogrov-Smirnov test equal to 0.110 and degrees of
freedom,120 and significant value,0.001 and comparing the sig value with
0.05 ,researcher conclude that the non-financial reward distribution is not normal.
However, the deviation from normality is not very extreme.

Table 8.Non-Financial Normality Test

Kolmogorov-Smirnov
Statistic df Sig

Non-Financial 0.110 120 0.001

Reward

Figure4. Histogram of non-financial reward

Figure5. Normal Q-Q plot of non-financial reward

 Figure6.Plot

4.3.3 Job satisfaction distribution Normality Test

By considering the statistics of Kolmogrov-Smirnov test equal to 0.323 and degrees of
freedom,120 and significant value that is 0.000 and comparing the sig value with
0.05 ,the researcher conclude that the job satisfaction distribution is not normal and the
deviation from normality is high.
 Table 9.Job satisfaction normality test

Kolmogorov-Smirnov
Statistic df Sig

Job satisfaction 0.323 120 0.000

Figure7.Histogram of job satisfaction normality test

Figure 8.Normal Q-Q Plot of job satisfaction

Figure9. Plot
4.4 Reliability analysis
As shown in table 10, all variables have Cronbach’s alpha value ranging from 0.841 to
0.987, which achieved the minimum acceptable level of coefficient alpha above 0.7
(Nunnally’s, 1978). The dependent variable of Job satisfaction has the highest
Cronbach’s alphas of 0.987 followed by independent variable of financial rewards with
Cronbach’s alpha of 0.901. Both financial and job satisfaction variables have value
considered excellent. The other independent variable of non-financial rewards has
Cronbach’s alpha of 0.841 which is considered acceptable. Conclusively, the reliability
of the scales used in this study was high with Cronbach’s alpha value close to 1.0.

Table .10 Reliability analysis

Variables Cronbach's Alpha No of Items

Financial Rewards 0.901 17

Non-Financial Rewards 0.841 24

Job satisfaction 0.987 20

4.5 Correlation analysis

4.5.1 Financial reward and Job satisfaction

The result obtained from the correlation test in table 11 shows that the variables is
significantly correlated. Financial rewards significantly and positively related with job
satisfaction (r = 0.251**, p < 0.05). That means, the insight of employees is more
positive in respect to financial rewards. Thus, the relationship between financial rewards
and job satisfaction is accepted as positive and strongly significant. So H1is supported
between financial reward and job satisfaction.
 Table 11. Pearson Correlation 1

Financial Reward Job Performance

Pearson Correlation 1 0.251**

Sig ( two tailed) 0.006

N 120

4.5.2 Non-financial rewards and Job satisfaction

The relationship between non-financial rewards and job satisfaction is also significant
and positive (r = 0.184*, p < 0.05). This implies that when there is an increase in non-
financial rewards, there is also an increase in job satisfaction, however the relationship
is not as strong as financial rewards.

Table 12: Pearson Correlation 2

Non-financial Reward Job Performance

Pearson Correlation 1 0.184*

Sig ( two tailed) 0.044

N 120

4.5.3 Non Parametric Correlation

Table 13. Nom Parametric Correlation

 Financial Reward Non-Financial Reward

Job Performance
Kendall Tau-b .066 -.100

Sig .353 .149

N 120 120
Job Performance
Spearman .082 -.145

Sig .373 .113

N 120 120

4.6 Regression Analysis

The results shown in Table indicate a relatively high percentage of job satisfaction
which can be explained by the variables of financial rewards and non-financial rewards.
Both contains direct, indirect and Extrinsic, intrinsic rewards respectively. The
coefficient of relationship illustrates that the value of R square is 0.063; which means
%6.3 of the changes in job satisfaction was influenced by the financial rewards and
%3.4 by non-financial rewards. The column labeled Beta (β) value of Standardized
Coefficients indicates the variable that contributes to the dependent variable.
‘Standardized’ means the value for each of the different variables have been converted
to the same scale in order to make comparison (Pallant, 2001). These analyses show that
job satisfaction is positively influenced by financial rewards (β = 0.285, p < 0.05) and
non-financial rewards (β = 0.274, p < 0.05). Comparatively, financial rewards variable
has a stronger impact on employees’ job satisfaction and a larger beta value as
compared to non-financial rewards variable. This implies that employees are better
satisfied by financial rewards than non-financial rewards generally. The study also
indicates that job satisfaction is positively influenced by direct financial rewards (β =
0.269, p < 0.05) and indirect financial rewards (β = 0.225, p < 0.05).However, job
satisfaction is not affected by extrinsic (β = 0.227, p > 0.05) and intrinsic non-financial
reward (β = 0.258, p >0.05) separately. Consequently, rewards like recognition has a
little importance, thus it does not influence much on employees’ job satisfaction.
Previous researchers Rehman, Khan, Zaiuddin and Lashari (2010) have also came up
with the same finding that financial rewards have higher impact on employees’ job
satisfaction than non-financial rewards.

Standardized
Unstandardized R square
Independent Variable Coefficient Sig R
coefficient (B) (R²)
(Beta,β)

Financial rewards 0.285 0.251 0.006 0.251 0.063

Non-financial rewards 0.274 0.184 0.044 0.184 0.034

Direct Financial 0.269 0.257 0.005 0.257 0.066

Indirect Financial 0.225 0.203 0.026 0.203 0.041

Extrinsic non-Financial 0.227 0.175 0.056 0.175 0.031

Intrinsic non-Financial 0.258 0.165 0.072 0.165 0.027

4.7 Moderators’ Analysis

The coefficient of relationship illustrates that the value of R square is 0.066; which
means %6.6 of the changes in job satisfaction was influenced by tenure and %15.8 by
age. It means age and maturity has a considerable effect on job satisfaction. The
outcome of the analysis displays that the effect of rewards in creating a favorable job
satisfaction could be stronger when tenure and age exist since the significant value of
moderator is less than 0.05.Consequently hypothesis perceive empirical support.
 Standardized
Unstandardized R square
Moderator Coefficient Sig R
coefficient (B) (R²)
(Beta,β)

Tenure .095 .257 .005 .257a .066

Age .160 .398 .000 .398a .158

5 Chapter Five: Conclusion
One of the key managements in an organization that help to achieve the goals is
the human resource managment. Too many ways and methods have been used in order
to achieve the employees’ satisfaction in respect to their jobs and their workplace.
Creating an appropriate reward system is one of the best strategies in the organization.
This study will present a better understanding for organizations’ managers to adopt the
proper reward system to raise job satisfaction. This study show a significant and positive
relationship between reward system and job satisfaction. People who are happy fully
with their salary will have a higher level of satisfaction and they are who have more
self-confidence and are more willing to face challenges (Pratheepkanth,2011).
Organizations will capable of choosing the strategies that help to meet their employees’
needs and expectations when they understand fully the expectations of them in response
for their hard work (Silverman,2004).Organizations shouldn’t focus on financial
rewards itself, moreover, they shouldn’t ignore non-financial

in order to increase the employees’ satisfaction. So one of the strategic approach

of organizations is to make a balance between financial and non-financial rewards
system is the best strategy to understand the employees’ needs as well as promoting
performance and efficiency of the employees and also improve customer service quality
at the same time (Chiang and Birtch, 2008).

5.1 Research limitations

This research is confronted with numerous limitations and difficulties at the first step.
Gathering the data is a challenging process that requires the cooperation of the Human
resource management of the company. Some of the companies are not cooperative
because of the topic of the study that is somehow sensitive. Some supports just in terms
of the second data. Thus, for accessing the correct data, the collaboration of the HR
management of the organization is required intensely in this study.
 The other limitation is related to the sample size and population. In order to get a
better result for generalization, we need to involve more organizations and participants.
But because of not cooperating of some target organizations, the sample size is limited
and measure the hypothesis according to the existing scale items will be more difficult
accordingly.

5.2 Future studies

For future research direction, the same study model can be used in various sectors,
to investigate that other sectors present the same or different results as rivals of this
study. Another issue that can take in to consideration is to investigate other companies,
industries or other countries. Different countries and cultures may motivate by different
dimensions. Moreover, researchers may take other demographic features as moderator
or mediator in future studies. In addition, making open-ended questions to acquire new
ideas from employees could be much more helpful and it is recommended in future
researches.
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