Impact of Compensation system on employee performance – A study with special reference to service sector

Compensation is recompense or reward given by an organization to individuals in return to a work done, services rendered, or a contribution made towards the accomplishment of organizational goals. The objective of competent pay for performance is to attract capable applicants and by retaining current employees as strengths.

This study examines impact of compensation on the performances of employees and the extent to which compensation management can be used as a tool for improving organizational performance in the service sector. It is also aimed at finding out if efforts of the employees commensurate with compensation and ascertain the extent to which reform programmes of the sector have affected compensation policies and practices. In pursuance of the objectives of the study, the descriptive survey design is developed. Chi square-test is also employed to test the significance of the coefficient of correlation at 5% level of significance.

The topic is of particular interest to the researcher because employees who are involved in service sector are those who are commonly found to experience face-to-face interactions with customers and play an important role in ensuring that service quality is delivered.

In this context, there is a need for companies in the service sector to really focus on determining how they can encourage their employees to be dedicated and engaged with their work.