The study sought to find out the effects of compensation packages and benefits on employee retention at some private and telecommunication organizations. Especially, the study considered compensation packages and benefits as salary, incentives, nonfinancial incentives, fringe benefits.
The study findings revealed that there is a positive relationship between salary and retention because employee looks forward to competitive salaries that are commensurate with their work. Employees would leave the organization if offered a better salary in a different organization. This inversely means that improving the salary for employees would be a strategy to retain them for longer. According to Parker and Wright, the salary affects the attractiveness and holding of the workers (Parker and Wright, 2001). Moncraz, Zhao, and kay also state that the salary reduces turnover and increase the commitment among the employees (Moncarz et al., 2009). The result of the study shows that annual increment motivates employees to stay in the organization. Higher and continuous increase in salary was the most common reason for turnover, and when asking how the remuneration system should be designed, base pay with additional bonus and benefits were preferred. Moncraz, Zhao and Kay salary increments in controlling employee turnover are very important (Moncarz et al., 2009).
From the result, it is clear that competitive compensation packages and benefits are very important for attracting and retaining employees. Because an employee can leave the job if they feel, their salary and benefits are not competitive with similar jobs at other organization. Lockwood and Walton also state that a way through which employers can maintain employment, by providing a good compensation package (Lockwood and Walton, 2008). If the company provides competitive, market-related salaries and benefits, its holding strategy can be successful. Because this motivates employees to be committed to the organization (Lockwood and Walton, 2008). So, a key strategy to attract and maintain a valuable employment in today’s market is to provide competitive employee benefits programs. Strategic Rewards study, 22% of top workers mention benefits as one of the top three reasons to leave their employer (Lewis and Heckman, 2006).
Workers compare their input (effort, experience, education, and competence) and results related to the input and results of other people (rewards). Employee focuses how fairly he/she had been treated compared to others. Employees try to balance the reward obtained by comparing what is given for their extended efforts with other receipts of similar circumstances before getting satisfaction over their work.
From the result of this study, it is found that non-financial incentives have not that much effect on employee retention. From regression analysis, it was found that a unit change in nonfinancial incentives, would lead to a 0.088 change in employee retention. The effect is very lower than other variables. Employee prefers financial rewards rather than nonfinancial rewards. In contrast, Cappelli argues that due to the recent movement towards benchmarking, organizations are now facing difficulties in setting competitive compensation package from their competitors hence the impact of financial rewards on employee retention is reduced (Cappelli, 2000).
Thus, this study shows that Compensation and benefits have the most significant relationship with intention to stay.
The study revealed compensation and benefits effects employee retention. Some limitation needs to be considered. The research was conducted in some private sector at Khulna region. The variables used in establishing the relationship in the study are limited to benefits, salary, incentives, nonfinancial incentives, and retention. But there are some other variables such as working environment, organizational culture, work-life balance can affect employee retention. Therefore, the future researcher can be conducted research by using additional variables which might not have been employed in this study.
5.3 Limitation and Future Studies
The study revealed compensation and benefits effects employee retention. Some limitation need to be considered. The research was conducted in some private sector at Khulna region. The variables used in establishing the relationship in the study are limited to benefits, salary, incentives, nonfinancial incentives and retention. But there are some other variable such as, working environment, organizational culture, work life balance can effect employee retention. Therefore, future researcher can be conducted research by using additional variables which might have not been employed in this study.
Thus we conclude that the compensation has a positive effect on the employee’s holding. An attractive compensation package employee is a motivation factor to maintain his work. Employee evaluation should include various enrichment. An upward career increase should come with increased pay and merit increase. In addition, performance-based bonuses motivate employees in terms of aligning their personal goals with the company’s goals. Stock options, profit sharing, and spot rewards, such as incentives, can affect compensation replacement by other means. This form of compensation demonstrates how the employee’s overall performance from the company’s overall profit is very high. Spot prizes are not usually profitable; however, they immediately give recognition, reward, and compensation when the company’s leadership performs an employee’s higher job worker. Approval acceptance with motivational policies is the key to employee retention, and if compensation is part of the recognition then the compensation can increase employee retention.