LITERATURE REVIEW

The purpose of this chapter is to conduct a review of the literature on employee compensation, which forms the foundation on which this study is based, by facilitating an understanding of previous research and insight into current trends in the field of employee compensation. This chapter describes how literature on Awareness of employee compensation and its effect on their motivation. Compensation philosophy is discussed, followed by a description of the motivational effect in this study. Previous studies on employee compensation are reviewed, followed by a discussion of the similarities between this study and other recent studies.

This focuses on a study which assessed the impact of awareness of employee benefit and Motivation. In addition, the influence of benefit awareness on both individual and organizational outcomes was examined. The findings of this study strongly support the idea that better communication of employee benefit plan features, leading to increased awareness, can facilitate motivation among the employees.

Dessler, ISSN 2090-4304 Journal of Basic and Applied Scientific Research, 2(5)4616-4623, 2012 Compensation as all forms of payments or rewards given to employees which arise from their employment. Compensation can be divided in to various parts. One way is to break it down into three parts namely, Fixed-Pay, Flexible Pay and Benefits. Fixed pay is the compensation given to employees as their base salaries example promotions, merit increase and cost of living increase. These come under fixed pay because all of them become part of the employees base salary after its effect. Flexible pay consists of two components in itself, variable pay and deferred Income. Variable pay relates to commissions, bonuses, gain sharing, goal-based pay etc: where, the amount of pay is variable or its distribution is not certain, which is given usually to salespeople. Deferred income is long-term organization pay schemes e.g. profit sharing, company savings plans employee stock ownerships etc. Finally

we have Benefits, which include things like vacations, sick leave, company car, company house, severance pay, medical insurance, retirement benefits etc.

Vroom, ISSN 2090-4304 Journal of Basic and Applied Scientific Research, 2(5)4616-4623, 2012 Motivation is the drive of a person to carry out a task which he desires to do so. focuses on higher end concepts like; motivation due to self-belief etc: (Vroom, 1964). However, one can say Motivation is the activation of goal-oriented behavior whether motivation is intrinsic or extrinsic. Intrinsic motivation is something that comes from within the person e.g challenging task motivates some people while thirst for recognition motivates others and extrinsic motivation is motivation caused by external factors example pay, bonuses etc. The Focus of this research is on extrinsic motivation. Vrooms Expectancy theory says that people are motivated when they have a self-belief on their skills, belief in the promises of the management about getting the reward and the personal value they place on a specific reward.

Bob, ISSN, TRANS Asian Journal of Marketing & Management Research September 2012

Vol.1 Issue 1,

Compensation processes are based on Compensation Philosophies and strategies and contain arrangement in the shape of Policies and strategies, guiding principles, structures and procedures which are devised and managed to provide and maintain appropriate types and levels of pay, benefits and other forms of compensation. This constitutes measuring job values, designing and maintaining pay structures, paying for performance, competence and skill, and providing employee benefits. However, compensation management is not just about money. It is also concerned with that non-financial compensation which provides intrinsic or extrinsic motivation

Rizwan et al, The International Journal Of Engineering And Science (IJES), Volume 2 2013 Issue 7 Pages 70-80 ISSN(e): 2319 1813 ISSN(p): 2319 1805

Motivation is derived from the word motivate, means a move, push or influence to proceed for fulfilling a want. Among financial, economic and human resources, the latest are more essential and have the capability to endow a company with competitive edge as compared to others. Employee performance fundamentally depend on many factors like performance appraisals, employee motivation, employee satisfaction, compensation, training and development, job security, organizational structure and others, but the area of study is focused only on employee motivation as this factor highly influence the performance of employees. Employee motivation is one of the policies of managers to increase effectual job management amongst employees in organizations.

Ajila, ISSN: 0975-5853,Global Journal of Management and Business Research,Volume 11 Issue 4 Version 1.0 March 2011 An intrinsically motivated individual, will be committed to his work to the extent to which the job inherently contains tasks that are rewarding to him or her. And an extrinsically motivated person will be committed to the extent that he can gain or receive external rewards for his or her job. He further suggested that for an individual to be motivated in a work situation there must be a need, which the individual would have to perceive a possibility of satisfying through some reward. If the reward is intrinsic to the job, such desire or motivation is intrinsic. But, if the reward is described as external to the job, the motivation is described as extrinsic. Good remuneration has been found over the years to be one of the policies the organization can adopt to increase their workers performance and thereby increase the organizations productivity. Also, with the present global economic trend, most employers of labour have realized the fact that for their organizations to compete favorably, the performance of their employees goes a long way in determining the to influence workers performance to motivate them began in the 1970s

Butkus & Green, ISSN 2222-1905, European Journal of Business and Management (Paper) Vol 3, No.3 According to Butkus & Green (1999), motivation is derived from the word motivate, means to move, push or influence to proceed for fulfilling a want

Among financial, economic and human resources, the latest are more essential and have the capability to endow a company with competitive edge as compared to others. Employee Performance fundamentally depend on many factors like performance appraisals, employee motivation, Employee satisfaction, compensation, Training and development, job security, Organizational structure and other, but the area of study is focused only on employee motivation as this factor highly influence the performance of employees. Employee motivation is one of the policies of managers to increase effectual job management amongst employees in organizations. A motivated employee is responsive of the definite goals and objectives he/she must achieve, therefore he/she directs its efforts in that direction.

Minner, Ebrahimi, and Watchel, International Journal of Business and Social Science Vol. 2 No. 1; January 2011 The management of human resources at work is a vital component of the management process. To realize the critical importance of people in the organization it is imperative to recognize that the human element and the organization go together. One way of achieving this goal and to realize the critical importance of the people in the organization is to keep them motivated. In the field of management the key to understanding the process of motivation lies in the meaning of, and relationship among, needs, drives, and incentives. In their work, Minner, Ebrahimi, and Watchel (1995) elaborate in a system sense that, motivation consists of these three interacting and interdependent elements, i.e., needs, drives, and incentives.For as long as organizations have existed, compensation has been recognized as a major motivator of employees as well as an important tool and expense for organizations. Understanding the construct of compensation systems, its impact upon the organization's structure, strategies, and employees has been an important area. To use compensation as a motivator effectively, personnel managers must consider four major components of a pay structures in an organization. These are (a) job rate, which is the importance the organization attaches to each job;(b) payment, which encourages employees by rewarding them according to their performance;(c) personal or special allowances; and (d) fringe benefits such as holidays with pay, pensions, and so on.

Luthans, International Journal of Business and Management

Vol. 5, No. 11; November 2010

Luthans (1998) asserts that motivation is the process that arouses, energizes, directs, and sustains behavior and performance. Motivation encourage people internally towards the actions which helps them to achieve a preferred task employ effectiveness is a way which can inspire people to their work and can bring more work motivation to their commitment of their jobs. Intrinsic motivation, however, can be defined as the motivation to perform an activity for it, in order to experience the pleasure and satisfaction inherent in the activity. According to cognitive evaluation theory and self-determination theory, rewards that are interpreted as information about ones competence and satisfy individuals need for autonomy, will enhance intrinsic motivation.

Beer et al, ISSN: 2278-487X, IOSR Journal of Business and Management (IOSR-JBM). Volume 6, Issue 2 (Nov. - Dec. 2012), PP 09-15 It is important for the organizations to meet and introduce new motivational tools of employees since the change has been observed on the workplace realities in todays organizations. Beer et al, (1984) strongly asserts in their research of changing work environment the reality that organizations today have totally changed, therefore it is more important for the top management to carry out new methodologies of developing strong and durable relationship between the organization and employees for meeting the organizational goals and fulfilling the continually changing needs of both parties. Most of the organizations have gained the immense progress by fully complying with their business strategy through a well balanced reward and recognition programs for employee

Davis, T.J.. Organizational Tenure and Job Performance. Journal of Management . Volume XX No X. Southern Management Association, 2007. Compensation systems do not exist in a vacuum. At a very basic level, an organizations compensation system reflects a reasoned strategy on the part of organizational decision makers with regard to how vigorously an organization is going to compete within a competitive and constantly changing marketplace. In the public sector, this often involves deliberate decisions by

appointed or elected policy boards, acting upon the recommendations of professional administrative staff. Over time, creative thinking by both public and private sector managers has resulted in the development of theories of compensation that purport to increase employee motivation, job satisfaction and, in turn, organizational performance and productivity (Davis, 2007)

Thomas E. Catanzaro, ISSN 2162-3058, International Journal of Human Resource Studies, Vol. 2, No. 3, 2012 Reward is a broad idea that can include anything an employee may value and desire that an employer is able or willing to offer in exchange for employee contribution. The productivity of an organization and human resource management has a direct relationship with each other. If employees are managed appropriately i.e. job analysis, recruitment, training, motivational tools like compensation etc. they are destined to give high performance in their operations so will improve the overall productivity of the organization (Ichniowski, 1997; Shaw, 1997; Prennushi, 1997). Thomas E. Catanzaro (2001) in his article Compensation and Motivation described the effects of rewards over employee motivation. He stated that rewards have a profound effect over employee motivation. He also discussed several factors of compensation which include both intrinsic and extrinsic factors and their possible effects over motivation in detail. He also emphasized that monetary values are not the only motivators but non-monetary factors have more importance towards motivating employees.

Brown, International Journal of Business and Social Science Vol. 2 No. 8; May 2011 Regarding the importance of an effective reward strategy, Brown (2001) says that reward strategy is eventually a way of thinking that one can apply to any reward issue arising in an organization, to see how he/she can create value from it. Hence we can say that the aim of reward strategy is to achieve higher levels of organizational, team and individual performance. Developing and managing a reward system, which is efficient and suited to the organization, is an essential human resource management function. From an organizational perspective, the aim of a reward system is to attract, motivate and retain high-quality employees, as well as to foster

high levels of performance but the reward system should be built on an understanding of employees reward preferences. There are several ways to classify means of rewarding, as well as individual reward preferences. In this study, rewarding is considered to consist of extrinsic and intrinsic elements. The origins of this classification can be traced back to the school of human relations. These means of reward should, ideally, create a motivating and effective total reward system. Besides pay, financial rewarding includes bonuses (such as result-based pay), options, stocks, insurance and retirement benefits.

Liang Gie, ISSN: 2319 8028, International Journal of Business and Management Invention, Volume 3 Issue 2 PP. 64-79, February 2014 One aspect of employee is motivation giving (power stimulant) to employees, with popular as giving employees spirit to work. Every employee who gave useful possibilities into organization is arranged by leadership to realize that. Effort to realize these possibilities is using motivation. Motivation is intended to give power to employee in order work with his own efforts. Work that performed by one manager in providing inspiration, enthusiasm, and encouragement to others (employees) will take such measures. Giving encouragement is intended to remind people or employees so they are excited and can achieve desired result. Therefore, a manager is demanded to know or understanding the nature and characteristics of employees. It requirement is based on mastery motive manager on behavior and actions are limited the motive, then manager can affect subordinates to act in accordance with organization wishes. Motivation basically is a process to try to affect someone to do what we want to do (Martoyo, 2000). In other words, it is beyond encouragement of someone to carry out something. Encouragement (driving force) meant a natural urge to satisfy life need, and a tendency to sustain life. Most important key is a deep understanding of human beings. As said by Liang Gie in Martoyo (2000), motive or impulse is an impulse that became base for a person to do something or working, highly motivated, namely those who carry out substantial efforts in order to support the objectives of production work unit, and organization where he works. A person without motivation only gives minimum effort to work.