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The Motivating Influence of Pension on Employees.

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Lapai Journal of Management Science Vol. 2, Nos. 1 & 2; December, 2011

The Motivating Influence of Pension on Employees in Nigeria

By
1
Mathew Olasehinde FASHAGBA & 2Joshua Solomon ADEYELE

1. Department of Business Administration,

Ibrahim Badamosi Babangida University, Lapai, Niger State, Nigeria

2. Department of Actuarial Science & Insurance,

Joseph Ayo Babalola University, Ikeji-Arakeji, Osun State, Nigeria

Abstract
Pension as a motivating factor to retain employees on the job may appear controversial
depending on the nation’s level of economic development and unemployment rate. The study
examines influence of pension on employee behaviour in Nigeria. Forty-two copies of
questionnaire were administered to respondents across various professions and the responses
were evaluated with the level of normal standard distribution test. The result fails to support
the fact that pension has any reasonable motivating influence on the Nigerian employees. The
only make employees see pension as important as salary is to improve the general standard
of living by creating more (and better) employments.

Keywords: Pension, Motivation, Employment, Employees’ behaviour

1. Introduction
Pension is no longer unfamiliar in today’s industrial setting across the world. One of the
strategies used for stability of the tenure in employment has been attractive pension
benefits. Although the earlier industrial post employment plans include gratuity and were
viewed as rewards to employees for long and loyal service to his/her employer (Davar,
1988). The pension plans were originally established on a sense of moral responsibility on
the part of the employer for the welfare of his/her aged employees and for the employer,
economic benefits, directly or indirectly would accrue from the establishment of such
plan. Nearly all enlightened employers realise that pensions are among the important
employee needs.

We will assume, basically, that people work for two motives: to meet the present need
(when they are in employment), and the future needs (when they can no longer work or
when they permanently disengaged from employment). While the latter is sought for in
employment, the former is sought for before entering into employment. As a result,
people take on any job that first comes their ways with the aim of building career before
better offer comes just to meet the present needs. With this realization, employer ensures
that creative, talented and trained employees are retained by offering them attractive
fringe benefits. This approach of rewarding employees has permanently become part of
employment contract until present.

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Lapai Journal of Management Science Vol. 2, Nos. 1 & 2; December, 2011

Today, however, few employees expect to work at one organsiation for their entire life
career, in spite of companies’ effort to retain their trained workers by offering flexible but
sophisticated benefits. Against this backdrop, this study seeks to find out whether
employees will be willing to remain in their present employment if their present needs are
carefully integrated with the needs of the future.

The study therefore, is organised into five sections. The second section that follows this
introduction deals with the review of relevant literature. Third section explains the
methodological approach used in the study, the fourth section discusses the findings of
the study while the fifth section contains the study’s recommendations.

2. Literature Review
Meeting the reasonable needs of employees in their present employment determines their
length of staying and this has great impact on organization’s well being as well as its
productivity. Nickels (2002: 23) define productivity as ‘the total output of goods and
service in a given period of time divided by the worker (output per work hour). Better
technology, machinery, tools, education, and training enable each worker to be more
productive.” This suggests that employees who work in organisations need resources for
their assigned responsibilities which must be available as and when needed (Suleiman,
2007).

However, measuring productivity in service organisiation is difficult. As a result, the use

of the term in this study means the extent by which the set target or goals are met. A
worker should be viewed as being productive if she/he meets the set targets or positively
contribute to the growth of the organisation. In other words, productivity should be seen
as a product of positive behavioural attitude of employees towards organisation goal.
A good organisation, according to Dransfied and Heedham (1999:54) seeks to make the
best use of the people employed. In order to do this, the leaders of the organisation must
try to understand how the employees behave, and then provide a suitable working
environment which caters for their individual needs and encourages good performance for
the employees. The success of a business in a competitive environment depends on
quality of the population, a good reputation of the business and a broad customer base
(Kotler, 2000). The achievement of the above – interrelated listed factors, however,
depend on the people who work for the organisation and its destiny rest firmly on their
shoulders (Dransfied & Heedham, 1999:54).

Knowing full well tha virtually all businesses today operate completive environment,
employer, or management that fails to device approapriate strategy as part of organisation
development to retain its key employees is likely to lose them to its competitors. Cunning
and Workey (2001) in Fergerhem and Workey (2003) elaborates on some key forces that
will improve the future of organisation development, including “changes in the economy,
the workforce, technology and organisations. The economy is tending towards more
concentrated wealth, globalisation, and ecological concerns. The workforce is being more
diverse, more educated and more temporary or at will.” Technology is driving
productivity within organisaitons, e-commerce is affecting both supply chain and sales,
and organisations are becoming more networked and knowledge based. In view of the
above, any factor indentified as being responsible for productivity in organisation with no
reference to motivation or reward that leads to employee creativity would not give a
better insight. Motivation is what causes people to act or do something in a particular

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Lapai Journal of Management Science Vol. 2, Nos. 1 & 2; December, 2011

way. By understanding why people behave in the way they do, managers can improve the
design of jobs, rewards and working environment to match more closely the economic,
social and personal needs of their employees (Dranfied & Needham, 1993: 58).

If management wants the employees to be creative, it should be sure to reward creative

behaviour. If I it fails to do so, creative behaviour is less likely to be repeated. As Cuming
(1999:188) put it, “treating employees fairly, motivating them effectively, managing and
designing jobs interestingly can lead to big gains for any firm.” Here, the big question is,
what should be used to reward creative employees to stay on the job? Further discussion
of two classes of rewards attempt to answer this question.

Extrinsic and intrinsic rewards: these are rewards given to an employee by someone else
usually someone in management. Pay rises, promotions and other symbols of
recognisation are extrinsic rewards. Intrinsic reward relate to the job itself, and the
pleasure and sense of accomplishment that it gives to the employees. Until fairly recently,
many firms and management theorists considered only extrinsic rewards – wages and
salaries in particular – in designing jobs and compensation programmes. The reason
might as well be that employers hold what is called a theory X set of assumption.
According to theory X, people are lazy and self indulgent, requires constant supervision,
and work only because they are paid. Employers who accept theory X as the best
assumption for employee’s motivation tend to watch their workers closely, treating them
as inferior and pay little attention to job satisfaction. The alternative to theory X assumes
that workers are responsible, like to work and want intrinsic rewards. This is known as
theory Y. Under theory Y, jobs are designed to be more interesting, and workers are
allowed more freedom in the performance of their work.

Financial and non-financial reward: Extrinsic reward can be financial (those involving
money) or non-financial (those not involving money). Several studies have shown that
financial rewards are the key influence on choice of jobs and in requests for transfer to
other job (Adeyemi, 2006; Bello, 2006, and Davar, 1998). There are many reasons why
money is desirable. One reason is that people get pleasure out of the act of making
money. Another is that a pay increase is often coupled with other things they want. That
is money can help satisfy needs at all levels in Maslow’s needs hierarchy.

Pension is one of the three means of providing for post service life of employees. The
other two are personal saving and state sponsor social security. Neil (1977) defined
pension as benefit that may be provided on retirement. This benefit is only made available
on the condition of attainment of certain age or ill-health. Similarly, Barbier (2007) sees
pension as a lifetime monthly benefit payable to a person upon his/her retirement.
Niethaus (2004) posits that incorporation of pension into employment contract can help to
improve productivity.

3. Statement of Hypothesis
There are different factors that motivate employees on the job. This study intend to
evaluate the extent to which pension affect employee’s performance as compared to other
factors such as current income, regular promotion etc. On this note, the following
hypothesis was developed in null form and tested at 0.05 level of significant for decision
to be derived.
H01: Pension does not have more influence on employees’ performance than other
motivating factors.

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Lapai Journal of Management Science Vol. 2, Nos. 1 & 2; December, 2011

4. Methodology
The study used simple random sampling technique to administer 100 copies of closed
ended questionnaire were administered to respondents from different professions such as
bankers, engineers, accountants, and civil servants in Lagos and Osun States. However,
the sequence of the respondents’ responses in some of the returned copies of
questionnaire rendered them invalid for the study. In all, only forty-two (42) of the
returned copies of questionnaire were valid for the study and were therefore used. The
high rate of invalid returned copies of questionnaire may not be unconnected to the level
of the respondents’ awareness and current value for pension system.

The method of data presentation predominantly used for the research is tables, which
appear in the appendix. The simple descriptive methods adopted for the analysis include
percentage method. However, for the testing of the hypothesis, normal distribution
method was used to analyse the research data.
The test was conducted at 5% level. The normal distribution test performed for the study
also appears at the appendix. Nevertheless, the formula used is given as follow:
x
z

where z is the test-calculated score
x is the score for pension alternative
 is the mean obtained in the observation
 is the standard deviation equally obtained
The decision were made by comparing the calculated z score with the standard normal
curve at 95% confident interval with z of approximately 1.95 (Spiegel, 1999). The
decision rule is to accept the null hypothesis if the calculated z-score is within the table
value (i.e. 1.95) as given in the appendix 2 and to reject it otherwise. That is to say we
will reject the null hypothesis if the calculated value is more than the table value.

5. Results and Discussion

The study samples consist of 32 male (76%) and 10 female (24%) from the forty-two
valid responses. This is represented in Table 1 in appendix. Also, 26(62%) of the total
respondents were singles while others 15 (36%) are married as shown in Table 2 in the
appendix. Only one (2%) of the valid responses did not indicate the state of marital status.
The age groups of the respondents can be said to be fairly well distributed with the largest
falling between 24-29 years. Table 3 in the appendix shows that there are six respondents
(14%) between 20 and 24 years, 14 (33%) between 25 and 29, 11(26%) between 30-34
years, 4(10%) between 35 to 39 years and 40 to 44 years each and 1(2%) between 45 to
49 and 60 to 64 years each. It is important to say that while 1(2%) of the respondents did
not indicate his age group, the age group 55 to 59 has zero response.

The other respondents’ data considered relevant for the study is the tenure of the
respondents’ jobs. 29(69%) are on permanent job, 7 (17%) of the respondents are on non-
permanent basis. This data which appear in Table 4 in the appendix also shows that
6(14%) other respondents did not indicate the term of their jobs.
Moving from bio-data to research data, the first information that is of interest is what
employees consider paramount to their need on the job. Five factors were considered
relavant as having motivating influence on the respondents. Seven (17%) respondents
want attractive salary. The next 17 (40%) believe in job satisfaction. Only 1(2%) see
rapid promotion as paramount to his/her job need. 15(36%) of other respondents do not
have preference among the alternatives.

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Lapai Journal of Management Science Vol. 2, Nos. 1 & 2; December, 2011

The level of poverty among the respondents is probably being displayed by the above
information. Only 2.38% of the respondents has good pension as his/her first choice of
alternative in his need. Other are probably still battling with their survival need identified
in Maslow’s Hierarchy of needs.

Also, in the study, attempt was made to merge two of the above alternatives to see what
the respondents’ decision would look like. Good salary with regular promotion receives
12(28.58%) positive responses. Job satisfaction with fair salary attracts 11(26.19%)
responses. However, good pension plan with rapid promotion only found favour with 2
(4.76%) respondents where as career development with fair salary has the largest
response of 15. This only further confirms the extent to which people are not driven by
the future financial security given their disposition to pension.

The normal distribution test analysis performed seeks to determine if there is a significant
difference between preference for pension and other four alternatives as perceived by the
respondents. The result shows mean score ( x ) of 78.2, variance (  2 ) of 2.020 and
standard (  )deviation of 44.96. The calculated z-score is 1.22 and the table value at 95%
is 1.65. Hence the null hythosesis is accepted while the alternate hypothesis is rejected.
In other words, pension does not have more influence on employees’ performance than
other motivating factors.

6. Concussion and Recommendations

The study examined the motivating influence of pension on employees’ industrial
behaviour. Other employment factors were compared with pension. The result reveals
that employment immediate rewards like current pay (wages and salaries). Career rise
rate etc is given priority by the Nigeria employees’ perception of related factor – pension.
It shows that pension receives such a low influence on the employees’ perception of the
job.
The result that appear ordinary unreasonable considered from the view of the
Maslow’s Hierarchy of needs would only suggest that the employees are still generally
poor. It confirms other studies that found high level of poverty in Nigeria and high rate of
unemployment (Bello, 2006; Adeyemi, 2006). So the majority of the few in employment
are still at the frontline of hierarchy of need suggested by Abraham Maslow (Kotler,
2000: 172). Therefore, for pension to exert its reasonable influence on the job motivation,
the employment portion of the Nigerian employees must be improved. This will help to
move employees from their current level of need and change their view of pension as a
motivating factor. The study further found that the level of pension awareness appears to
be low among the employees. A further study therefore is recommended on employees’
awareness and appreciation of pension scheme.

Reference
Adeyemi, A.A. (2005). “Economic reforms and the social charter: A critique” In Saliu,
H.A., A. Ogunsanya, J.O. Olujide and J.O. Olaniyi (eds.), Democracy and Development
in Nigeria.
Aldag, R.J, Block, S.Bl & Cunning, W.H. (1993). Business in changing world. Ohio:
South-Publishing, Cincinnati
Barbier, R.B. (2007) Academic’s Dictionary of Insurance, Academic (India) Publishers,
New Delhi

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Lapai Journal of Management Science Vol. 2, Nos. 1 & 2; December, 2011

Bello, M.I. (2005). “Reflection on poverty-reduction strategies”, In Saliu, H.A., A.

Ogunsanya, J.O. Olujide and J.O. Olaniyi (eds.), Democracy and Development in
Nigeria.
Davar, R.S. (1998) Personnel management and industrial relations. Vikas Publishing
House PVT LTD. Delhi
Dranffied, R. & Needham, D. (1993). The business finance, Heineman Educational
Harrtley, B. & Palmer, A. (1993). The business and marketing and marketing
environment. McGraw-Hill International (UK) Ltd: London
Kotler, P. (2000). Marketing management, Pretence-Hill Inc.: London
Neil, A. (1977). Life contingencies, Heinemann, London.
Nikels, W. G., McHugh, J.M. & Mehugh, S.M. (2002). Understanding business,
McGraw-Hill Co. Inc., New York
Niehaus, H. (2004). Risk management and insurance. McGraw Hill Education, Botton.
Spiegel, M.R. (1999). Theory and problems in statistics, Tata McGraw-Hill Publishing
Company Ltd, New Delhi.
Suleiman, E. (2007). organizational behaviour management in Nigeria Vol 44(1)

Appendix

Table 1: Sex Distribution of the Respondents

Sex Number of respondents Percentage (%)
Male 32 76.19
Female 10 23.81
Total 42 100
Source: Questionnaires Administration, 2009
Table 2: Marital Status Distribution of the Respondents
Marital Status Number of respondents Percentage (%)
Single 26 76.91
Married 15 35.71
Other 1 2.38
Total 42 100
Source: Questionnaires Administration, 2009
Table 3: Age Distribution of the Respondents
Age Distribution Number of respondents Percentage (%)
20-24 6 14.29
25-29 14 33.33
30-34 11 26.19
35-39 4 9.52
40-44 4 9.52
45-49 1 2.38
50-54 0 0
55-59 1 2.38
60-65 1 2.38
Total 42 100
Source: Questionnaires Administration, 2009

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 Lapai Journal of Management Science Vol. 2, Nos. 1 & 2; December, 2011

Table 4: On the Job Tenure Distribution of the Respondents

Tenure Number of respondents Percentage (%)
Permanent 29 69.05
Non-Permanent 7 16.67
Other 6 14.29
Total 42 100
Source: Questionnaires Administration, 2009
Table 5: Employees' needs Distribution of the Respondents
Needs alternative Number of respondents Percentage (%)
Attractive salary 7 16.67
Job satisfaction 17 40.48
Rapid promotion 1 2.38
Career development 15 35.71
Good pension 1 2.38
Other 1 2.38
Total 42 100
Source: Questionnaires Administration, 2009

Table 6: Distribution of the Respondents First Order Preference for the alternative
4 3 2 1 Total
Attractive salary 7(4) 14(3) 16(20 4(1) 106
Job satisfaction 17(4) 12(3) 8(2) 2(1) 122
Rapid promotion 1(4) 1(3) 7(2) 3(1) 24
Career development 15(4) 14(3) 4(2) 6(1) 116
Good pension 1(4) 0(3) 3(2) 13(1) 23
Total 164 123 76 28
Source: Questionnaires Administration, 2009
Table 7: Normal distribution test
1 Score (x) (x-u) (x-u)2
2 106 27.8 772.84
3 122 43.8 1918.44
4 116 -54.5 2937.64
5 24 37.8 1428.84
Total 391 -55.2 3047.04
10104.8

101648 101648
Variance ( 2 )   2,020.96 Standard deviation ( )   2,020.96  44.96
5 5

23  78.2
z  1.22
42

The table value at 95% confidence interval with one-tail is 1.65. Therefore, the calculated
value for z of 1.22 is less than the table value of 1.65. This test shows that the result is within
the acceptable region and the null hypothesis should be accepted.
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