The Impact of Compensation and Internal Equity on Employee Performance

Abstract

Currently, employee performance has been an issue in many organizations and needs to be paid more attentions to. There is a greater need for organizations to focus on solving the issue of employee performance that will help them to accomplish their goals through the good performance of employees in the organizations. This study aimed to examine the impact of compensation and internal equity on employee performance of the ABC automotive corporation. A descriptive method of research was used in achieving the purpose of the study to assess the impact of compensation and internal equity on employee performance and to determine the significant relationships between the variables based on the respondents’ characteristics: Gender, age and length of working. The study used convenience sampling to distribute survey questionnaires to the respondents. A total number of 30 questionnaires were distributed and the researchers were able to get back the 30 questionnaires. To answer the first and second questions, the researchers used the descriptive design of research to get the overall mean of the respondents when it came to compensation and internal equity. To address the third and fourth question which is the relationship between compensation and employee performance and the relationship between internal equity and employee performance, the researcher used Pearson product-moment correlation coefficient. To address the fifth question of the research, Anova was used to determine the significant difference in the employee performance based on the respondents’ characteristics: gender, age, and length of working. Results revealed that ABC employees are highly compensated and have a high internal equity. There is a statistically significant relationship between compensation and internal equity and employee performance. There is no difference in terms of gender, age and length of working when employee performance is considered. Compensation plays a vital role in the performance of the employees therefore the organization should keep on compensating them highly so that there will not be a negative impact on employee performance, and also pay them fairly and equally based on their amount of works done. The study recommends the organizations to always consider a high and fair compensation of employees and for future studies, the use of different variables and sub-variables that can provide same or different results as the present study, also the future study should use a large sample of size since this study used a small one.