Employees Perception for Pay Parity and Its Impact on Job Satisfaction in Textile Industry of Ahmedabad Region

Transcription

1 Employees Perception for Pay Parity and Its Impact on Job Satisfaction in Textile Industry of Ahmedabad Region Ms. Avani Shah Faculty, Chimanbhai Patel Institute of Management and Research, Ahmedabad. Mail id: Ms. Chaitali Shah Faculty, Chimanbhai Patel Institute of Management and Research, Ahmedabad. Mail id:

2 ABSTRACT Compensation forms a major part of the organizational expenditure, so it is of utmost important for any organization. Thus, compensation management should be given the prime importance. Employees who are satisfied and motivated engage in productive activities and dedicate themselves fully to the organizational needs. It results in more productivity, turnover, profits and customer satisfaction on organization s part. Thus, compensation management helps the organization in achieving its predetermined goals by way of employee satisfaction and motivation. The research was carried out for 100 employees of Selected Textile Companies of Ahmedabad Region. This research paper aims to identify employees perception regarding pay parity and job satisfaction. Keywords: Compensation Management, Pay parity, Job Satisfaction, Textile Industry

3 1.1 INTRODUCTION TO TEXTILE SECTOR Popularly termed as the textile state of India, Gujarat has one of the most flourishing textile industries in the country. Also said to be the Manchester of the East and the Denim Capital of India the textile industry in Gujarat contributes almost 3% towards the GDP of India. India holds a major portion of global textile market share. The two major textile manufacturing cities in Gujarat are Ahmedabad and Surat. Both these cities together account for almost 50% of the total textiles produced in Gujarat. The textile industry in Ahmedabad has flourished and has an established presence in domestic as well as international textile industry. It is one of the prominent cities in Gujarat having built necessary facilities for textile industry. The Indian textile industry contributes 14 per cent to industrial production, 4 per cent to GDP, 17 per cent to export earnings and employs 3.8 crore people, making it the largest source of employment after the Railways. It is currently valued at Rs 2.75 lakh crore with 64 per cent catering to domestic demand. 1.2 INTRODUCTION TO TOPIC Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required. Compensation is based on: Market research about the worth of similar jobs in the marketplace, Employee contributions and accomplishments, The availability of employees with like skills in the marketplace, The desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and The profitability of the company or the funds available in a non-profit or public sector setting, and thus, the ability of an employer to pay market-rate compensation. Employees receive compensation in return for his or her contribution to the organization. Compensation also termed as remuneration occupies an important place in the life of an employee. His or her standard of living, status in the society, motivation, loyalty and productivity

4 depend upon the remuneration he or she receives. For the employer too, remuneration is significant because of its contribution to the cost of production. Besides, many battles are fought between the employer and the employees on issues relating to wages or bonus. For Human Resource Management, employee remuneration is a major function. The HR specialist has a difficult task of fixing wages and wage differentials acceptable to employees and their leaders. Compensation can be paid in variety of forms such as wages and salary, incentives, fringe benefits, perquisites and other non-monetary benefits. Adam Smith s equity theory says that an employee who perceives inequity in his or her rewards seeks to restore equity. The theory emphasizes equity in pay structure of compensation. Employees perception of how they are being treated by their firm is of prime importance to them. The dictum a fair day work for fair day pay denotes a sense of equity felt by the employees. When employees perceive inequity, it can result in job dissatisfaction, lower productivity, higher absenteeism or increase in employee turnover. When employees feel that pay parity exists in the organization, employees will develop a sense of job satisfaction, motivation and dedication which in return would help organization in terms of higher productivity, low turnover and increased organizational effectiveness. 1.3 LITERATURE REVIEW Karen Hopper Wruck (2000) explained that a sound compensation system improves the motivation and productivity of employees, reduces personnel turnover. The study emphasized the need of strategic compensation management to enhance employee satisfaction. The research established that a strong positive relation between reward and performance is critical to bring about value-creating change. Marco Van Herpen & et. al. (2003) developed a conceptual model that can be used to empirically test this effect. It has been found that the employee's perception of the compensation system influences the motivation level of employees. The survey results demonstrated a significant positive relationship between the perceived characteristics of the compensation system and extrinsic motivation. The compensation system also significantly affects other indicators of motivation, namely work satisfaction and turnover intent. Axel Engellandt and Regina T. Riphahn (2004) studied 6500 employees of large international company to study the incentive effects of performance related pay. The study established that

5 surprise bonus payments and flexibility in the evaluation of individual performances over time provide effective incentives for employee effort. The part of the salary is determined by individual performance evaluations. Ian Larkin & et. al. (2011) studied that the psychological costs of Pay-for-Performance. Compensation is strategic not only in motivating and attracting the worker being compensated, but also in its impact on peer workers and the firm s complementary activities. Joerg-Markus Hitz & et. al. (2012) focused on insights of remuneration and sensitive personal information disclosure. Findings indicated that the compensation level and particularly payments over industry average are positively associated with disclosure resistance, while variable compensation components are conducive to transparency. 1.4 RESEARCH METHODOLOGY Research Problem: The research aimed to identify whether pay parity exists in the compensation management across the textile industries of Ahmedabad region. The study also focused on identifying the impact of the pay parity in compensation management on employees job satisfaction in selected textile industries of Ahmedabad region Research Objective: To identify the impact of employee s perception of pay parity on Job satisfaction. To analyze the level of job commitment across various income groups. To identify the association between frequency of salary structure reviewed and job satisfaction Research Design: Type of Research: Descriptive Sampling Unit: Employees of Selected Textile Companies Sample size: 100 Employees Sampling Method: Non-probability Convenience Sampling Data Collection Instrument: Questionnaire Type of Questionnaire: Five point Likert Scale

6 1.4.4 Data Collection: Primary data: Questionnaire from the employees of textile industries of Ahmedabad region. Secondary data: brochures, magazines, websites, 1.5 DATA ANALYSIS AND INTEPRETATION 1) H0 1 : There is no significant relationship between employees perception of Pay Parity and Job satisfaction. HA 1 : There is a significant relationship between employees perception of Pay Parity and Job satisfaction. Correlations Parity_of_pay Job_Satisfaction Parity_of_pay Pearson Correlation Sig. (2-tailed).001 N Job_Satisfaction Pearson Correlation Sig. (2-tailed).001 N The significant value is.001 which is less than.05. Therefore H0 is rejected and H1 is accepted. It can be concluded that there is a significant relationship between employees perception of Pay Parity and Job satisfaction. The Pearson Correlation value is.332 stating a positive moderate correlation between Pay Parity and Job satisfaction. 2) H0 2 : There is no significant impact of employees perception of Pay Parity on job satisfaction. HA 2 : There is a significant impact of employees perception of Pay Parity on job satisfaction. Model Summary b Model R R Square Adjusted R Square Std. Error of the Estimate a

7 a. Predictors: (Constant), Pay_Parity b. Dependent Variable: Job_Satisfaction Coefficients a Model Unstandardized Coefficients Standardized Coefficients B Std. Error Beta T Sig. 1 (Constant) Pay Parity a. Dependent Variable: Job_Satisfaction It can be inferred from the above table that impact of pay parity on job satisfaction is.498 which is moderate. Upto 50% of variation in Job Satisfaction can be explained through Pay Parity. One of the most important reasons for moderate impact is that job satisfaction is affected by many other individual and organisational factors apart from compensation. 3) H0 3: There is no significant difference in the job satisfaction level of employees across various income groups. HA 3: There is a significant difference in the job satisfaction level of employees across various income groups. ANOVA Job_Satisfaction Sum of Squares df Mean Square F Sig. Between Groups Within Groups Total The significant value is.000 which is less than.05. Therefore H0 is rejected and H1 is accepted. It can be concluded that there is a significant difference in the job satisfaction level of employees across various income groups. 4) H0 4 : There is no significant relationship between frequency of salary structure reviewed and Job satisfaction. HA 4 : There is a significant relationship between frequency of salary structure reviewed and Job

8 satisfaction. Correlations Parity_of_pay Job_Satisfaction Frequency_of_Review of SS Pearson Correlation Sig. (2-tailed).002 N Job_Satisfaction Pearson Correlation Sig. (2-tailed).002 N The significant value is.002 which is less than.05. Therefore H0 is rejected and H1 is accepted. It can be concluded that there is a significant relationship between frequency of salary structure reviewed and Job satisfaction. The Pearson Correlation value is.598 stating a positive correlation between Pay Parity and Job satisfaction. 1.5 FINDINGS OF THE STUDY The research established that there is a significant impact of employees perception regarding pay parity and job satisfaction. Thus, employees will have higher job satisfaction when they feel that there is pay parity. The frequency of salary structure reviewed also bear a strong relationship with job satisfaction level among employees. The level of job satisfaction among employees varies across various income groups and experience groups. The research results established that majority of the employees expect annual increment in their compensation package based on either seniority, merit or job performance. The major components of compensation package are basic salary, various allowances, EPF, ESI, Profit sharing plans, perquisites and earned leaves. Pay parity also affected motivation level of employees which means those employees who believed that pay parity exists in the organization were motivated.

9 1.6 CONCLUSION OF THE STUDY Employees standard of living, status in the society, motivation, loyalty, and productivity depend upon remuneration they receive. Thus, HR department has a great responsibility in determining in compensation packages as proper packages can lead to job satisfaction and increased motivation. It can be concluded from the study that compensation packages, its components, and pay parity are significant factors in enhancing and maintain job satisfaction level among the employees though pay parity is not the only factor. Organizations should adopt practices such as transparent pay structures, skill and performance based pay and al-carte options for allowances. The level of job satisfaction can be enhanced if salary structure and bonus payments and reviewed at regular interval.

10 REFERENCES Engellandt, Axel and Riphahn, Regina T., Incentive Effects of Bonus Payments: Evidence from an International Company (July 2004). IZA Discussion Paper No Available at SSRN: Hitz, Joerg-Markus and Werner, Joerg R., Why do Firms Resist Individualized Disclosure of Management Remuneration? (October 4, 2012). Available at SSRN: or Larkin, Ian, Pierce, Lamar and Gino, Francesca, The Psychological Costs of Pay-for-Performance: Implications for the Strategic Compensation of Employees (July 27, 2011). Harvard Business School NOM Unit Working Paper No Available at SSRN: or Van Herpen, Marco, Van Praag, Mirjam and Cools, Kees, The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study (June 2003). Tinbergen Institute Discussion Paper No /3. Available at SSRN: or Wruck, Karen Hopper, Compensation, Incentives and Organizational Change: Ideas and Evidence from Theory and Practice (Autumn 2000). Dice Working Paper No Available at SSRN: or Ashwathappa K., (2010), Human Resource Management (6th Edition), Tata McGrew Hills publication, pp Gary Dessler and Biju Varkkey, (2009), Human Resource Management (11 th Edition), Pearson Publication, pp