Rewards and compensation play a vital role in motivating employees and improving performance in organization. A cautiously designed reward and compensation system can significantly increase the performance of employees resulting in organization's effectiveness and productivity. With the changing scene in the world of work today, a multifaceted reward and compensation system is required to meet the demands of the employees.
According to Watson (2003) a reward is usually something valuable, such as money. Rewards serve in various ways in organizations. They help to build a better employment contract, hold on to good employees and to reduce employee turnover (Watson, 2003).
Armstrong (2007) asserted that reward is concerned with employees and organization performance development through which better result can be achieved by understanding and managing reward within an agreed framework and planned goals.
According to Gkorezis and Panagiotis (2008) the principal goal of reward is to increase people's willingness to work in one's company to enhance their productivity. Reward systems are the mechanisms that make this happen. They can include awards and other forms of recognition, promotions, re-assignments, non-monetary bonuses like vacations or simply thank you. Employers get more of the performance they reward, not what they anticipate they will automatically get from employees (Rivai & Ella, 2010).
Sarika (2016) indicated that compensation plays an important role in organizations that want to achieve their objectives and goals. It is one of the most important and vibrant human resource practices. Compensation includes design, development, implementation, communication and evaluation of the reward strategy and processes of the organization. Compensation is the total of all forms of payments and rewards provided to employees for executing tasks to achieve organizational objectives (Sarika, 2016).
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According to Azis (2020) compensation may accomplish numerous purposes assisting in recruitment, job performance and satisfaction. Compensation includes direct cash payments, indirect payments in the form of employee benefits and incentives to motivate employees to strive for higher levels of productivity. It is a critical component of employment relationship (Ibojo & Asabi, 2014).
Reward and compensation systems are extremely vital for an organization. Rewards and compensation include systems, programs and practices that influence the actions of people. The purpose of reward systems is to provide a systematic way to deliver positive consequences. The only way employees accomplish the employers dream is to share in their dream. Compensation is important for employees as individuals because the volume of compensation reflects the size of their work among the employees themselves, family and community.
According to Liebowitz (2010) rewards and compensation programs can be modified to give bonuses based in part on the employee’s appraisal ratings on the behavioral and technical competencies and in addition, employees could be awarded bonuses for their outstanding work on special projects.
Colquitt, Lepine and Wesson (2011) indicated that performance is the organization's ability to maintain its objectives by using resources effectively and efficiently. Performance is a measure of tangible behavior in the workplace that is multi-dimensional in nature, where quality of work, the quantity of work, working time and cooperation with co-workers are performance indicators (Colquitt et al, 2011).
In a very keen competition situation today, every organization is required to be able to boost all its resources to win the competition, one of which is improving the quality of human resources. Improving the quality of human resources is one of the organizations main determinations in preparing a reliable and committed employees. Improving the quality of human resources has an imperative role in increasing organizational performance to compete and sustain in global competition.
Employees are the key resources for any organization and in the circumstance of managing people, the reward and compensation system underlines a center feature of the employment association. The success or failure of the organization mostly depends on their employees. To be successful or to get a well performed tasks or achieving the desired goals of the company, employees should be motivated, attracted and retained in the organization.
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