THE MOTIVATIONAL IMPACT OF A

COMPENSATION SYSTEM ON
EMPLOYEE PERFORMANCE
September 25, 2022

Dhaka-
Dear Sir,
Here is the research paper on the motivational impact of a compensation system on
employee performance

As you will see, my research paper analysis the impact compensation system on the
employee performance. I will elevate some precise effective system. Also help to made a
acceptable compensation system to the employee.
I appreciate having this assignment. If you should need research paper related any help
please contact me

Sincerely yours,
 Abstract
Compensation is the remuneration received by an employee in return for their contribution to the
organization. It is an organized practice that involves balancing the work-employee relation by
providing monetary and non-monetary benefits to employees. Compensation includes payments
such as bonuses, profit sharing, overtime pay, recognition rewards and sales commission.
Compensation is an integral part of human resource management which helps in motivating the
employees and improving organizational effectiveness. Direct Compensation is typically made
up of salary payments and health benefits. The creation of salary ranges and pay scales for
different positions within the company are the central responsibility of compensation
management staff. Direct compensation that is in line with industry standards provides
employees with the assurance that they are getting paid fairly. Indirect Compensation focuses on
the personal motivations of each person to work. Although salary is important, people are most
productive in jobs where they share the company's values and priorities. These benefits can
include things like free staff development courses, subsidized day care, the opportunity for
promotion or transfer within the company, public recognition, the ability to effect change in the
workplace, and service to others. Employees should be managed properly and motivated by
providing best remuneration and compensation as per the industry standards. The lucrative
compensation will also serve the need for attracting and retaining the best employees.
 Introduction
In today’s competitive environment, compensation system of the company has direct impact on
its employee performance. Compensation is one of the physical needs that motivates which in
turn will affect the employee performance. Job performance is influenced by many factors
externally and internally.
Providing appropriate compensation within the meaning of fair and adequate to meet the
requirements is one of the personnel department functions that are difficult to implement. Every
organization needs a strategic compensation system for its employees that address compensation,
benefits, recognition and appreciation. Compensation includes the returns to the services
rendered by employees as part of employment relationships. It has a big influence in the
recruitment of employees, motivation, productivity and employee turnover. The level and
magnitude of compensation should be of concern because the level of compensation will
determine the lifestyle, self esteem, and the value of the company.

Methodology
Research paper only solves specific and required issue so here is only precise information shows.
This research paper is basically descriptive in nature with qualitative information.
There are some sources are highly used to collect the data for making this report:
Internet
Paper article
Online Journals
 Theoretical framework
When employees are motivated, it is possible to achieve strategic goals for the organization.
When the compensation scheme is based on positions or skills that are relevant to the position,
the organization has a greater chance to attract, motivate and retain employees.
In designing a compensation system or a program, organization can separate the salary or merit
pay system from the main compensation system. Monetary rewards, especially those given on a
regular basis like, bonuses, profit sharing, etc., should be tied to an employee's achievements and
accomplishments and should be considered "pay at risk" in order to distance them from salary.
By doing so, organization can avoid a sense of entitlement on the part of the employee and
ensure that the compensation emphasizes excellence or achievement rather than basic
competency. Methods of employee compensation

Methods of employee compensation:

Some of the most common methods of employee compensation which as impact on employee
performance are as follows,
 Individual incentives
 Merit pay
 Profit sharing
 Stock plans
 Gain sharing

In order to get the benefit of increasing productivity and profitability, organization has to design
compensation programs that identify company or group goals to be reached and the performance.

Employee performance
The performance is defined as the achieved results of operations with the capabilities of the
employee who acts in certain situations. It is a combined result of effort, ability, and perception
of tasks. High performance is a step towards the achievement of organizational goals. Therefore,
efforts are needed to improve employee performance.

Performance measurement
The most difficult part of the performance appraisal process is to accurately and objectively
measure the employee performance. Measuring the performance covers the evaluation of the
main tasks completed and the accomplishments of the employee in a given time period in
comparison with the goals set at the beginning of the period. Measuring also encompasses the
quality of the accomplishments, the compliance with the desired standards, the costs involved
and the time taken in achieving the results. In order to minimize subjectivity, the rating scales
used to evaluate jobs must be clearly defined, and evaluators should be thoroughly trained on
how to use them. Moreover, the evaluators should be provided with complete, accurate, and up-
to-date job descriptions.
 Compensable Factor Criteria
Competency: Education
Knowledge Experience
Skill/know-ho Knowledge
Efforts Physical Effort
Mental Effort
Responsibility and Judgment/decision-making
Accountability Internal business contacts
Consequence of error
Degree of influence
Supervisory responsibilities
Responsibility for independent action
Responsibility for machinery/equipment
 Fiscal responsibility
 Responsibility for confidential information
Working environment Risks
Comfort
Physical demands
Personal demands

Limitations
The major limitation of this research is that this study not covers all the sector of job. Another
limitation is that it excludes many variables of compensation due to shortage of time. Funds were
also another limitation. Apart from these limitations this research may provide insights to the
managers to enhance the employee performance of their subordinates.
 Conclusion
Compensation doesn’t only mean only salary but there many different ways to compensate
competent employees. Salary is just a part of the compensation system, the employees have other
psychological and self-actualization needs to fulfill. The most competitive compensation will
help the organization to attract and sustain the best talent. The compensation package should be
as per industry standards. A good compensation package is important to motivate the employees
to increase their performance and to increase organizational productivity. Performance
evaluation practices helps to recognize the level of performance performed by employees.
Performance appraisals should be devised in such a way that it must have all the elements and
aspects. These activities must be done in a systematic and synchronized way.

References
(Adar, 2018)

(Premalatha, 2013)

(Prof. Aabha S Singhvi, 2018)