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THE IMPACT OF BONUSES AND INCREMENTS ON EMPLOYEES RETENTION

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 THE IMPACT OF BONUSES AND INCREMENTS ON EMPLOYEES RETENTION
Neama Talal and Haitham M. Alzoubi*
*Associate professor of Management, Skyline University College, UAE

ABSTRACT
The study investigates the impact of the bonuses and increments on employee retention. The study
discussion is about how the retention of the employees would be impacted by the type and sort of
bonus and increment targeted in the employee monthly salary. The study tells about the "crucial
business cycle" that is based on the payment that is for one time. The study builds on the review
of the literature, and how benefit from these different approaches of scholars about the use of the
bonus and increment for the employee retention. The study followed a quantitative method that is
to be used to achieve the study objectives. The SPSS package analyzed the 50 questionnaires were
collected. The results of the analysis used the proper statistical methods. The results showed
positive and high impact to the way that any organization uses the bonuses and increments to
enhance and improve its level of retaining its employees.
Keywords: Bonus, Increment, Reward System, Employee retention.

1. INTRODUCTION
In any business scenario, bonuses and incentives are two essential elements that the employers and
the management team need to consider. Incentives and rewards are given to employees who
perform exceptionally well and work beyond their limitations. These factors act as a form of
motivation for the workers. The employees whose performance is better than other employees
receive a bigger bonus or incentive than the others. The ‘built-in incentive" for any workers or the
employee’s demands high performance from the business or the organization. Gifts can be of
various types. Performance bonuses are given to employees who perform well in the organization;
year-end bonuses are given to employees who worked dedicatedly throughout the year and do not
change the organization. These bonuses are given for their loyalty.. Bonuses and employee help
the organizations or businesses to retain their employees. Gifts will ensure that employees and
workers get a feeling of attachment with the company.
LITERATURE REVIEW
According to the Wickramasinghe, M. D. N., & Sajeevani, T. L. 2018, the employee retention with
the help of the bonus has been described. To generate the description, the author has created a
study upon the relation between the rewards provided by the company and its impact on the mind
of the people (Hogarth, 2018)). To perform the analysis, they have completed the first study. To
achieve this analysis, they have generated, one questionnaire to the 162 people and with the help
of it, they have performed a detailed report. They have finalized the structure of the analysis and
then started the investigation. They have also taken the samples and analyzed them in the SPSS
software. From the generations of the solutions, they reached in a decision they have performed a
recommendation with the help of it (Adane, 2017). In the recommendation section, there are also
many of the factors that have generated, which will be noted as the future scope of another project.
Besides, the report has described an element so that employee retention can be identified. The
story has focused on the discussions which are being performed in the company in the case of the
bonus and from it if they can get a solution or not.
Research conducted by Joffrion, J. L., & Wozny, N. 2015 stated "the effect of the rewards in the
Military persons". The main intention of the study is to study and test the benefit of the culture and
the salary bonus. The hypothesis methods are to be used in this research. The random sampling is
also to be used with the hypothesis. The rate of the response by the population is about to be 70%.
The research is to be concluded by supporting the organizational culture and also satisfy the
workers facing the problems. The study also tells about some of the future and the limitation that
is to be discussed. The future scope of this research says by using more variables, the problem of
the bonus can be able to solve.
Azeez, S. A. 2017, in his journal, stated that retention of employees could be defined as a process
of physically keeping their workers or employees in an organization. It is one of the key elements
or aspects of the retention process. The authors also stated that employee retention is critical for
any organization or company as they form the energy or pillar of success for any organization in
the long run. The organization should implement necessary and appropriate strategies so that they
were able to retain the employees. One of such strategy the author describes is the increment from
time to time from based on performance. For a small organization where increment at a constant
rate may be a problem and therefore for such cases the retention of employees can be based on
providing bonuses. The authors stated that the concept of retention and engagement are essential
for ensuring a "productive workforce."
According to Haider et al.2016, retention of employees is necessary and forms a pivotal role in
the development of an organization or company. Retention is necessary as it can motivate the
employees in giving out their best performance and effort for the organization or company. This
can be achieved by paying the employees bonuses when particular work aspects can be achieved.
Thus from the review of the articles it can be derived that the variables which they discuss is
important for retention in increment and bonuses. They can be useful in providing the employees
with constant motivation. Thus are important factors for this study.

STUDY DILEMMA AND DESIGN

Employees may be dissatisfied if they are not given proper recognition for their work. Bonuses
and incentives can help the employees in achieving satisfaction in some of these aspects. Making
of the “strategic decisions” in an organization is beneficial both for the employers and the
employees (Correa-Garcia, J. A., Garcia-Benau, & Garcia-Meca, 2018). The views and
perspectives of the employees need to be considered and taken into account by their organization.
(ongdom.org, 2015)

Study Model
To perform the research, the analytical model has been selected to perform the analytical
performances of the software. The report is consists of the research model so that the generation
of the files can be achieved. The report has been generated with the help of the analysis, which is
shown in the SPss software (Faisal Ahammad et al. 2015). In the analysis model, there is both a
descriptive model and the "chi-square" model has been selected. (smallbusiness.chron.com, 2019)

Bonuses

Employees retention
Increments

Strategic decisions are the long term decisions of any company or organization. It is generally
associated or concerned with the business operation of an organization or business. These are
related to the planning of the organization for future references. Strategic decisions also deal with
threats, risks, and opportunities and threats linked to or associated with the environment. "Strategic
decisions” also impacts and benefits the organizational growth and planning for the business of
the organization or company. "Employee satisfaction" is a term which is used for describing the
situation or condition as to whether or not the employees in the organization is happy and
performing their responsibilities and duties in their working place (Naudé et al. 2016)). Some of
the factors which contribute to the "employee satisfaction" includes management behavior with
the employees, providing and giving recognition to the employees, offering benefits and incentives
to motivate and satisfy the demands of the employees (Wickramasinghe, & Sajeevani, 2018).
"Employee satisfaction" can be measured using a variety of factors (Azeez, 2017). These factors
include management, empowerment, "team working, effective communication" and relationship
and communication with coworkers or teammates.

Research Question
The research questions that will be asked or mentioned in this research are:
1. To what degree will the bonuses impact the retention of employees?
2. To what degree will the increments impact the retention of employees?

Research Hypothesis
There will be two hypotheses that will be taken into account or consideration.
H01: There is no statistically impact to bonuses on employee retention at 0.05 level.
H02: There is no statistically impact to increments on employee retention at 0.05 level.

Methodology
Research Design: Three types of research design can be performed. They are ‘exploratory,
descriptive, and explanatory.” The explanatory model will be used for this research purpose.
Sample size and Population: A total of 50 employees of the Woolworths company located in
Australia is taken into consideration (Haider et al. 2015). Woolworths company offers services to
millions of customers in the Australian market and on a global scale.
Data collection procedure: A questionnaire is prepared based on which the data are collected and
analyzed — the survey comprised of 11 questions (Moodley, & Hove, 2018). The questions have
been prepared while keeping the views and perspectives of the employees intact and prioritized.
This data collection method proved to be useful for the research purpose.
Data Collection: There are two types of data which include primary data and secondary data. The
first hand or raw data collection involves primary data, whereas the secondary data collection
includes collecting information and data from newspapers, journals or any kind of websites. In this
research, data is obtained from 50 employees of the Woolworths organization in Australia.

DATA ANALYSIS
In the analysis phase, the graphs related to the data analysis will be performed. In this situation,
the data analysis helps to generate the chart from the study and get the actual results from it. For
example-

Figure 2: Bonus factor

In this graph, the importance of the bonus has been measured by asking the employee that if they
get a bonus in time or not. Here, most of the people thought that, if they got a gift in time so that
they can feel valuable in the company. From the graph, it is clear that from 50 of the samples, 25
samples said that they would think themselves scarce if they got a bonus in time. In this section,
they are also an answer was there, which tends to "Don't know", this person is the neutral people
in the sample (Huang, 2017). The complete analysis has been performed by taking them as neutral.
After that, the graphs have been generated. This analysis is also known as the primary analysis.
The figure which is made is a clear and comprehensive one. (bizjournals.com, 2019)

Descriptive Analysis

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Gender 50 1 2 1.40 .495

Age 50 1 4 2.48 1.092

Stratergic_analysis 50 1 3 1.90 .789

complexity 50 1 3 1.84 .738

desicion_making 50 1 3 1.92 .752

Views 50 1 3 1.76 .847

Opportunity 50 1 3 1.62 .697

Struggle 50 1 3 1.92 .900

Feedback 50 1 3 2.20 .808

availability 50 1 3 1.76 .847

Involvement 50 1 3 2.06 .843

Bonus 50 1 3 2.00 .808

Valid N (listwise) 50

Table 1: Descriptive Statistics

Frequencies
Statistics

Gender Age valuability Opportunity

 N Valid 50 50 50 50

Missing 0 0 0 0

Gender

Frequency Percent Valid Percent Cumulative

Percent

Valid Male 30 60.0 60.0 60.0

Female 20 40.0 40.0 100.0

Total 50 100.0 100.0

Age

Frequency Percent Valid Percent Cumulative

Percent

Valid 25-34 12 24.0 24.0 24.0

35-44 13 26.0 26.0 50.0

45-54 14 28.0 28.0 78.0

55-64 11 22.0 22.0 100.0

Total 50 100.0 100.0

Availability

Frequency Percent Valid Percent Cumulative

Percent
 Valid Yes 25 50.0 50.0 50.0

No 12 24.0 24.0 74.0

Don’t know 13 26.0 26.0 100.0

Total 50 100.0 100.0

Opportunity

Frequency Percent Valid Percent Cumulative

Percent

Valid Yes 25 50.0 50.0 50.0

No 19 38.0 38.0 88.0

Don’t know 6 12.0 12.0 100.0

Total 50 100.0 100.0

Table 2: Frequencies

Crosstabs
Case Processing Summary

Cases

Valid Missing Total

N Percent N Percent N Percent

Gender * 50 100.0% 0 0.0% 50 100.0%

desicion_making * Views
Gender * Retention * Views Cross tabulation

Views decision-making Total

Yes No Don’t
know

Yes Gender Male Count 16 9 25

Expected Count 16.0 9.0 25.0

Total Count 16 9 25

Expected Count 16.0 9.0 25.0

No Gender Male Count 5 5

Expected Count 5.0 5.0

Female Count 7 7

Expected Count 7.0 7.0

Total Count 12 12

Expected Count 12.0 12.0

Don’t Gender Female Count 1 12 13

know

Expected Count 1.0 12.0 13.0

Total Count 1 12 13
 Expected Count 1.0 12.0 13.0

Total Gender Male Count 16 14 0 30

Expected Count 9.6 13.2 7.2 30.0

Female Count 0 8 12 20

Expected Count 6.4 8.8 4.8 20.0

Total Count 16 22 12 50

Expected Count 16.0 22.0 12.0 50.0

Chi-Square Tests

Views Value df Asymp. Sig. (2-

sided)

Yes Pearson Chi-Square .b

N of Valid Cases 25

No Pearson Chi-Square .c

N of Valid Cases 12

Don’t know Pearson Chi-Square .b

N of Valid Cases 13

Total Pearson Chi-Square 28.788a 2 .000

Likelihood Ratio 38.460 2 .000

 Linear-by-Linear 27.285 1 .000
Association

N of Valid Cases 50

a. 1 cells (16.7%) have expected count less than 5. The minimum expected count is 4.80.

b. No statistics are computed because Gender is constant.

c. No statistics are calculated because retention is constant.

Symmetric Measures

Views Value Asymp. Approx. Approx.

b
Std. Error T Sig.

Yes Interval by Pearson's R .d

Interval

N of Valid Cases 25

No Interval by Pearson's R .e
Interval

N of Valid Cases 12

Don’t Interval by Pearson's R .d

know Interval

N of Valid Cases 13

Total Interval by Pearson's R .746 .049 7.766 .000c

Interval

Ordinal by Spearman .741 .051 7.637 .000c

Ordinal Correlation
 N of Valid Cases 50

Table 3: Crosstabs
a. Not assuming the null hypothesis.

b. Using the asymptotic standard error assuming the null hypothesis.

c. Based on normal approximation.

d. No statistics are computed because Gender is constant.

e. No statistics are calculated because desicion_making is constant.

T-Test
One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

Gender 50 1.40 .495 .070

Age 50 2.48 1.092 .154

complexity 50 1.84 .738 .104

retention 50 1.92 .752 .106

Struggle 50 1.92 .900 .127

Stratergic_analysis 50 1.90 .789 .112

Involvement 50 2.06 .843 .119

Views 50 1.76 .847 .120

One-Sample Test

Test Value = 0
 t df Sig. (2- Mean 95% Confidence Interval of
tailed) Difference the Difference

Lower Upper

Gender 20.004 49 .000 1.400 1.26 1.54

Age 16.052 49 .000 2.480 2.17 2.79

complexity 17.619 49 .000 1.840 1.63 2.05

retention 18.063 49 .000 1.920 1.71 2.13

Struggle 15.087 49 .000 1.920 1.66 2.18

Stratergic_analys 17.029 49 .000 1.900 1.68 2.12

is

Involvement 17.280 49 .000 2.060 1.82 2.30

Views 14.700 49 .000 1.760 1.52 2.00

Table 4: T-test

ONEWAY ANOVA

Bonus

Sum of Squares df Mean Square F Sig.

Between Groups 21.503 2 10.752 48.141 .000

Within Groups 10.497 47 .223

Total 32.000 49

Table 5: ANOVA
Conclusion and Recommendation
After the performance of the analysis, it is clear that the report which is performed is justified and
as per the basis of it, the recommendations have been generated (Joffrion, & Wozny, 2015). They
are to gather more people in the analysis, then to generate the solutions more accurately.
Furthermore, to gather more data about the company. Moreover, to have a clear idea about the
management role.

CONCLUSION
"Strategic business planning" plays a vital role in any organization or business. Retaining
employees is another crucial factor that organizations or companies need to follow or observe. If
the employees are hired, then an emotional attachment and bonding between the employees and
employers grow up, which improves and enhances the performances of both sides. Retained
Employees will dedicate and give their full efforts which can help the organization. The company
also needs to find ways and strategies so that their employees can be retained. The companies or
business organizations need to provide incentives or bonuses which can act as a source for keeping
employees in the organization. The organization or the management team needs to take feedbacks
and responses from the employees so that the organization can improve in certain aspects. Bonuses
can give motivation to the employees working in an organization. So to conclude it can be said
that rewards and incentives play a massive role in retaining many employees in an organization or
a company-provided their job satisfaction and other requirements are made or fulfilled by the
organization.
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