Organisational Reward as a Tool to Enhance

Pay Satisfaction
PULAK DAS AND K.B. AKHILESH

Performance based promotion and salary have positive effects on only the pay
level satisfaction while the aggregate profit based bonus payment has positive
effect on only the benefit satisfaction. These findings are based on the pay
satisfaction responses of 390 research and development engineers from three
public sector organisations in India. The study further shows that the positive
effect of gross salary is only due its positive effect on take home salary, indicating
that the financial pay referent plays an important role in pay level satisfaction. No
such role for the financial referent is, however, observed in the benefit satisfaction.
The implications of these findings are discussed.
Dr. Pulak Das is Assistant Professor, Human Resources Group, Indian Institute
of Management Calcutta. Prof. K.B. Akhilesh is Chairperson, Department of
Management Studies, Indian Institute of Science, Bangalore.

Introduction
One of the most significant changes in the industrial scene of post-war
period is the growing importance of knowledge based products. There
had been a phenomenal rise in the number of research workers in
industrial organisations providing-vital services to forge a link between
the new developments of science and technology and the organisa-
tion's strategic plans. The growing number and importance of these
professionals in the overall success of the organisation have spawned
an emerging body of research literature on the specific managerial and
personnel problems of these organisations (Coltrin and Glueck, 1977;
Dhawan and Roy, 1993; Manly, 1978; Marcy, 1978). Some of these
studies have shown that perception of reward system is different for
the Research and Development (R&D) personnel and other functional
managers (Sankar, Ledebetter, Snyder, Roberts, McCreary, Boyles,
1991). Studies on the compensation system of high-tech firms indicate
that these high-tech organisations use a variety of reward strategies,
524 Pulak Das and K.B. Akhilesh

for example profit sharing, stock ownership, project based bonus and
individual performance based reward (Balkin and Gomez-Mejia,
1984; Riggs, 1983) to attract high quality professionals and to motivate
them towards higher work effort.
Pay satisfaction has been linked with a number of important
behavioural implications such as absenteeism, turnover (Cotton and
Tuttle, 1986; Weiner, 1980), pro-union voting (Heneman and Sand-
ver, 1983) with negative effect on the functioning of the organisa-
tion. Research on the relation between organisational reward and
behavioural response of the personnel indicates that the way a
particular reward is determined and distributed has distinct effects
on different dimensions of individual attitude and behaviour
(Gomez-Mejia and Balkin, 1984; 1989). These studies indicated
that while performance based reward had a positive effect on pay
satisfaction, the organisation's aggregate profit based reward had
no effect on pay satisfaction but a strong effect on withdrawal
cognition. One of the shortcomings of these early pay satisfaction
research was that, all these studies used a unidimensional pay
satisfaction construct making it difficult to identify the areas of
compensation policies where remedial measures are most war-
ranted and organisational intervention strategies are likely to be
most fruitful. The present research is an attempt to understand the
role of different types of rewards in affecting pay level and benefit
satisfaction of R&D personnel while controlling for some of the
correlates identified in the literature as significant moderators for
pay satisfaction.
Lawler (1971) laid the foundation of a comprehensive model of
pay satisfaction. This model emphasised the role of the discrepancy
between the perceived amount of pay that is expected from the
organisation and the perceived pay that is actually delivered by the
organisation.
Research on pay satisfaction has brought in two major modifications
to Lawler's model. The first refinement was suggested by Dyer and
Theriault(1976). Their proposal, based on the work of Goodman (1974),
was that the pay satisfaction was the combined effect of perceived equity
of pay as conceptualised by Lawler and the perceived adequacy of the pay
system administration. Adequacy of the pay system administration was
defined as the employee perception concerning the appropriateness of pay
criteria, understanding of pay criteria, accuracy of performance assess-
ment and adherence to pay policy contracts.
 Organisational Reward as a Tool to Enhance Pay Satisfaction 525

Thus, a simple improvement of perceived pay equity, due to

higher financial reward, may not be a guarantee for improved pay
satisfaction unless such a reward raised one's perception of pay
system administration. Empirical support to the role of perceived
pay system administration in pay satisfaction was provided by the
studies of Folger and Konovsky (1989); Heneman, Greenberger
and Strasser (1988); Meceli, Jung, Near and Greeberger (1991); and
Weiner(1980).
The second modification was proposed by Heneman and Schwab
(1979) on the dimensionality of pay satisfaction construct. Research
on the dimensionality of pay satisfaction construct has identified
the existence of four sub-dimensions to individual pay attitude
(Heneman and Schwab, 1985; Heneman, Greenberger and Strasser
1988; Judge, 1993). These sub-dimensions are labeled as satisfac-
tion with pay level, pay structure/administration, pay raise and
benefit. The satisfaction with pay level refers to the perceived
satisfaction with direct wages or salaries whereas the satisfaction
with pay structure/administration refers to the perceived satisfac-
tion with the internal pay hierarchy and with the method used to
distribute pay. The satisfaction with pay raise is defined as the
perceived satisfaction with change in pay level and the satisfaction
with benefit is the perceived satisfaction with the indirect payment
made to the employees.
One of the key points in Dyer and Theriault's (1976) modi-
fied model of pay satisfaction was the role of perception of
pay for performance in pay satisfaction. According to this
model, the success of performance based pay plan in raising
pay satisfaction depends on the effect of such pay on the pay
for performance perception. Researches have also indicated
that sub-dimensions of pay satisfaction have differential sen-
sitivity towards pay for performance perception. It is ob-
served that pay for performance perception has a significant
positive effect on pay raise satisfaction (Heneman, Greenber-
ger and Strasser, 1988; Judge, 1993). Further, the salary
increase based on performance are usually built into the base
salary for subsequent years. As a result, such performance
based financial reward also shows a positive effect on the pay
level satisfaction. This gives us our first study hypothesis on
the relation between individual performance based rewards
and sub-dimensions of pay satisfaction.
526 Pulak Das and K.B. Akhilesh

Hypothesis 1: Performance based organisational reward with finan-

cial implications will have a positive effect on pay level satisfaction.
Besides the individual performance based rewards, aggregate com-
pany profit based rewards (for example, profit based bonus, stock
option, preferential share, and so on) are a few other types of rewards
quite often used by high-tech organisations. These rewards are not
linked with any individual or group performance. As a result, such
rewards are unlikely to have any effect on the pay for performance
perception of the employees, even if such rewards bring in substantial
financial gain to them. Thus if the pay for performance perception is
the sole reason for the positive effect of a financial reward on pay raise
satisfaction, then such an aggregate profit based uniform reward is not
expected to have any effect on the pay raise satisfaction. Nevertheless,
individual financial entitlement from the organisation goes up due to
these rewards. Such non-performance based financial gain has been
found to contribute more towards employee retention and reduced
turnover and less towards higher work efforts (Gomez-Mejia and
Balkin, 1989). It has been observed that turnover of employees and
benefit payment are inversely related (Mitchell, 1982; 1983). This
gives us our second study hypothesis.

Hypothesis 2: Rewards distributed over all individuals, irrespective

of performance or seniority, are likely to have positive effects on
benefit satisfaction.
An important variable emphasised in both Lawler's (1971) and Dyer
and Theriault's (1976) model of pay satisfaction was the role of pay
referents. Goodman (1974) identified seven different types of pay
referents in individual pay comparison process. These are other-inside,
other-outside, system structure, system administration, self-pay his-
tory, self-family, and self-internal. Subsequent empirical works by
Miceli and Lane (1991), Deckop (1992) and Blau (1994) showed the
importance of these pay referents in pay satisfaction. These studies
confirmed the role of five different types of pay referent categories:
social, financial, historical, organisational and market. Social pay
referents uses family, relatives and friends; financial looks at the
adequacy of pay to meet one's current financial needs; historical refers
to one's job related pay rewards in the past; organisational deals with
the pay comparison within the organisation; and market refers to pay
comparison outside the organisation.
 Organisational Reward as a Tool to Enhance Pay Satisfaction 527

In the present study, the role of financial pay referent are analysed
in two dimensions of pay satisfaction. Research on the choice of pay
referents indicates that financial pay referents plays an important role
in the pay comparison process (Hills, 1980; Summers and DeNisi,
1990; Sweeny, McFarlin and Inderrieden, 1990). These studies indi-
cated that pay, necessary to maintain the standard of living, was an
important category of referent influencing the pay satisfaction. These
studies indicate that an individual evaluates the worth of a reward
based on his/her own economic needs. Rewards that do not enhance
one's capacity to satisfy these needs are unlikely to have any effect on
pay satisfaction. Thus we propose:

Hypothesis 3: The positive effective of a performance based reward on

pay level satisfaction is only through its effects on one's capacity to satisfy
one's financial need.

Method

Setting
As part of a bigger study on pay and pay satisfaction, data was collected
from the R&D personnel of three public sector undertakings. The
compensations and personnel policies of all the public sector under-
takings in India are framed by the Central Bureau of Public Enterprises
(India, 1979). The overall policy for recruitment, pay, promotion and
number of grades between the entry grade and the highest grade are
identical in all the public sector organisations in India.
The personnel hierarchy in the R&D units consists of a total of seven
grades starting from the entry grade to the head of the unit. For every
grade, there is a minimum and a maximum pay which is covered by
an annual automatic increment of about three per cent. The recruitment
in R&D units is usually in the bottom of the grade hierarchy with fresh
engineering graduates and post-graduates. The filling of vacancies in
higher grades are mainly by way of promotion based on performance
and seniority from lower grades with occasional direct entry from
outside in the middle ranks. The promotion to higher grade is based
on a mixed criteria of performance and seniority.
There is no merit based salary in the organisations. An individual
gross salary depends on one's position in the hierarchy of grade, one's
seniority in the grade and in the organisation. The total pay package
consists of a gross salary based on one's promotion history and
528 Pulak Das and K.B. Akhilesh

seniority; and a number of fringe benefits that includes provident fund

payment by the employer as retirement benefits, holiday allowances,
company transport on nominal payment for attending office, subsi-
dised lunch during working days, company housing for personnel
working in remotely located factories, house building loan facilities,
and so on. Except for the retirement benefits, the organisation's
expenditure on account of the employee benefits are almost the same
for personnel in all the grades from which the sample for the present
study was drawn. The gross salary goes up either due to annual
automatic increment of three per cent per year or due to promotion to
the next higher grade. The gross salary and promotion are two distinct
rewards based on one's performance. Though promotion to higher
grades raises one's gross salary, a growth in gross salary need not
require a promotion. In addition to these rewards, there is yearly
'incentive bonus' which is a fraction of the company profit distributed
over all the officers irrespective of grade and seniority. Apart from the
gross salary, fringe benefits and 'incentive bonus', there is a take home
salary which is the gross salary less the deductions at source on account
of tax, compulsory savings payment and other miscellaneous deduc-
tions. The take home salary gives the total monthly disposable income
of the individual and is related to one's gross salary and to the overall
government policy regarding tax and savings.

Sample

The sample consists of a total of 390 engineers from the R&D units of
three public sector undertakings located in and around Bangalore,
India. The sample covered more than 60 per cent of the total qualified
engineers in their respective R&D units. Persons having at least six
months of service in the organisation at the time of the survey and with
at least a Bachelor's degree in Engineering or any equivalent degree
were requested to participate in the study. The respondents in the
sample were mostly from the first four grades of the organisational
hierarchy of seven grades. Out of the 390 respondents, 90 had a
Master's degree in engineering while the rest had only a Bachelor's
degree. Among the respondents, 120 had work experience prior to
joining their existing organisation; 137 were working as team leaders
in a research projects; 257 were married at the time of the survey; 47
were female; and 253 persons indicated to have received industrial
bonus. The average age of the persons in the sample was 33.4 years.
 Organisational Reward as a Tool to Enhance Pay Satisfaction 529

The average monthly gross and take home salaries were Rs. 5424/- and
Rs. 3266/- respectively. The average tenure to a post was 2.2 years.

Measures
The pay level and benefit satisfaction were measured by a pre-tested
questionnaire administered personally by the first author. It was ad-
ministered in groups of 25 to 30 persons in each group. The participants
were explained about the objective of the study and about the way each
item in the questionnaire was to be answered.
A five point Likert format with 1 = 'strongly disagree' and 5 =
'strongly agree' was used to measure pay satisfaction. The items for
measuring pay satisfaction was borrowed from Pay Satisfaction Ques-
tionnaire (PSQ) (Heneman, 1985) with certain modifications to make
them appropriate to the Indian social and economic environments.
Further, it has been reported that factor structure of the PSQ response
vary according to the pay practice of the organisation and even among
the different job levels within the same organisation. (Scarpello and
Vandenberg, 1988). Following the suggestions of these authors, the
items for measuring pay level and benefit satisfaction for the present
study were phrased in such a way that each item measured the pay
satisfaction of only one specific dimension. The respondents were told
in advance about which item was measuring which dimension of the
pay satisfaction. The pay level satisfaction was measured by three
items. The items covered satisfaction with take home salary, pay scale
and total income. A typical item read 'The total monthly earnings from
my job is sufficient to meet my present and future needs'. The
reliability of the items on this dimensions was 0.78.
In order to make the statements measuring benefit satisfaction more
meaningful to the respondents, the satisfaction with the benefit pack-
age was measured by nine items covering most of the important benefit
payments in public sector organisations in India. These items covered
satisfaction with organisational payments made for medical emergen-
cies, retirement, recreation, food during office hours, accident insur-
ance, educational opportunities, transport facilities for attending
office, house building loan facilities and bonus. A typical item on these
dimensions read 'the retirement benefits in this organisation is quite
satisfactory'. The reliability coefficient of the items on this dimensions
was 0.79.
The most important difference of the present questionnaire from the
PSQ is that, here the statements measuring pay satisfaction were
530 Pulak Das and K.B. Akhilesh

addressed to specific types of payments. One advantage of such a

measurement is that there is less possibility of getting measurements
related to other aspects of pay satisfaction.
This questionnaire was also used to measure four types of organis-
ational rewards, for example monthly gross salary, monthly take home
salary, promotion to higher grades in the current years and the payment
of yearly profit based industrial bonus. The R&D personnel in public
sector organisations are not eligible for industrial bonus under the
Payment of Bonus Act (India, 1965). This Act makes it mandatory for
all industrial organisations, including the public sector organisations,
to pay a minimum percentage of the yearly gross salary as bonus to all
their workers. The R&D engineers come under the category of officers.
As such they are not entitled to bonus under the Payment of Bonus
Act, 1965. However, all public sector organisations distribute a part of
their annual profit as 'incentive bonus' among all officers in proportion
to their participation in total human days in the previous year. Due to
the common source of fund for industrial bonus of the workers and the
'incentive bonus' for the officers, many R&D personnel consider this
'incentive bonus' as industrial bonus. As such, the bonus question was
measured by a 'yes-no' type response with 'yes' corresponding to their
perception of the existing 'incentive bonus' as industrial bonus.
Promotion to the next higher grade in the current year was identified
from the present grade and the number of years in the existing grade
of the respondents. Those who were in any grade above the entry grade
of the respective organisation and was working in the grade for no
more than one year were assumed to have received a promotion in that
year. Out of the 390 respondents, 90 persons were found to have
received promotion in that year.

Analysis
The data were first tested for its factor structure to see that the items
corresponding to each of the two dimensions of pay satisfaction had
distinct and significant loading on two separate factors. An exploratory
factor analysis was conducted using the principal factor method. A
cut-off loading of 0.30 was used to identify an item with a factor.
Rotated factor loading of the items indicated a satisfactory convergent
and discriminant validity of the items. The details of the results of
factor analysis are shown in Table 1.
The effect of different forms of organisational reward on pay level
and benefit satisfaction were analysed by the method of multiple
 Organisational Reward as a Tool to Enhance Pay Satisfaction 531

regression. The dependent variables were the sum of the items of pay
level and the benefit satisfaction separately. The effect of a particular
type of reward on pay level and on benefit satisfaction were estimated
by controlling for the effect of personal job input of educational
qualification, age and tenure in the existing grade; personal charac-
teristics of sex and marital status; job attributes of team leadership and
work history of prior work experience. The effect of different rewards
on pay level satisfaction were estimated twice: first without the control
of take home salary and the second time with the control of take home
salary along with other control variables.
TABLE 1
Rotated Factor Loading (Oblique Varimax) of Pay Satisfaction Response
(Principal Factor Method)

The means, standard deviation and inter-correlation among all

variables are shown in Table 2.

Results
The results of the regression analysis of the pay level and the benefit
satisfaction are shown in Table 3. The total explanatory power of the
regression equation, with only the control variables, is about 17 per
cent for both the pay level and the benefit satisfaction equations.
However, the explanatory power of the regression equation of pay
level satisfaction increases by 3.6 per cent due to addition of the take
home salary and by about 1.7 per cent due to addition to either
Note: The figures in parentheses indicate the Reliability Coefficient.
 Organisational Reward as a Tool to Enhance Pay Satisfaction 533

promotion or the gross salary as an explanatory variable. Similarly, the

explanatory power of the regression equation for benefit satisfaction
increases by 5.6 per cent due to addition of industrial bonus as an
explanatory variable. The addition of any of the other three forms of
rewards namely promotion, gross salary and take home salary in the
regression of the benefit satisfaction does not increase the explanatory
power of the equation significantly. Thus, it appears that the take home
salary and the payment of industrial bonus are the two most important
forms of reward to affect pay level and benefit satisfaction respec-
tively.
TABLE 3
Standardised Regression Coefficients of Different Organisational Rewards in
the Regression of Pay Level and Benefit Satisfaction with Control of Personal
Job Input, Personal Characteristics, Job Attributes and Work History

Notes: +Control variables are educational qualification dummy, turnover experience

dummy, team leadership dummy, sex dummy, marital status dummy, age and
experience in current position.
( ) t-Statistic.
**p 0.05. ***p 0.10.

The standardised regression coefficient of promotion, gross salary,

take home salary and industrial bonus in the regression of pay level
satisfaction are 0.176 (p<0.01), 0.195 (p<0.01), 0.20 (p<0.01) and
-0.037 respectively. This indicates that except for the payment of
534 Pulak Das and K.B. Akhilesh

industrial bonus, all the other three forms of rewards have a strong
positive effect on the pay level satisfaction. Promotion to higher grades
in these organisations are based on a mixed criteria of performance
and seniority. Thus under constant personal job input, personal char-
acteristics, job attributes and work history, the reward of promotion to
a higher grade or a higher gross salary is likely to be perceived as
recognition of performance. Thus our Hypothesis-1 that performance
based reward has a positive effect on pay level satisfaction is well
supported by the data.
Further, it can be seen that with control of take home salary, the
coefficient of promotion and gross salary come down to 0.140 (p<0.05)
and 0.043 respectively. This indicates that the positive effect of gross
salary on pay level satisfaction is entirely due to its effect on the take
home salary. This supports our Hypothesis-3 on the significance of
financial implication of a performance based reward on pay level
satisfaction.
The regression equation of benefit satisfaction shows that the coef-
ficient of aggregate profit based industrial bonus is 0.249 (p<0.01) and
is highly significant. But none of the coefficients of other forms of
rewards namely promotion, gross salary or take home salary are
statistically significant. This goes well with Hypothesis-2 on the
relation between company profit based financial reward and benefit
satisfaction.
In order to see, if the presence of an item related to bonus in the
benefit scale was the cause of the positive effect of profit based bonus
reward on benefit satisfaction, a test was conducted (not shown in
Tables) without the score of bonus item in the benefit satisfaction scale.
This test showed that the absence of bonus item score on the benefit
satisfaction makes only a marginal difference in the regression coeffi-
cient of the variable of aggregate profit based bonus payment.

Discussion and Implications

The present study was undertaken with the objective of examining the
effect of four forms of organisational rewards namely, promotion,
gross salary, take home salary and yearly company profit based bonus
on pay level and benefit satisfaction.
Notwithstanding the low explanatory power of both the regression
equations confirming Dreher's (1981) observation that it is futile to
attempt an explanation of pay satisfaction using more number of objec-
tively defined variables. The result of the present study substantiate the
 Organisational Reward as a Tool to Enhance Pay Satisfaction 535

contentions of Heneman and Schwab (1985) that the variables believed

to be related to pay satisfaction may not correlate equally well with all
the facets of pay satisfaction. The standardised beta coefficients of
different forms of reward in regression equations of pay level and
benefit satisfaction are quite distinct. The coefficients of the variable
of promotion are 0.176 and -0.048 in the regression equation of pay
level and benefit satisfaction respectively. The coefficient of gross
salary is 0.195 in the regression equation of pay level satisfaction while
it is -0.065 in the regression equation of benefit satisfaction.
Further, three of the four types of rewards namely promotion, gross
salary and take home salary have significant coefficients in the regres-
sion of pay level satisfaction. All these three forms of rewards, with
significant effects on pay level satisfaction, have either a direct or an
indirect effect on one's level of pay as measured by the disposable
income. This is quite similar to the positive correlation found by
Dreher (1981) between pay level and pay satisfaction for professionals
and by Gomez-Mejia and Balkin (1984; 1989) for R&D professionals
using unidimensional pay satisfaction construct. Multidimensional
pay satisfaction study by Judge (1993), among managers and technical
employees, also established a positive relation between pay and pay
level satisfaction. This suggests that irrespective of the work and social
environments, the net income received from work plays a dominant
role in shaping one's pay attitude. Therefore, the organisations must
continue to devise policies to meet these crucial needs of their person-
nel if it wishes to attract high quality and highly trained professionals.
The positive effect of promotion on the pay level satisfaction, even
under the condition of constant take home salary, further highlights
the importance of potential income in the pay comparison process.
On the relative sensitivity of pay satisfaction towards different
forms of reward, it is to be noted that pay level satisfaction is most
sensitive to the variations of the take home salary and least sensitive
to the variations of aggregate profit based industrial bonus. On the
other hand, the benefit satisfaction is almost independent of the take
home salary. Thus the financial pay referent, that plays such an
important role in pay level satisfaction, seems to have no effect on
benefit satisfaction. It appears that all the different types of pay
referents, identified in the literature (Goodman, 1974), do not play an
equally important role in all the different dimensions of pay satisfac-
tion. This possibly explains some of the contradictory findings on the
importance of different types of pay referents in pay satisfaction
536 Pulak Das and K.B. Akhilesh

(Berkowitz, Fraser, Treasure and Cochran, 1987; Hills, 1980; Jackson

and Blank, 1986).
The sensitivity of fringe benefit satisfaction is maximum and posi-
tive with respect to industrial bonus which confirms the observation
of Gomez-Mejia and Balkin (1989) that when a payment is made to
all, irrespective of individual or team performance, it is likely to be
perceived as another kind of benefit. The industrial bonus of the R&D
personnel in Indian public sector undertakings is a small fraction of
the aggregate profit distributed according to one's attendance in the
company and not according to any individual or team performance. As
a result one can fail to relate such payment with any individual or
collective action or activity. The motivational effect of a reward
depends on the strength of the perceptual relation between pay and
performance (Lawler, 1987; Nadler, Hack-man and Lawler, 1979). The
immediate gain from the aggregate profit based industrial bonus is that,
it raises one's disposable income and the level of living. Thus, the
financial gain due to cost of living adjustments in pay or due to
adjustment of the pay scale of all employees under union pressure or
due to a suggestion by the National Pay Commission or any such
agency, are likely to be perceived as a benefit rather than a pay for
one's contribution to the cause of the organisation. Obviously, all these
organisational or the state enforced pay actions do not have much
motivational significance.
The negligible effect of the industrial bonus on the pay level
satisfaction is quite intriguing. It shows that even though the payment
of bonus raises one's capacity to satisfy one's financial need and level
of income, such payment has no effect on pay level satisfaction. This
is possibly an indication that the choice of pay referent depends not
only on the dimension of the pay satisfaction but also on the type of
rewards. The Payment of Bonus Act, 1965, prescribes a mandatory
minimum bonus for industrial workers in proportion to their annual
gross salary. The R&D personnel who perceive their 'incentive bonus'
as industrial bonus are likely to compare their bonus payment with
what they would have got under the Payment of Bonus Act, 1965. The
compulsory state enforced minimum bonus can work as a threshold
standard in the pay comparison process of these personnel. Consider-
ing the small fraction of the yearly profit distributed by the public
sector undertakings as 'incentive bonus', it is quite possible that the
amount of such bonus is actually less than the prevailing market rate
as prescribed by the Payment of Bonus Act, 1965. Thus, the negligible
 Organisational Reward as a Tool to Enhance Pay Satisfaction 537

effect of the industrial bonus payment on the pay level satisfaction can
be considered as the reaffirmation of the role of market as a referent
in the perception of pay (Cappelli and Sherer, 1988).
The coefficients of promotion and gross salary in the regression of
benefit satisfaction are quite small. This indicates that one's total
benefit payment does not change due to promotion or due to increase
of gross salary. Benefit satisfaction has been found to be sensitive to
variations of benefit coverage and personal cost for the enjoyment of
benefits (Dreher, Ash and Bretz, 1988). The total benefit payment
(except the retirement benefits!) by the organisation and the personal
expenditure or the collateral pay to enjoy those benefits in the organ-
isation of our study, are the same for all personnel irrespective of grade,
seniority or salary. Thus the neutral effects of promotion and salary on
benefit satisfaction are essentially a confirmation of the above organ-
isational policy.
Three issues of considerable managerial implication are emerging
from the present study. First, is the role of gross salary vis-a-vis the
take home salary. Our research shows that even a performance based
financial reward is compared with one's financial need. Unless a
monetary reward raises one's capacity to satisfy one's financial need,
such a reward is not going to have any effect on the pay level
satisfaction.
Second, even though the positive effect of monetary reward on pay
level satisfaction requires a simultaneous increase in the take home
salary, no such financial provision is necessary for promotion type
reward. Due to the long run effect of promotion on one's earnings, a
promotion can raise the pay level satisfaction even if there is no
immediate gain in the take home salary. Thus the organisations can
use such non-financial rewards, which do not need any immediate
budgetary support to enhance the pay level satisfaction of their per-
sonnel, provided of course that such rewards ensure certain financial
gain to the recipients in future.
Third, aggregate company profit based bonus is likely to be per-
ceived as a benefit rather than as a reward for performance. Also, like
any other benefit, the behavioural impact of such payment is likely to
be limited only in terms of reduced personnel mobility with very little
effect on performance and motivation (Mitchell, 1983). Further, the
existing performance based promotion or salary do not show any effect
on benefit satisfaction. Hence, in organisational settings plagued
by high personnel turnover, the mere existence of a successful
538 Pulak Das and K.B. Akhilesh

performance based reward without a matching benefit package might

not succeed in stemming the outflow of quality personnel. Thus the
company profit based bonus plan can be used as a tool to arrest the loss
of key personnel.
Apart from the above managerial implications, the present study
takes the existing methodological question of dimensionality of pay
satisfaction one step forward. Our study showed that multidimensional
pay satisfaction analysis is not only more appropriate to determine the
potential attitudinal effect of a particular type of reward, but can also
provide an insight on how these attitudes are actually shaped by
different types of pay referents. There seems to be a kind of dimension
specificity in the choice and use of different types of pay referents.
As a final point, the result of the present study should be viewed in
the context of certain potential limitations. First, the present study was
based on the response of personnel working in the R&D unit only,
without any control sample from other functional areas of the organi-
sation. As such the result of the present study cannot be claimed as
unique for the R&D personnel. Both the R&D personnel and the
personnel in other functions of the organisation of our study face
almost similar types of rewards. Thus, a similar study with a sample
from non R&D functions can shed some light on the unique attitudinal
response of the R&D personnel due to the special work environment
in which they operate. Secondly, the present study was based on the
response of personnel working only in the public sectors. Though both
the public sector and the private sectors in India follow the same types
of policies regarding pay and career growth, the absolute pay, its
growth rates, the types and varieties of rewards are distinctly different
between the public and the private sector (Trivedi and Mookerjee,
1989). Thus, a similar study with sample from the private sector is
expected to be more enriching.

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