Compensation Practices in Construction Industry A

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COMPENSATION PRACTICES IN CONSTRUCTION INDUSTRY: A HUMAN

RESOURCE MANAGEMENT PERSPECTIVE OF CONSTRUCTION PROJECTS IN
SINDH, PAKISTAN
Research · October 2020
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International Research Journal of Modernization in Engineering Technology and Science
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COMPENSATION PRACTICES IN CONSTRUCTION INDUSTRY: A HUMAN

RESOURCE MANAGEMENT PERSPECTIVE OF CONSTRUCTION PROJECTS IN
SINDH, PAKISTAN
Touqeer Hassan Dahri*1, Tauha Hussain Ali*2, Muhammad Saad Memon*3
*1,2Department of Civil Engineering, Mehran University of Engineering and Technology, Jamshoro-
76062, Sindh, Pakistan.
*3Department of Industrial Engineering & Management, Mehran University of Engineering and
Technology, Jamshoro- 76062, Sindh, Pakistan.
ABSTRACT
Effective compensation practices play a significant role in motivating employees and eventually enhancing
productivity of organization. This study investigates the compensation practices in construction industry of
Sindh, Pakistan. Projects under China Pakistan Economic Corridor (CPEC) and Local construction projects are
analyzed from perspective of compensation practices. The results of this study revealed that there was a
significant difference in basic pay, additional benefits and satisfaction of employees to various components of
compensation in CPEC and Local construction projects. The study also discovered the basics need satisfaction of
employees regarding compensation in CPEC and Local construction projects in Sindh.
Keywords: Compensation, Construction, CPEC, Local, Sindh.
I. INTRODUCTION
Construction is a fundamental sector which plays a key role in the growth of infrastructure and economy of a
nations. It provides noteworthy social advantages for the livelihood of people in this world. Construction sector
provides plenty jobs to the people of rural areas and big cities (Khahro et al.). There is a use of capital of goods,
human and non-human resources in the construction industry. Human resource is one of the basic resources
for any organization (Pirzada et al., 2013). A central unit in organizations supports the activities and services
related to humans. In many organizations it is known as employee relations department, personnel department
and human resource department, also in some unionized organizations it is known by the name of industrial
relations department (Ofili, 2004). Compensation is one of the activities of HR department, it is given for the
performance of employees in the firm in order to retain them and to increase their confidence and motivation
in the firm, it could be in the form of non-financial or financial rewards. It is a way to reward an employee's
contributions who is involved in carrying out different operations in the organization. It is a phenomenon of
great importance in any organization, a key role is played by it in accomplishing the goals of any company. If
financial rewards as well as non-financial rewards are granted to the employees on the ground of their
performance, they are going to be more motivated in the organization to achieve the objectives and goals of the
organization (Altarawmneh & Al-Kilani, 2010). Compensation is a give-and-take procedure between the
organization and employee. Something else is given by both in the repayment of something (Reddy &
Medipally, 2017). An adequate compensation is important to uphold and reward the top performance of the
employees, attain morale and motivation of employees, increase or maintain job satisfaction of employees,
reduce turnover rate, recruit and retain qualified employees, achieve internal and external equity, encourage
company loyalty and to modify the practices of unions in any organization. This research study determines the
compensation practices in Sindh, Pakistan’s construction industry projects with special reference to CPEC and
Local construction projects in Sindh. It is assumed that there is a noteworthy difference in the compensation
packages of employees working in CPEC and Local construction industry projects, therefore this research study
also determines the difference between the compensation packages of different employees working in CPEC
and Local Construction projects, by comparing the basic pay, additional benefits and satisfaction of employees
to various components of compensation, additionally it will also highlight the suggestions given by the
employees of both construction projects regarding the need of employees towards the basic components of
compensation for effective work at site, which will help the employers to take a prompt action that will yield
positive results. The study will hopefully create awareness by exposing the construction industries problems of
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compensation in Sindh especially by comparing the CPEC and Local projects. It will highlight the difference in
basic pay, additional benefits and satisfaction of employees working in CPEC and Local construction projects.
There are several studies from construction sector on influence/impact of compensation on job satisfaction and
performance of employees, some have also identified compensation system in a single construction firm but
none has compared the compensation practices of two different organizations as in Pakistan this study has
worked on compensation in CPEC and Local construction projects.
II. LITERATURE REVIEW
Compensation definitions
Many researchers have defined compensation in their own way, few definitions are given below: In managing
the human resources, compensation plays a role of essential variable. Basically, it is an element of cost for
companies and an income for the employees. It is all that income, which is taken by the staffs, in return for the
use of their capabilities and efforts in the organization. It is in the shape of both money and goods (Emmywati &
Fatimah, 2018). Compensation can be characterized as an exchange between the employer and the employee.
Something else is given by both in refund of something (Reddy & Medipally, 2017). Compensation is defined as
something granted to workers, it could be in the form of non-financial or financial rewards, offered to the
employees as a return for their performance, to increase their self-confidence and to keep them in the
organization (Altarawmneh & Al-Kilani, 2010). Compensation is the payment of rewards that employees collect
from their employers for their services provided or their contribution in the achievement of organizational
goals. It is known as a basic unit of human resource management. It includes financial reward in the shape of
salaries and wages as well as indirect compensation or additional pay and other benefits (Jamilu B Salisu et al.,
2015).
Compensation components
Compensation is an organized tactic to worth the staff in a firm, following are the different compensation
components defined by the authors: Compensation for employees is categorized into following two categories:
The extrinsic rewards and intrinsic rewards. Extrinsic rewards are comprised of employees’ benefits and pay,
which employees own as a result of their contributed role to the organization however the intrinsic rewards
interact to a psychological mindset that can be felt by workers at workplace (Jamilu B Salisu et al., 2015).
Compensation for employees includes all forms of rewards and pay that is awarded to employees for their
services. (Kadir et al., 2019) discussed about the following components of compensation: 1. Remuneration: It
includes the salary and wages. These are the rewards or payments given to the worker for the work done by
him. Wages and salary can be defined as the employees’ monthly payment paid by the employers for the
services provided by employees based on contractual agreement. 2. Allowance: It is that money which is given
to an employee for a particular purpose. It contains insurance coverage, salary sick, pension, car companies and
some other additional benefits. It is an economic benefit not a salary, it is offered to employee for a definite
purpose such as financial support, employee engagement allowances and employee movements. 3. Benefits:
These are known as those benefits which are offered in any type of rewards other than salaries or wages, which
are paid in whole or a part by the firm to the employees of the firm. Benefits are also known as indirect financial
payments because these are given to the employees in the form of a plan (i.e. organization shares, retirement
benefits and health Insurance) instead of a cash amount, it is received by the employee for continuing her
employment in long term within the organization. Types of Benefits: A) Promotion: It is the recognition of
efforts made by the employees for the organization. It is the process in which employee is upgraded from lower
scale to higher scale. B) Incentive: These rewards are directly related to the performance of the employee and
are offered in addition to the basic wage or salary. (Kakepoto et al., 2012) in his study talked about intrinsic and
extrinsic components of compensation. Intrinsic are the non-financial rewards and extrinsic are the financial
rewards. He stated that employees should be motivated both intrinsically and extrinsically. If we draw a line of
demarcation between intrinsic and extrinsic motivation, we can articulate that intrinsic motivation comes
within the engineer and extrinsic motivation comes outside of the engineer in terms of advance increments, job
promotions and other monetary benefits.
Advantages of having an Adequate Compensation system
An Adequate compensation system has positive effects on growth and productivity of the firm, according to
some authors: Compensation is of utmost importance for the performance of the employees in any

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organization. It is decided after different results that compensation has an encouraging impact on performance
of employee (Hameed et al., 2014). Compensation strategies are one of the most important human resource
management strategies because they affect the productivity and growth of an organization. Researcher found
that the compensation strategy has potentially beneficial effects on increasing worker productivity and
improving overall organizational performance. Therefore, the importance of compensation cannot be neglected
in any organization, in fact it is a viable option to attract, retain and motivate employees for the productivity of
the organization. (Obasan, 2012). In addition to financial rewards many researchers believe that recognition
component of compensation is also a motivational tool for employees, and it does not impose any financial
burden on the revenue of the organizations. In this regard, one should never feel ashamed to encourage
employees in terms of recognitional rewards and some amount of appreciation letters (Kakepoto et al., 2012).
When employees are properly compensated, they will feel satisfied and motivated to achieve organizational
goals, so that organizational performance will also increase (Emmywati & Fatimah, 2018). By observing the
relationship between compensation and perceived performance of university teachers (Shahzad et al., 2008)
found the positive results. They concluded that the practice of compensation through attractive packages could
increase the efficiency of the employees. (Kadir et al., 2019) said that the higher allowance can engage the
employee in staying in the organization and they give their support and show their loyalty for the organization.
(Hashim et al., 2017) founded that compensation practice has a positive relationship with employee
performance, he further stated that most individuals who are with higher education are not satisfied from their
jobs and their turnover rate is more, so organizations should overcome this problem and should design an
adequate compensation plan to retain as well as to attract more employees.
Previous Research Work on Compensation in Construction Sector
(Jamilu B Salisu et al., 2015) Brought a research study on construction workers in Nigeria, his research was
about finding “The impact of compensation on job satisfaction of public sector construction workers of Jigawa
state of Nigeria”. They assumed that packages of compensation have positive relationships with job satisfaction
of the workers, for which they took four compensable aspects regarding compensation package, namely:
allowance, salary, pension and gratuity. Their findings revealed that compensation has a positive impact on
satisfaction of job of the workers. (Permadi et al.) worked on “The impact of compensation and work
environment towards job satisfaction to affect the employee performances”. He took the Employees of Sinarbali
Binakarya industry in Denpasar Bali Indonesia. The results of his study displayed that compensation and work
environment partially have the positive influence towards the job satisfaction and employee performance.
(Ofili, 2004) It was related to the investigation of the total compensation system in the construction industry,
with special reference to the compensation system in the Nigerian construction company Pecolo-Brunelli
Engineering Limited. He found that the compensation system is the major issue for personnel management. It
has a significant role in organizational life as well as the personal lives of any company. Any company that fails
to identify the worth of compensation to its employees usually faces the dire penalties of that negligence. He
further concluded that any organization that neglects the important role of compensation on the lives of its
employees is at risk. A person within an organization can destroy or develop any organization. Therefore, it is
important for organizations to pay noticeable to the personnel resources inside the organizations in order to
continue the smooth functioning and progress of the organization. (Okoronkwo Anulika, 2017) in his research
work examined the system of compensation in the Nigerian construction company with specific reference to
Arab Contractors Nigeria Limited in Enugu State. The research work tried to examine the compensation system
applied on the Nigerian Construction Industry and to formulate remedies as to how to enhance its effectiveness
and efficiency in its administration. It was concluded that any organization that fails to recognize an essential
and an adequate system of compensation is going to have a negative impact on both its employees and
employers. It was also suggested from the study that construction companies should also boost up a system of
indirect compensation. This is a long-term plan that benefits both employees and employers. (Jamilu Bappa
Salisu et al., 2016) worked on “The influence of compensation on public construction workers’ motivation in
Jigawa state of Nigeria” this research paper focuses on the relationship between motivation of workers and
compensation. four aspects of compensation, such as allowance, gratuity, pension, and salary were taken in this
research paper. Conclusion was that gratuity and allowance were found to have positive and significant effect
on the motivation of public construction workers in Jigawa state of Nigeria. Further he wrote that this study has

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only focused on the public construction sector in the Nigerian state of Jigawa, therefore, the results cannot be
prolonged to all over the country.
CPEC and Local construction industry

CPEC construction industry is comprised of different Chinese construction firms, in this research study those
construction projects were taken which were working under the supervision of Chinese construction firms
where mostly Projects Mangers and Deputy Project managers were Chinese and remaining employees were
Pakistani. Pakistan’s local construction industry is comprised of different construction firms registered in
different categories with Pakistan Engineering Council. In this research study CA category contractor firms
were taken only because this is the highest category in Pakistan Engineering Council.
III. METHODLOGY
Quantitatative method of research was used, most of the work was related to field because there was a need of
filling of questionnaire from CPEC and CA category Local construction firms registered with Pakistan
Engineering Council. The data survey used 5 Likert scales to establish the accurate result, open and close ended
questions were asked from different respondents and was collected from 100 employees (General Manager,
Project Manager, Chief Engineer, Deputy Project Manager, Construction Manager, Site Engineer, Quantity
Surveyor, Material Engineer, Site Surveyor, Site Supervisor and Trainee Engineer) working in CPEC and Local
construction projects. 50 questionnaires were distributed to CPEC projects and 50 were distributed to Local
construction projects. For CPEC projects; data was collected from Shahdadpur, Jamshoro and Islamkot. For
Local; projects data was collected from Shaheed Benazirabad, Nooriabad, Karachi and Jamshoro. SPSS version
20 was applied in this research to perform statistics techniques including reliability and independent sample t
test.
IV. RESULTS AND DISCUSSION
Demographic analysis of respondents are summarized in Table 1. Majority of respondents are of manager
position with Bachelor degree in the fields. 30% of respondents have two to five years of experience in
construction industry.
Table 1. Demographic Statistics of respondents from CPEC construction Projects
Measure Item Count Percentage (%)
Respondent Trainee Engineer 09 18
Site Supervisor 05 10
Site Surveyor 05 10
Site Engineer 08 16
Construction Manager Chief 10 20
Engineer 02 04
Deputy Project Manager 05 10
Project Manager 05 10
General Manager 01 02
Qualification Diploma 09 18
Bachelors 41 82
Masters 00 00
PhD 00 00
Experience Less than 1 year 08 16
1-2 years 01 02
2-5 years 15 30
5-7 years 07 14
7-10 years 07 14
10-20 years 12 24
More than 20 years 00 00
Gender Male 50 100
Female 00 00

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Basic Pay Below 10 thousand rupees 00 00
10-15 thousand rupees 00 00
More than 1 lac 13 26
Table 2. Demographic Statistics of respondents from Local construction Projects

Measure Item Count Percentage (%)
Respondent Trainee Engineer 09 18
Site Supervisor 07 14
Site Surveyor 06 12
Site Engineer 07 14
Construction Manager Chief 10 20
Engineer 00 00
Deputy Project Manager 05 10
Project Manager 06 12
General Manager 00 00
Qualification Diploma 08 16
Bachelors 40 80
Masters 02 04
PhD 00 00
Experience Less than 1 year 09 18
1-2 years 04 08
2-5 years 12 24
5-7 years 10 20
7-10 years 09 18
10-20 years 03 06
More than 20 years 03 06
Gender Male 50 100
Female 00 00
Basic Pay Below 10 thousand rupees 04 08
More than 1 lac 04 08
The results in Table 3 shows that there is a significant difference in the basic pay and additional benefits of
employees with same qualification and same experience in CPEC and Local construction projects, the basic pay
and additional benefits of employees working in CPEC projects are more than the Local construction industry
projects.

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Table 3. Demographic Statistics of additional benefits respondents getting from CPEC and Local construction
projects in percentage (%)
No Benefits CPEC (%) Local (%)
1 Free Transportation 100 70
2 Free Mess/Food Allowance 100 54
3 Rent Subsidy/Free Accommodation 100 94
4 Medical Allowance/Facility 100 20
5 Performance based Bonus/Rewards 100 14
6 TA/DA 100 22
7 Yearly Bonus 84 42
8 Qualification based Allowance 30 0
9 Location/Environment/Weather based Allowance 16 0
10 Free Mobile 22 6
11 Mobile Balance/Communication Allowance 32 24
12 Free Laptop/Own Laptop usage Allowance 56 24
13 Life Insurance 44 22
14 Disability Insurance 44 22
15 Monthly/Annual Leave 100 48
16 Casual Leave 100 92
17 Medical Leave 100 74
18 Special Occasion Leave 100 56
19 Paid Leaves 100 54
20 Vehicle/Vehicle Allowance 26 18
21 Fuel Allowance 26 18
22 Over time Allowance 06 0
23 Retirement Benefits 06 0
24 Tours/Visits: Foreign/Pakistan 0 0
25 Job Security 22 16
26 Job Rotation 84 78
27 Job Satisfaction 82 52
28 Praise 88 56
29 Status Recognition 74 50
V. CONCLUSION AND SUGGESTIONS

From the overall study it is concluded that employees in CPEC construction projects as compared to Local
construction projects are getting more salary and more additional benefits therefore, they are more satisfied
than Local construction industry, following suggestion are given for the satisfaction of employees in the
construction industry:
 Formation and implementation of policies for fair payment of trainee engineers by Pakistan
Engineering council in local construction industry.
 The organizations should pay salaries to their employees on time.
 Organizations should implement a proper compensation policy with professional HRM department and
aware them regarding their policies.
 Organization should define a proper work break policy and gives over time allowance to their
employees in case of extra duty.
 Organizations must focus on defined life/health insurance policy/risk allowance, medical facility and
availability of personal protective equipment’s for their employees due to increased chances of medical
emergencies.
 Organizations should give proper job description for a given job and pay for extra efforts.

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 Organization must implement a proper leave policy.
 Organizations ensure to give free hygienic food to their employees for their wellbeing.
 Organizations should ensure job security of their employees or at least pay some amount in case of
unavailability of projects for easiness in their daily life routine.
 It is advised to organizations to make sure the timely promotion of their hard-working employees
through evaluation technique.
 Organizations should also give chance to their employees in developing their career by giving extra
incentive for further studies/skill development.
VI. REFERENCES
[1] Altarawmneh, I., & Al-Kilani, M. H. (2010). Human resource management and turnover intentions in the
Jordanian hotel sector. Research Practice in Human Resource Management, 18(1), 46-59.
[2] Emmywati, N. R. S., & Fatimah, N. (2018). PERFORMANCE DEVELOPMENT: THE ROLE OF
COMPENSATION AND WORK DISCIPLINE.
[3] Hameed, A., Ramzan, M., & Zubair, H. M. K. (2014). Impact of compensation on employee performance
(empirical evidence from banking sector of Pakistan). International Journal of Business Social Science
5(2).
[4] Hashim, M., Rafi, S., Kazmi, S. S. A., Ullah, M., & Kee, D. M. H. (2017). Impact of human resource practices
on perceived performance: A study of teaching faculty in private universities of Peshawar, Pakistan. City
University Research Journal, 120-129.
[5] Kadir, A. A., AlHosani, A. A. H. H., & Fadillah Ismail, N. (2019). The Effect of Compensation and Benefits
Towards Employee Performance. In: Faculty of Technology Management and Business, Universiti Tun
Hussein Onn.
[6] Kakepoto, I., Hadina, H., Omar, N., & Omar, H. (2012). Conceptions on low motivation of engineers in
engineering workplace of Pakistan. European Journal of Business Management 4(18), 149.
[7] Khahro, S. H., Ali, T. H., Siddiqui, F., & Khoso, A. R. CRITICAL SUCCESS FACTORS AFFECTING JOB
SATISFACTION IN CONSTRUCTION PROJECTS: A CASE OF PAKISTANI WORKERS.
[8] Obasan, K. A. (2012). Effect of compensation strategy on corporate performance: Evidence from Nigerian
firms. Research Journal of Finance Accounting 3(7), 37-44.
[9] Ofili, U. (2004). Compensation System in Nigerian Construction Firm: Piccolo-Brunelli Engineering Ltd.
St. Clements University.
[10] Okoronkwo Anulika, S. (2017). Compensation System in Nigerian Construction industry (A study of Arab
Contractors Nigeria Limited Enugu State).
[11] Permadi, I. K. O., Landra, N., Kusuma, I. G. A. E. T., & Sudja, I. N. THE IMPACT OF COMPENSATION AND
WORK ENVIRONMENT TOWARDS JOB SATISFACTION TO AFFECT THE EMPLOYEE PERFORMANCES.
[12] Pirzada, D. S., Hayat, F., Ikram, A. A., Ayub, M., & Waheed, K. (2013). Impact of human resources
management practices on turnover, productivity and corporate financial performance. European journal
of business management 5(10), 163-176.
[13] Reddy, I. V., & Medipally, U. (2017). A Study on Compensation Management with Reference To Bank
Employees Working in Hyderabad. Management, 2(11), 33-38.
[14] Salisu, J. B., Chinyio, E., & Suresh, S. (2015). The impact of compensation on the job satisfaction of public
sector construction workers of jigawa state of Nigeria. The Business Management Review 6(4), 282.
[15] Salisu, J. B., Chinyio, E., & Suresh, S. (2016). The influence of compensation on public construction
workers’ motivation in Jigawa state of Nigeria.

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[16] Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill building approach: John Wiley &
Sons.
[17] Shahzad, K., Bashir, S., & Ramay, M. I. (2008). Impact of HR practices on perceived performance of
university teachers in Pakistan. International review of business research papers, 4(2), 302-315.

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COMPENSATION PRACTICES IN CONSTRUCTION INDUSTRY: A HUMAN

Research · October 2020

Touqeer Hasan Dahri Tauha Hussain Ali

SEE PROFILE SEE PROFILE

Muhammad Saad Memon

The user has requested enhancement of the downloaded file.

COMPENSATION PRACTICES IN CONSTRUCTION INDUSTRY: A HUMAN

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CPEC and Local construction industry

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Table 2. Demographic Statistics of respondents from Local construction Projects

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V. CONCLUSION AND SUGGESTIONS

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