i

EFFECT OF COMPENSATION ON EMPLOYEES PERFORMANCE IN

PUBLIC HEALTH SECTOR: A CASE OF MBULU TOWN COUNCIL

JOSEPH DOMINIC CHIWANGA

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE

REQUIREMENTS FOR THE DEGREE OF MASTER OF HUMAN

RESOURCE MANAGEMENT (MHRM)

DEPARTMENT OF LEADERSHIP AND GOVERNANCE

OF THE OPEN UNIVERSITY OF TANZANIA

2021
 ii

CERTIFICATION

The undersigned certifies that she has read and hereby recommends for acceptance

by the Open University of Tanzania a dissertation entitled; “Effect of Compensation

On Employees Performance in Public Health Sector: A Case of Mbulu Town

Council” In partial fulfilment for the award of Degree of Master of Human Resource

Management (MHRM).

………………………………….
Dr. France Shayo
Supervisor

………………………………..
Date
 iii

COPYRIGHT

No part of this dissertation may be reproduced, stored in any retrieval system, or

transmitted in any form by any means, electronic, mechanical, photocopying, recording

or otherwise without prior written permission of the author or The Open University of

Tanzania in that behalf.

 iv

DECLARATION

I, Joseph Dominic Chiwanga, declare that, the work presented in this dissertation is

original. It has never been presented to any other University or Institution. Where

other people’s works have been used, references have been provided. It is in this

regard that I declare this work as originally mine. It is hereby presented in partial

fulfilment of the requirement for the Degree of Master of Human Resource

Management (MHRM).

…………………………………..
Signature

.……………………………….
Date
 v

DEDICATION

I, dedicate this study to my beloved wife Faraja Nkana and my children Jackline,

Janeth, and James whose prayers and emotional made this study to become possible.
 vi

ACKNOWLEDGEMENTS

May, I express my unique gratitude to almighty God who is full of love, care and

mercy for granting me health and life in every new day towards this quality end.

I also, would like to acknowledge with appreciation to many people who contributed

their time, skill and expertise to take the report from a mere idea through the

proposal process and ultimately this dissertation. My sincere thanks should go to my

supervisor Dr. France Shayo for his professional supervision that lead to come up

with this useful work. Vote of healthful appreciation should also go to all staff

particularly the management of Mbulu Town Council for their moral and material

support being done throughout my study.

Finally, I am obliged to thank my family for their moral tolerances under our

budgetary constraints throughout my study to its end. Let the highest sustain this

kind of spirit forever!

 vii

ABSTRACT

The study determined the effects of compensation on employees’ performance in the

public health sector in Mbulu town council. The study used three objectives namely,

to find out how extrinsic rewards have effects on employees’ performance, to

determine how intrinsic rewards have effects on employees’ performance and to

examine how feelings of equity have effects on employees’ performance. Also the

study addressed three research questions, namely: How extrinsic rewards have

effects on employees’ performance, how intrinsic rewards have effects on

employees’ performance and how feelings of equity have effects on employees’

performance. The study was conceptualized on two main theories namely Equity

theory and Herzberg two factors theory, methodology adopted was quantitative. The

population comprised 240 public health employees in Mbulu town council. Sample

size of 150 participants was chosen using systematic random sampling. Data were

collected using structured questionnaires. Data were analysed using descriptive

statistics and simple linear regression analysis. Finding from the study revealed that

there is moderate positive linear relationship between compensation and employees’

performance. The main conclusion drawn from the study addressed that

compensation is significant tools to improve employee performance. It was

recommended that recommends that the government and other stake holders should

revise the current salary scale, also organization should adhere to rules and

regulations when dealing with employees’ affairs, on top of that organization were

advised to recognize the outstanding performers. In connection to that equity should

be considered in distributions of extrinsic and intrinsic rewards.

Keywords: Compensation, Employees Performance, Public Health Sector, Compansation.

 viii

TABLE OF CONTENTS

CERTIFICATION....................................................................................................ii

COPYRIGHT............................................................................................................iii

DECLARATION.......................................................................................................iv

DEDICATION............................................................................................................v

ACKNOWLEDGEMENTS......................................................................................vi

ABSTRACT.............................................................................................................vii

TABLE OF CONTENTS........................................................................................viii

LIST OF TABLES....................................................................................................xii

LIST OF FIGURE ..................................................................................................xiii

LIST OF ABBREVIATIONS.................................................................................xiv

CHAPTER ONE.........................................................................................................1

INTRODUCTION AND BACKGROUND OF THE STUDY................................1

1.1 Overview.........................................................................................................1

1.2 Background to the Research Problem..........................................................1

1.3 Statement of the Research Problem.............................................................5

1.3 Research Objectives.......................................................................................6

1.3.1 General Objective..........................................................................................6

1.3.2 Specific Objectives.........................................................................................6

1.4 Research Question.........................................................................................6

1.5 Justification for the Study.............................................................................6

 ix

1.6 Organization of the Study.............................................................................7

CHAPTER TWO........................................................................................................8

LITERATURE REVIEW..........................................................................................8

2.1 Overview.........................................................................................................8

2.2 Conceptual Definition....................................................................................8

2.3 Theoretical Literature Review......................................................................9

2.3.1 The Equity Theory.........................................................................................9

2.3.2 Herzberg’s Two Factor Theory..................................................................10

2.4 Types of Compensation Packages..............................................................11

2.4.1 Direct Compensation...................................................................................12

2.4.2 Indirect Compensation................................................................................12

2.5 Empirical Literature Review......................................................................12

2.6 Research Gap...............................................................................................18

2.7 Conceptual Frame Work.............................................................................19

CHAPTER THREE..................................................................................................20

RESEARCH METHODOLOGY............................................................................20

3.1 Overview.......................................................................................................20

3.2 Research Philosophy....................................................................................20

3.3 Research Approach......................................................................................20

3.4 Survey Population........................................................................................21

3.5 Area of the Study.........................................................................................21

3.6 Sampling Design and Procedures...............................................................22

3.7 Variables and Measurement Procedures...................................................22

3.8 Methods of Data Collection.........................................................................23

 x

3.9 Data Processing and Analysis.....................................................................24

3.10 Ethical Issues................................................................................................24

CHAPTER FOUR....................................................................................................25

DATA ANALYSIS, INTERPRETATION AND DISCUSSION OF

FINDINGS.................................................................................................................25

4.1 Overview.......................................................................................................25

4.2 Respondents’ Profile....................................................................................25

4.3 The effect of Extrinsic Rewards on Employee Performance...................27

4.4 The Effect of Intrinsic Rewards on Employee Performance...................29

4.5 The Effect Of Feeling Of Equity On Employees Performance................31

4.6 Perception of Respondents on their Work Performance.........................33

CHAPTER FIVE......................................................................................................35

SUMMARY, CONCLUSION AND RECOMMENDATIONS............................35

5.1 Overview.......................................................................................................35

5.2 Summary of Major Findings......................................................................35

5.3 Conclusion....................................................................................................36

5.3.1 Effect of Extrinsic Rewards on Employees Performance........................36

5.3.2 Effect of Intrinsic Rewards on Employees Performance.........................37

5.3.3 Effect of Feelings of Equity on Employees Performance.........................37

5.4 Recommendations........................................................................................37

5.4.1 Reviewing Salary..........................................................................................37

5.4.2 Adhering to Rules and Regulations............................................................38

5.4.3 Recognizing Outstanding Performer.........................................................38

 xi

5.4.4 Providing Equal Rewards...........................................................................38

5.4.5 Providing Compensation Manual...............................................................38

REFERENCES.........................................................................................................39

APPENDICES...........................................................................................................46
 xii

LIST OF TABLES

Table 3.1: Measurement of Variables.....................................................................23

Table 4.1: Profile of Respondents........................................................................... 26

Table 4.2: Effects of Extrinsic Rewards on Employees Performance.................27

Table 4.3: Simple Linear Regression...................................................................... 27

Table 4.4: Effects of Intrinsic Rewards on Employees’ Performance.................29

Table 4.5: Simple Linear Regression...................................................................... 30

Table 4.5: The Effects of Feeling of Equity on Employees Performance............31

Table 4.6: Simple Linear Regression...................................................................... 32

Table 4.6: Perception of Respondents on their Work Performance....................33

Table 4.7: Simple Linear Regression...................................................................... 34

 xiii

LIST OF FIGURE

Figure 2.1: Conceptual Framework........................................................................19

 xiv

LIST OF ABBREVIATIONS

CWT Chama cha Walimu Tanzania

HRM Human Resources Management

KM Kilometre

OECD The Organization for Economic Co-operation and Development

QMPMS Quantitative Models for Performance Measurement Systems

SPS Statistical Package for social Sciences

ST Saint
 CHAPTER ONE

INTRODUCTION AND BACKGROUND OF THE STUDY

1.1 Overview

This chapter introduces the research topic by elaborating a background to the

research problem, statement of research problem, research objectives, and research

questions, justification of the study and organization of the study.

1.2 Background to the Research Problem

Compensation is an important issue that needs serious attention this is due to fact

that it directly or indirectly affects employees’ performance Armstrong (2016). It

has stronger impact on employees’ standards of living and communicates to them

the degree to which the employer values their contribution Mayson (2016). The

objective of compensation is to give proper refund to the employees for their

contributions to the organization, also it has a positive control on the efficiency of

employees and motivates them to perform better and achieve the specific standards

moreover it creates a base for happiness and satisfaction of the work force that limits

the labour turnover and confers stable organization on top of that it excites an

environment of morale efficiency and cooperation among the workers and ensures

satisfaction to the workers.

Generally compensation encourages the employees to perform better and show the

excellence as provides growth and development options to the deserving employees

Raza (2015). Employees are the organization key resource and the success or failure

of organizations center on the ability of the employers to attract, retain, and reward

appropriately talented and competent employees. Employees readmes to stay in the

company mainly depends on compensation packages of the organization

(Armstrong, 2016).

In an attempt to ensure employees optimal performance and retention, organizations

need to consider a variety of appropriate ways to reward the employees to get the

desired results (Olokundun 2014). It has been argued that the degree to which

employees are satisfied with their job and their readiness to remain in an

organization is a function of compensation packages and reward system of the

Organization (Fadugba, 2012).

Adeniyi (2013) posits that the fundamental tasks in human resources management

are compensation management. It is a complex task that occurs periodically, demand

accuracy and must not be delayed. In recent years, the inclusion of non-financial

measures has gained some popularity in compensation management, while some

scholars demonstrate positive effects of incorporating non- financial measures in

compensation management system empirically (Armstrong 2016). He further states

that, human resources model of compensation generally assume that higher

performance requires greater effort or that is in some other ways associated with

disutility on the part of workers.

It has been found that there is a significant relationship between compensation and

employee performance Muhammad (2014). For example, Nurray (2016) who was

examining the effect of compensation on employees in Bangladesh found that

compensation contributes positively on employees’ performance. Also Habtamu

(2018) who was determining the effect of compensation on employees in Ethiopia

found that there is stronger positive relationship between compensation and

employees’ performance.

Compensation Laws vary by the region or city where company is located. Japanese

employees are paid monthly in steady of bi-weekly, wages often start on the lower

end, but works are rewarded by seniority. Promotions are based on a mixture of

experience and ability. Globalization partners’ retrieved on 25, June 2021. Minimum

wage level is regularly adjusted; however payment can include the monetary value,

in Brazilian currency of such things as food, housing, clothing or any other benefits

the company provides habitually to employees by express or tacit agreement. All

employees in Brazil are entitled to a bonus. jdsupra. com/legal news/brazil retrieved

on 25, June 2021

In Nigeria majority of employees who change from one job to another move as a

result of finding better pay Raza (2018) more than 70% of employees who are

interested in changing their employer normally gave the reason of low income in

their present job that makes them seek for new employment environment. In Kenya

despite several research done establishing some strong relationships between

compensation and employees’ performance still many organizations have not done

much in managing compensation in order to improve the performance of employees

particularly those of Public Service for example doctors in (2016) downed their tools

and refused to work for about 100 days demanding many things among them, better

pay, better working conditions, improvement of doctors’ patient ratio Aljazeera

(2017).

In Tanzania generally the salaries for employees are still low for example For five

years employees in public sector have seen no salary increment while wages have

remained the same, living costs have continued to rise while employees income have

remained the same (The Citizen May 2021). In Tanzania many research has done

establishing relationship between compensation and employees performance for

example, Luka (2013) who was examining the impact of remuneration on the

performance of Local Government staff, found that the current Local Government

Authority staff minimum salary is not satisfactory influential for employees’

performance

On top of that Karia (2015) was examining the importance of compensation and

benefits on performance of Public Water Utilities in Tanzania, study comprised five

regions in Tanzania namely, Lindi, Mtwara, Morogoro, Tanga and Dares salaam, the

finding revealed that there is a statistical significance relationship between

compensation and benefits with organization performance. Apart from that Kyaruzi

(2017) was assessing the effects of compensation on employees’ performance at

Massana Hospital in Dar es Salaam; the study revealed that compensation of

employees increases commitment and increase employees’ performance.

In connection to that Shaban (2020) was examining the influence of compensation

on employee’s performance in National Insurance Corporation (NIC) in Iringa. The

major finding of the study shown effective motivation programs have greater

likelihood of increasing employees morale, retention rate and performance. These

previous study done in Tanzania concerning the effects of compensation on

employees’ performance investigated compensation in general did not examine in

details as to what motivates employees more than others between extrinsic rewards,

intrinsic rewards and by feeling of equity this research is intended to fill this gap.

1.3 Statement of the Research Problem

For five years’ employees in public sector have seen no salary increment while

wages have remained the same, living costs have continued to rise while employees’

income have remained the same (The Citizen May 2021), during International

workers’ day celebrated nationally in Mwanza Trade Union through TUCTA call on

the government to increase salaries of employees and other rights and benefits.

Employees need to be motivated so that they can work with all their heart and raise

their performance, management must be aware in the importance of compensation

for their workers for maximization of performance Ijaya (2019). Now days

employees are compensated by both intrinsic (internal) and extrinsic (external) and

equity compensation. In most of these studies, each factor namely extrinsic, intrinsic

and equity compensation had significant influence on employee performance

Shaban (2020).

Previous studies done in Tanzania addressing the effects of compensation on

employees performance such as Shaban (2020) who was examining the influence of

compensation on employees in National Insurance Corporation in Iringa, Kyaruzi

(2017) who was assessing the effects of compensation on employees performance at

Massana Hospital in Dar es salaam, Karia (2015) who was examing the importance of
compensation and benefits on performance of water utilities in Mtwara, Lindi,

Morogoro Tanga and Dar es salaam, these studies did not examine in details as to

what motivates employees more than others between extrinsic rewards, intrinsic

rewards and by feeling of equity this research is intended to fill this gap.

1.3 Research Objectives

1.3.1 General Objective

To determine the effect of compensation on employees performance

1.3.2 Specific Objectives

i. To find out how extrinsic rewards have effects on employee performance.

ii. To determine how intrinsic rewards, have effects on employee performance.

iii. To examine how feelings of equity have effects on employee performance.

1.4 Research Question

iv. How extrinsic rewards have effects on employee performance?

v. How intrinsic rewards have effects on employee performance?

vi. How feelings of equity have effects on employee performance?

1.5 Justification for the Study

The finding provides knowledge into the effects of compensation on employee

performance. It indicates the important of employees for any type of Organization

that is either the public sector or the private. The consequences of the study will also

serve as a knowledge base for a comprehensive look into the lapses in the
management of compensation at Mbulu Town Council. After the study, findings will

also be used as the source for other subjects relating to Compensation Management

by future researchers.

1.6 Organization of the Study

The study comprises five sections. The first part addressing introduction which

involve all components found in this part. Part two reviewing literature, Section

three focuses on Research Methodology. The forth area focuses on data analysis and

interpretation while the fifth part addressing Summary, Conclusion and

Recommendations.
 CHAPTER TWO

LITERATURE REVIEW

2.1 Overview

The chapter consists of conceptual definitions, theoretical literature review,

empirical literature review, research gap and conceptual frameworks

2.2 Conceptual Definition

2.2.1 Compensation

This study adopts the definition by (Mortocchio, 2016) which defines compensation

as output and the benefit that employee receive in the form of pay, wages and also

some rewards like monetary exchange for the employees to increases the

Performance. This definition is adopted because the objective of compensation is to

attract, satisfy and retain employees in order to increase performance.

2.2.2 Compensation Management

This study adopts the definition by Armstrong ( 2016) which defines compensation

management as effort organization puts in place to have a compensation structure

which makes it possible for the organization to recognize employees with better

performance and compensate them accordingly extra than the normal performing

employees .The aim of this strategy is to encourage and motivate top performers to

improve their performance. This definition is adopted because compensation

management aims to improve performance

2.2.3 Performance

This study adopts the definition by Mathias (2009) which defines performance as

number of production, standard of aggregate, time lines of production, job

attendance ,efficiency and effectiveness of the work completed. In other words

performance means the successful completion of tasks by employees according to

the standard set and measured by the direct line manager of the organization to

previously set acceptable standards while utilizing available resource efficiently and

effectively. This definition is adopted because it shows indicators of performance

such as number of production, standard of production, timeliness, job attendance,

efficiency and effectiveness of work completed.

2.3 Theoretical Literature Review

2.3.1 The Equity Theory

First was developed in 1963 by John Stacey Adams in 1963 it depends on whether

the employee perceives that what they get from employment in form of employment

benefits or reward is equal to the amount of efforts or inputs they put in their work in

the organization. According to Adams, employees will compare their inputs and

outputs to those colleagues who are in the same level. In cases where the employees

perceive that there are inequalities, it may lead to an increase in absenteeism and to

some extent resignation. The theory explains that what employees contribute in their

work are classified as inputs which include commitment shown, the number of hours

worked, the experience brought to the role, work responsibilities of employees, the

work duties of employees, the loyalty of employee towards the organization and

flexibility amongst other.

On the other hand, Adam proposed the out puts , outputs are the result an individual

receives as a result of their inputs to the organization these include salaries,

bonuses, incentives, allowances employee recognition, promotion, health insurance,

retirement plans, overtime pay, and company car. Employees will perceive inequity

when there is imbalance in the ratio between the inputs and outputs as compared to

others in the same level.

Adams (1963) some employees will perceive that they have been treated well (with

equity) if they perceive that their ratio of inputs to their outputs is fair and is equal to

those around them or in the same level. If an employee perceives that their

colleagues in the same level are treated better than him/her while they have put in

the same efforts, it will lead into job dissatisfaction. The dissatisfaction will lead into

demotivation of employees where he/she feels underappreciated by the organization.

Equity theory principle is very helpful in this study because it will assist the

management to understand and perceive what motivates employees. The theory is

applicable in study because the employees expect better treatment and rewards in

return to the efforts they put to their work in the company. If this is not met, they

become demotivated and their performance will be reduced. The relevant of equity

Theory, the theory is applied at every work place an individual satisfaction at work

is directly linked to the efforts her or she is putting and what exactly he or she is

getting out of it. It aims to strike a balance between employees input and output in

workplace, if the employee is able to find his or her fight balance it would lead to a

more productive relationship with the management Adam (1963).

2.3.2 Herzberg’s Two Factor Theory

First was developed in 1959 by American psychologist Frederick Herzberg who

classified these job factors into two categories namely hygiene factors or (extrinsic)
and motivational factors or (intrinsic). Hygiene factors or (extrinsic reward).

Motivational factors or (Intrinsic rewards) concern with promotion, recognition, and

growth potential, autonomy, feedback and decision making. According to Herzberg

intrinsic and extrinsic factors have an inverse relationship, that is intrinsic factors

tend to increase motivation when they are present while extrinsic factors tend to

reduce motivation when they are absent this is due to employee expectations.

Relevance of Herzberg’s Two Factor Theory, this is an important theory in

organization behavior that identifies and examines factors contributing towards

motivating employees at work place, there should be adequacy of the hygiene factors

and managers must ensure that employees are motivated to work by giving

opportunities, recognition, job enrichment, and utilizing their capabilities to the

maximum possible level Ajira (2004).

Employees all the World not only want job security but also want quality

employment. They desire to be given ample opportunities for advancement, good

working conditions, and fair treatment by managers and autonomy on their work

challenging jobs and responsibility. These factor are included in the motivator

factors given by Herzberg and still holds true in contemporary business environment

Today‘s organization focus on team work and cohesion among the group so as to

create an inductive environment for work where employees are motivated to work

and contribute to attaining the goals of the organization Carraher (2006).

2.4 Types of Compensation Packages

Dessler (2011) categorized compensation into two namely direct and indirect

compensation as discussed bellow.

2.4.1 Direct Compensation

According to Dessler (2011) direct compensation is usually restricted to the direct

cash benefits that the employees receive on monthly or weekly basis for the services

they render as employees of specific organization, they are salary (wages) it may

even be in the form of stock bonus compensation, where employees of the

organization are given chance to own shares within the organization they work for

and at the end of each year they have the opportunity again to gain some dividend in

of form equity on their shares.

2.4.2 Indirect Compensation

Dessler (2011) refers to indirect compensation as the indirect monetary and non-

financial payments employees receive for continuing their employment with the

company which are important part of every employee compensation. Other

terminologies like fringe benefits, employees’ services, supplementary

compensation and supplementary pay are used.

2.5 Empirical Literature Review

Nurray (2016) conducted research examining the effect of compensation on

employee performance, the location of the study was in Chittagon City in

Bangladesh, methodology used was quantitative, and data was analyzed through

statistical package for social science. Finding from the study revealed that

compensation contributes positively on employee performance; in conclusion the

study demonstrated that there is relationship between compensation and employees’

performance. The study recommended that as the result of the effect of

compensation on employees’ performance is very interesting, it is necessary for

further study to include larger and more representative sample, because future

research would benefit from a larger sample size and using a variety of samples for

this kind of research study.

Another study was conducted by Adibah, A. (2019), who was examining the effect

of compensation on employee performance, location of study held at XYZ College

in Malaysia, Methodology used was quantitative and SPSS were used in data

analysis. Major finding of the study revealed that compensation contributes to

employee performance, also compensation has a significant positive effect on

employee performance, It was concluded that, compensation increase level of

performance for employees, also organization should focus on other factors on

creating an environment which is supportive, caring characterized with good

working conditions to allow employees to attain work and personal spheres of life.

The study recommended that on the requirement to attain higher levels of employee

performance through effective strategies for employee compensation and benefits,

for example setting a real wage system in by referring to established wage structure

by process and evaluate the information from labor market and internal policies of

the organization.

Another study was conducted by Onuorah (2019) who was examining the effect of

compensation on employee performance, the study was carried out in Anambra

Nigeria, Methodology used was quantitative method, and data was analyzed by

using Z-test to test hypotheses level of significance. Finding of the study shown that

compensation has positive effect on employee performance. Study concluded that

compensation contributes positive on employee performance. The study

recommended that every organization should make equity Compensation as

Compulsory Policy, since equity compensation management are used more

extensively in firms for ensuring maximum performance also every Organization

should formulate competency based compensation policy.

Another study was conducted by Tetth (2014) who was examining the implication

of compensation on employee performance, the location of study was at ST. Michael

Catholic Hospital, Pramso in Ghana, and Methodology used was quantitative and

qualitative approach. Data was analyzed by statistical package for social science.

Major finding of the study shown that, employees were not aware of compensation

packages which were entitled; also there was no effective performance management

system to measure performance. The study concluded that there was a link between

compensation and employee performance also the study recommended that

management must supply for every new employee a copy of the compensation hand

book and discuss the items during orientation.

Another study was conducted by Patrick (2014) who was examining the effect of

compensation on employee performance, the study was carried out at Chloride

Excide group companies in Dar es Salaam Tanzania, Methodology used was

quantitative method, and data was analyzed using statistical packages for social

science. Finding of the study shown that many of the respondents were not very

conversant with the methodology used to look into employee compensation at

Chloride Exide, in particular they were not familiar with the compensation plan used

in the organization. The study concluded that a proper compensation plan was

lacking and employees lacked some of the information in employee compensation. I

t was recommended that a proper system of compensation plan should be developed.

The system should have all the fundamentals of good compensation plan.

Another study was conducted by Kimani (2017) who was determination the effect

of compensation on employee performance, the study was conducted at Cement

Limited in Mombasa Kenya. Methodology used was quantitative method; data was

analyzed using statistical packages for social science. Finding of the study revealed

that reasonable salary, benefits in form of bonuses and allowances and recognition

through certification enhances employee performances. It was concluded that

employment benefits such as allowances, incentives and bonuses have a positive

effect on employee performance. The study recommended that, human resources

manager should develop systems for ensuring equitable salary plan entailing proper

job evaluation processes and pay structures in the organization as this could

motivates employees to perform.

Another study was conducted by Habtamu (2018) whose intention was to determine

the effect of compensation on employee performance focusing on foods

manufacturing factors in Addis Ababa. Methodology used was quantitative; data

was analyzed through statistical packages for social science (SPSS). Main results of

the study shown that employee performance is strongly and positively influenced by

financial compensation, while it is weakly and negatively related with non-financial

compensation. Thus, the conclusion of the study based on the existence of direct

relationship between compensation and employee performance. It further,

recommended top management to periodically review the compensation packages in

their organizations.
Another study was conducted by Luka (2013) who was examining the impact of

remuneration on the performance of Local Government staff, the location of the

study was in Ludewa Tanzania, Methodology used were both qualitative and

quantitative and data was analyzed through Statistical package for Social Sciences

(SPSS) computer Software. Finding of the study revealed that the current Local

Government Authority staff minimum salary is not satisfactory influential for

employees’ performance, thus it was concluded that remuneration has great impact

on the staff performance. It was further recommended that more allowances should

be offered to the staff in order to enhance the sustainable Local Government

Authority staff on staff performance delivery the council is responsible of improving

the current local social services so as to make employees be able to work under a

more conducive social environment, this may also enhance work morale, thus good

performance.

Another study was conducted by Karia (2015) who was examining the importance

of compensation and benefits on performance of Public Water Utilities in Tanzania,

the location of study comprised five regions in Tanzania namely, Lindi, Mtwara,

Morogoro, Tanga and Dar es Salaam, Methodology used were both quantitative and

qualitative and data was analyzed by descriptive and inferential statistics with the

help of the (SPSS). Finding of the study revealed that there is a statistical

significance relationship between compensation and benefits with organization

performance, it was concluded that compensation and benefits practices are positive

predictors of performance, also the study recommended that financial and non

financial compensation should be effectively realized to the Public water utilities

employees so as to enhance performance of both employees and organization

Another study was conducted by Kyaruzi (2017) who was assessing the effects of

compensation on employees performance, the location of the study was at Massana

Hospital in Dar es salaam Tanzania, methodology used were both qualitative and

quantitative and data was analyzed through descriptive statistics and Statistical

package for Social Sciences (SPSS) computer Software. The main finding found that

compensation of employees, increase commitment, retain employees increase

organization performance, also it was concluded that there is a relationship between

compensation and performance. It was further recommended that the Hospital

Management and Human Recourse dealing with health workers should focus more

on promotion, salary ,over time, responsibility allowance, medical allowance and

training to attract, retain motivate employees as it has positive impact on employees

and organization performance.

Another study was conducted by Shaban (2020) who was examining the influence

of compensation on employees’ performance in National Insurance Corporation

(NIC) in Iringa. Methodology used was both quantitative and qualitative method;

data was analyzed using statistical packages for social science. Finding of the study

revealed that motivation programs have greater likelihood of increasing employees’

morale, retention rate and performance. It was concluded that compensation has

been useful at NIC to improve employees’ performance.

The study recommended that, for a wider participation from the government and

interested parties to support the insurance industries in making sure that

compensation becomes successful in the sector. At same time organizations are

urged to put in place appropriate motivation of their employees in order to enhance

skills utilization and ultimate employees’ performance.

Another study was conducted by Kibiki (2019) who was determining the factors

influencing employee compensation and its impacts on employees’ performance, the

location of the study was in Iringa Tanzania, Methodology used was quantitative

data was analyzed through Statistical package for Social Sciences (SPSS) computer

Software. Finding of the study revealed that there is a relationship between factors

of employees’ motivation, intrinsic factors, extrinsic factors and employees’

performance. Also extrinsic factors are fundamental in influencing employees to

strive at achieving the set goals by efficiently performance, it was concluded that

compensation is an important factor on employee performance, it is important to

know which factors motivate employee so that management can put more emphasis.

It was further recommended that future research should also concentrate on several

factors (extrinsic or intrinsic) so as to establish exactly the manner and extent in

which the chosen factors do determine employee motivation.

2.6 Research Gap

Previous studies done in Tanzania addressing the effects of compensation on

employees performance such as Shaban (2020) who was examining the influence of

compensation on employees in National Insurance Corporation in Iringa, Kyaruzi

(2017) who was assessing the effects of compensation on employees performance at

Massana Hospital in Dar es salaam and Karia (2015) who was examing the

importance of compensation and benefits on performance of water utilities in Mtwara,

Lindi, Morogoro Tanga and Dar es salaam, did not examine in details as to what

motivates employees more than others between extrinsic rewards, intrinsic rewards
and by feeling of equity research is intended to fill this gap.

2.7 Conceptual Frame Work

Elaborates about ideas arranged in a way that they communicate to each other

(Ediniyi, 2013). Diagram 2.1 is the conceptual frame work of study illustrating the

way the independent and dependent variables are conceptualized to relate. Variables

of compensation includes extrinsic rewards and intrinsic rewards, extrinsic rewards

have the followings elements salaries, benefits, allowances and working condition

(Ajira, 2004) and intrinsic rewards have the following elements promotion,

recognition, growth potential, autonomy, feedback and decision making (Akram,

2012). On the other hand, the dependent variable measures work performance such

as job quality, time lines, cost effectiveness, job accomplishment and over all

organization performance (Ebele, 2018).

Independent Variables Dependent Variables

Extrinsic rewards
 Salaries
 Benefits
 Allowances
 Working
conditions
Employee performance
Equity  Quality work
 Timeliness
 Cost effectiveness
Intrinsic rewards
 Promotion
 Increase output
 Recognition
 Growth potential
 Autonomy
 Feedback
 Decision making

Figure 2.1: Conceptual Framework

Source: Mathias, (2009)
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Overview

This chapter comprises steps and procedures followed in conducting research

to be precise, this chapter consists of research philosophy, research approach, Survey

population, area of the study, Sampling design and procedures, Variables and

measurement procedures, methods of data collection, data processing and analysis

and Ethical Issues.

3.2 Research Philosophy

Is a growth of knowledge Saunders et al., (2009). Positivism researches are

philosophically related to natural science. This refers working on visible social

constructs and the end product allows for generalizations just like in physical and

natural sciences.One feature of positivism is that the researcher is independent of

and neither affects nor is affected by the subject of the research Kothari (2009) .It is

frequently advocated that the positivist researcher is likely to use a highly structured

methodology in order to facilitate replication Sanders et al (2009). The positivist

paradigm prescribes quantitative methods Kothari (2009).

3.3 Research Approach

Researcher used deductive reasoning approach.Deductive reasoning approach is a

method which researcher identify theories or set principles (Laws), which requires

to go through the logical systematic and scientific process to find out the authenticity

of the theory or set principles. Deduction possesses several important first, there is

the search to explain causal relationships between variables, use a highly structured
methodology to facilitate replication (Bryman 2015). In order to pursue the principal

of scientific rigor, deduction dictates that the researcher should be independent of

what is being observed, it involves only the collection of observed data. It is also un

problematic if a postal questionnaire is being administered.

Also researcher used case study because only single unit of public Health employees

were studied in Mbulu Town Council. Apart from that cross-sectional study was

used due to the following reason, cross sectional research is relatively quick, cheap

and easy to conduct no long period of follow up, data is only collected once, more

over cross sectional research is able to measure prevalence for all factors under

investigation also multiple out comes and exposures can be studied (Cochran1963).

3.4 Survey Population

According to (Saunders 2009) population is all the components (individuals, items

and events) that meet the sample basis for incorporation in research. The population

of this study consisted all employees employed on permanent basis. Employees

employed in public health sector in Mbulu Town Council are 240 (source of data

Human Resource Office provided on May 04, 2020).

3.5 Area of the Study

Was conducted at Mbulu Town Council, found 179 km from Arusha region.

Area has been chosen because there is no any research that has been conducted

addressing issues of compensation on employees’ performance particularly public

health sector. In connection to that, the infrastructures such as roads network in the

area of the study is not attractive.

3.6 Sampling Design and Procedures

Sampling is the process of choosing part of the inhabitants from which judgment or

reference about the entire population is made Kothari (2009) The research used

systematic random sampling; systematic random sampling is a process of selecting

sample at regular intervals from the sampling frame, Saunders (2009). This is

obtained by numbering each of the cases in sampling frame, first case is selected

using random number, then sampling frame is calculated, finally subsequent cases

are selected systematically using the sampling fraction to determine the frequency of

selection.

Sampling frame is a register of items where sample is drawn from Kothari (2009).

The sampling frame for this study was a list of all employees working in Public

Health Sector in Mbulu Town Council a total of 240 employees as provided by the

Human resources office on May 04, 2020. Researcher used systematic random

sampling because it has a notably low risk of error and data contamination also it

reduces the potential for bias in the information. Sample size calculated by using

Yamane (1967:886), this formula uses a 95% confidence level and P=.5 where

by n = N = 240 =150 sample size

1+N(e)2 1+240(.05)2

Sample size of 150 respondents were chosen from sampling frame using fraction of 1

3.7 Variables and Measurement Procedures

Measurement of variables is about being sure that the variables used in research

really do capture the true meaning of the concepts being measured (Bryman, 2015).

Variable is anything that has a quantity or quality that varies. https://study.com

retrieved on May 04, 2020. Researcher used independent variables and dependent

variable. Independent variable is a variable believed to affect the dependent variable,

where by dependent variable is a variable that changes in response to changes in

other variables. Variables was measured by Simple Linear Regression.

Table 3.1: Measurement of Variables

Variables Nature Indicators
Employee Dependent Increased output, quality of work, time lines,
Performance Variable cost effectiveness
Compensatio Independent Salaries, Benefits, Allowances, promotion
n variables recognition ,Growth potential, Autonomy,
Feedback decision making and Equity
Source: Mathias, (2009)

3.8 Methods of Data Collection

The researcher used structured questionnaires to collect data. According to

Saunders (2009) a questionnaire is the data collection instrument designed to gather

information from the respondents, usually by asking written questions. It is often

used in research as the initial data collection instrument Investigator used

questionnaire in collecting information because it is appropriated to collect

effectively data from a greater population in a short period with less expenses.

Moreover, it allows the respondents to express themselves, hence, helps the

researcher to capture more relevant information to answer the research question

pertaining to the effect of compensation on employees performance. Thus,

questionnaire employed to gather data from employees employed in permanent

employment in Health sector in Mbulu Town Council.

3.9 Data Processing and Analysis

The researcher analyzed Data quantitatively, data processing is an activity of

collecting, classifying, grading arranging the collected in order to make them

manageable ( Kothari ,2009). Descriptive statistics and simple linear regression were

used in analyzing data descriptive statistics narrate the fundamental characteristics

of the figures in a study, Simple linear regression measure relationship between

independent and dependent variables. Also researcher applied SPSS as tool for

analysis of data

3.10 Ethical Issues

These are rules conduct directing virtuous about our conduct and our relationships

Bryman (2015). The following number of ethical issues was considered in various

stages of research. Firstly is privacy anonymity of the participants which was

attained by treating the participants without involving their names. Secondly is

voluntary participation, where, the participants were allowed to withdraw from study

whenever they wished to do so. Thirdly is consent of participants and maintenance

of confidentiality of information obtained. Moreover, the research made sure that the

participants are free from embarrassment, stress, discomfort pain and other forms of

harm during data collection.

 CHAPTER FOUR

DATA ANALYSIS, INTERPRETATION AND DISCUSSION OF FINDINGS

4.1 Overview

This area addresses results and findings , part one of this chapter focuses on profile

of respondents, Section two covers findings on research objective one , Section three

focuses on the second research objective ,Section four addresses the findings of the

third research objective. Section five focuses on finding from dependent variables in

this section respondents were asked to rate themselves on how they Perceive their

own work performance. For testing reliability the most popular Cronbach’s alpha

method used to test reliability of questionnaire tools, Cronbach’s alpha for

compensations α=0.9 and for job performance α=0.8 which are satisfactory and

highly reliable for data collections

4.2 Respondents’ Profile

From Table 4.1 analysis it was revealed that many employees were in middle level,

this was associated with their experience at work and education level, top level were

only 4% this is fact hence within each organization leadership position are few

compared to number of employees. Gender of respondents revealed that female were

dominant for 64.6% this was similar to report of Human Resource for Health

provided by Ministry of Health and Social Welfare in 2012/2013 were by number of

female Public Health employees were 64.6%.

Table 4.1: Profile of Respondents
Characteristics Frequencies Percentages
Gender
Male 53 35.3 %
Female 97 64.6 %
Age
18-30 51 34 %
31-40 56 37.3 %
41-50 25 16.6 %
51-60 18 12 %
Level of Management
Top level 6 4.0 %
Middle level 79 52.7 %
Lower level 65 43.3 %
Department
General Administration 1 0.7 %
Records 5 3.3 %
Pharmacy 3 2%
Nursing 86 57.3%
Medical 55 36.7 %
Length of service
Less than 1 year 2 1.3 %
1-5 years 43 28.7 %
6-10 years 24 16 %
Greater than 10 years 81 54 %
Education
Certificate 61 40.7 %
Diploma 72 48 %
Degree 17 11.3 %
Source: Field Work 2020

Age of respondents were dominated by the age between 31-40 for 37% this age is

productive age and when employers utilizes them effectively usually leads to high

performance. Department of respondents study revealed that majority of employees

came from nursing department this is related to report of Human Resource for

Health provided by Ministry of Health and Social Welfare in 2012/2013 were by

number of nurses were grater comparing to other cadre.

Length of service, the finding shown that 54% had been working for greater than 10

years this indicated that organization has potential employees with enough
experience usually experience increases performance of organization. Education of

respondents revealed that organization has employed employees with relevant

qualification according to government scheme of service number 1 of 2009.

4.3 The effect of Extrinsic Rewards on Employee Performance

Table 4.2: Effects of Extrinsic Rewards on Employees Performance

Questions Strongly Disagree Not sure Agree Strongly
Disagree n (%) n (%) n (%) Agree
n (%) n (%)
I receive additional payments 16 (10.7) 25 (16.7) 27(18.0) 82 (54.7) 0
apart from the salary that I am
paid
If my basic pay increase I will 3 (2.0) 6 (4.0) 4 (2.7) 57 (38.0) 80 (53.3)
perform better
I receive over time payment if I 31 (20.7) 40 (26.7) 14 (9.3) 65 (43.3) 0
work extra hours
The overtime paid to me 27 (18.0) 43 (28.7) 8 (5.3) 70 (46.7) 2 (1.3)
motivates me to perform
The benefits I receive motivates 18 (12.0) 44 (29.3) 10 (6.7) 78 (52.0) 0
me to perform
I am aware of what the 1 (0.7) 9(6.0) 40 (26.7) 100 (66.7) 0
conditions of service manual
contain
My basic pay motivates me to 6 (4.0) 38 (25.3) 17 (11.3) 89 (59.3) 0
perform
Source: Field Work 2020

Table 4.3: Simple Linear Regression

Predictor Estimator (β) Correlation Adjusted R P Values
coefficient squared
Extrinsic rewards 11.1 0.5 0.22 0.00013
Source: Field Work 2020

Simple linear regression shown that there is moderate positive linear relationship

between compensation and employee performance, correlation (r=0.5) is significant

at the level of 0.95 (2-tailed), findings from regression analysis (R 2=0.22) which

implies that 22% of variation in job performance perceptions is accounted by

extrinsic rewards and the results were statistically significant with P= 0.00013. Thus
extrinsic rewards has significant effect on employees performance.

From above analysis of objective one it was revealed that organization provide

various extrinsic rewards to employees in terms of benefits and salaries as part of

motivation to increase their performance, this collaborate with Two Factors theory

developed by Herzberg (1959) who said that Hygiene factors or (extrinsic reward)

and they tend to represent more tangible, they include salaries, benefits, allowances

and working condition Badrinarayan (2011). It is important for managers to realize

that when extrinsic factors are not provided will lead to dissatisfaction and decrease

motivation among employees hence low employee performance Bryman (2015)

argued that in general higher levels of pay and more attractive benefits tend to result

in greater satisfaction thus promotes employees performance.

Armstrong (2016) said that the objectives of employees benefits is to attract and

increase commitment of employees in order to make them perform more. Also study

shown that salary were not reviewed for long time it was indicated by majority of

respondents who agreed that when salary increase they would perform better, this is

similar to Badrinarayan (2011) who said that compensation is payment in the form

of wages or salaries that can positively or negatively affect employees performance ,

Bowen (2015) argued that existing salaries should be reviewed.

Also it was revealed that many employees are not paid over time payment if they

work extra hours, according to Standing orders for the Public Service 2009 Third

Edition over time payment is a right to be paid to employees when worked extra

hours, also Herzberg (1959) said that when extrinsic rewards are not provided will

lead to dissatisfaction of employees and decrease motivation hence lead to low

performance.

From the finding, it was revealed that there is moderately positive relationship

between Compensation and employee performance. This is similar to the study done

by (Zaman 2010) who examined the effects of extrinsic rewards in employees

performance in Cement Industry in Pakistan, the finding shown that there was a

relationship between Extrinsic Rewards and employees performance. Extrinsic

rewards is important due to the factors that it motivates and inspires employees

because money or equivalent rewards are important to most people, for example a

sales person may not be interested in the product he/she is selling but upon realizing

that he/she would get a cash bonus on the completion of sales targets, he she would

make an additional effort to complete his/her targets before time (Bryman 2015).

4.4 The Effect of Intrinsic Rewards on Employee Performance

Table 4.4: Effects of Intrinsic Rewards on Employees’ Performance

Questions Strongly Disagree Not sure Agree Strongly
Disagree n (%) n (%) n (%) Agree
n (%) n (%)

I am praised for the work well 11 (7.3) 20 (13.3) 20 (13.3) 87 (58.0) 12 (8.0)
done
Employees are given enough 0 38 (25.3) 30 (20.0) 82 (54.7) 0
respect and this motivates me
to perform
There is clear path for career 20 (13.3) 25 (16.7) 28 (18.7) 77 (51.3) 0
advancement
There is a system of 13 (8.7) 16 (10.7) 38 (25.3) 83 (55.3) 0
recognition, where outstanding
performances are recognized
on timely manner, regularly
and also for the right reasons.
The recognition system 6 (4.0) 11 (7.3) 35 (23.3) 97 (64.7) 1 (0.7)
motivates me to perform.
Management normally 10 (6.7) 10 (6.7) 28 (18.7) 102 (68.0)
involves staff in decision
making.
Communication seems good 4 (2.7) 17 (11.3) 18 (12.0) 111 (74.0) 0
 within the organization
Source: Field Work 2020

Table 4.5: Simple Linear Regression

Predictor Estimator (β) Correlation Adjusted R P Values
coefficient squared
Intrinsic 9.7 0.32 0.32 0.0000047
rewards
Source: Field Work 2020

Simple linear egression shown that there is a moderate positive linear relationship

between performance and intrinsic rewards (r=0.6), correlation is significant at the

level of 0.95 (2-tailed), findings from regression analysis (R 2=0.32) which implies

that 32% of variation in job performance perceptions is accounted by intrinsic

rewards and the results were statistically significant with P= 0.0000047, therefore

intrinsic rewards has significant effect on employees performance.

From above analysis of objective two it was revealed that organization provide

various intrinsic rewards to employees as part of motivation to increase their

performance, as it was revealed that for every question asked to respondents

concerning intrinsic rewards respondents agreed for more than 50% .The findings

is similar to Herzberg’s Two Factor Theory developed by Herzeberg (1959) he said

that intrinsic rewards are constructed intentionally to value employees in form of

self assurance and related to their feelings of fulfillment and growth with institution.

Managers need to recognize that while these needs may fall outside the more

traditional scope of what a work place ought to provide, they can be critical to strong

individual and team performance. According to Herzberg intrinsic rewards have an

inverse relationship, that is intrinsic rewards tend to increase motivation when they

are present. This is similar to the study done by Farooq (2016) who examined the

effects of intrinsic rewards in employees performance in Preston University, Islama

bad in Pakistan, the finding shown that there was a relationship between Intrinsic

Rewards and employees performance. Intrinsic rewards are important because are

psychological rewards that employees get from doing meaningful work and

performing it well. They are intrinsic because they are internal to the work being

done and achieving them largely depends on one’s own effort. They are essential to

sustain behavioral change (Mortocchio 2016).

4.5 The Effect Of Feeling Of Equity On Employees Performance

Table 4.5: The Effects of Feeling of Equity on Employees Performance

Questions Strongl Disagre Not Agre Strongly
y e sure e Agree
Disagre n (%) n n n (%)
e (%) (%)
n (%)
Organization provides equal 28 40 76 6 0
compensation for all (18.7) (26.7) (50.7 (4.0)
employees who are in the )
same level.
If Compensation is 12 (8) 9 (6) 21 75 33 (22)
managed to ensure that all (14) (50)
employees receive equal
compensation for the same
kind of work I feel
motivated to perform
The basic pay is balanced 22 27 88 13 0
for all people in the same (14.7) (18.0) (58.7 (8.7)
level in this organization )
The benefits in the 10 (6.7) 34 91 14 1 (0.7)
organization does not (22.7) (60.7 (9.3)
discriminate against )
employees in the same level
in the organization
Policies in organization 9 (6.0) 25 76 40 0
 treats all employees equal (16.7) (50.7 (26.7)
)
Basic pay is well balanced 20 39 65 26 0
relating to the work I do (13.3) (26.0) (43.3 (17.3)
)
Basic pay differs from 10 (6.7) 34 91 14 1 (0.7)
others in from the same (22.7) (60.7 (9.3)
level of employment )
Source: Field Data, (2020)

Table 4.6: Simple Linear Regression

Predictor Estimator (β) Correlation Adjusted R P Values
coefficient squared
Equity rewards 10.9 0.4 0.17 0.0011
Source: Field Work 2020

Simple linear regression shown that there is a moderate positive linear relationship

between performance and feeling of equity (r=0.4), correlation is significant at the

level of 0.95 (2-tailed), findings from regression analysis (R 2=0.17) which implies

that 17% of variation in job performance perceptions is accounted by employee’s

feelings of equity and the results were statistically significant with P=0.0011,

therefore employees feelings of equity has significant on employees performance.

From above analysis of objective three it was revealed that majority of employees

were not aware concerning compensation packages. Greater number of participants

responded that were not sure concerning the practices of equity in organization.

Generally, the findings revealed that there is moderately positive association

between feeling of equity and employee performance.

Adams (1963) in equity theory said that some employees will perceive that they have

been treated well (with equity) if they perceive that their ratio of inputs to their

outputs is fair and is equal to those around them or in the same level. If employee
perceives that their colleagues in the same level are treated better than him/her while

they have put in the same efforts, it will lead into job dissatisfaction. The

dissatisfaction will lead into demotivation of employees where he/she feels

underappreciated by the organization. This is similar to the study done by Farooq

(2016) who examined the effects of intrinsic rewards in employees’ performance in

Preston University, Islama bad in Pakistan, the finding shown that there was a

relationship between compensation and employees performance. This is similar to

the study done by Ogolo (2016) who examined the effects of equity rewards in

performance in higher Institutions, Awka, Anambra State University Igbarian

Campus and Enugu State University of Science and Technology, the finding shown

that there was a relationship between Equity and employees performance, also fair

treatment should be used to motivate employees.

Equity is important at work places due to the factor that the opportunities afforded

by an equitable work place motivates employees to perform. Believing that rewards

will be commensurate with effort, employees with ability and strive to shine. This

behavior is explained by equity, which links fairness to employee effort. When

people receive bonuses, pay and promotions at a job that equitably rewards merit, the

company ends up with the right places doing the right things, equity then, sets the

stage for a dynamic culture of achievement (Bowen 2015).

4.6 Perception of Respondents on their Work Performance

Table 4.6: Perception of Respondents on their Work Performance

Questions Strongly Disagree Not sure Agree Strongly
Disagree n (%) n (%) n (%) Agree
n (%) n (%)
 I perceive my work 1 (0.7) 2(1.3) 19 (12.7) 109 (72.7) 19 (12.7)
as being of high
quality
I perform my duties 0 1 (0.7) 10 (6.7) 123 (82.0) 16 (10.7)
timely
I am always careful 0 2 (1.3) 67 (44.7) 63 (42.0) 18 (12.0)
when it comes to
managing cost
The output of my 0 2 (1.3) 88 (58.7) 47(31.3) 13 (8.7)
work has always
being on the increase
Source: Field Work 2020

This section intended to measure depended variable in conceptual frame work.

Table 4.7: Simple Linear Regression

Predictor Estimato Correlation Adjusted R P Values
r (β) coefficient squared
Dependent 9.3 0.5 0.31 0.0000049
Variables
Source: Field Work 2020

The findings revealed that there is a moderate positive linear relation between

compensation and employees’ performance (r=0.5, p=0.0000049), There is more

than 31% (R2=0.31) chance that variations in perceptions of employees’

performances are accounted by different types of compensations provided by

employer. Statistically compensation is significant tools to improve employees’

performance. Mathias (2009) argued that performance is amount of production,

standard of production, time lines of production, job attendance ,efficiency and

effectiveness of the work completed. In other words performance means the

successful completion of tasks by employees according to the standard set and

measured by the direct line manager of the organization to previously set acceptable

standards while utilizing available resource efficiently and effectively.

 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Overview

This chapter focuses on the summary of major findings, conclusion and

recommendation.

5.2 Summary of Major Findings

Research Objective 1: To find out how Extrinsic Rewards have Effects on

Employee Performance

The study revealed that employees were given various benefits as extrinsic rewards

these rewards motivated them to increase performance, Simple linear Regression

revealed that correlation (r=0.5) is significant at the level of 0.95 (2-tailed), findings

from regression analysis (R2=0.22) which implies that 22% of variation in job

performance perceptions is accounted by extrinsic rewards and the results were

statistically significant with P= 0.00013 .Thus extrinsic rewards has significant

effect on employees performance.

Research Objective 2: To Find out how Intrinsic Rewards have Effects on

Employee Performance

The study found that employees were given various rewards as intrinsic rewards,

these rewards increases motivation to employees and motivation contributes to

increase employees performance, simple linear regression revealed that correlation

(r=0.5) is significant at the level of 0.95 (2-tailed), findings from regression analysis

(R2=0.22) which implies that 22% of variation in job performance perceptions is

accounted by extrinsic rewards and the results were statistically significant with P=

0.00013 .

Research Objective 3: To find out how Feelings of Equity have effects on

Employee Performance

The study revealed that greater number of employees were not aware concerning

compensation packages offered by organization, Simple linear regression revealed

that there is a moderate positive linear relationship between performance and feeling

of equity (r=0.4), correlation is significant at the level of 0.95 (2-tailed), findings

from regression analysis (R2=0.17) which implies that 17% of variation in job

performance perceptions is accounted by employee’s feelings of equity and the

results were statistically significant with P=0.0011,therefore employees feelings of

equity has significant on employees performance.

5.3 Conclusion

5.3.1 Effect of Extrinsic Rewards on Employees Performance

Extrinsic rewards motivate and inspires employees because money or equivalent

rewards are important to most people, for example a sales person may not be

interested in the product he/she is selling but upon realizing that he/she would get a

cash bonus on the completion of sales targets, he /she would make an additional

effort to complete his/her targets before time. It is important for the organization to

improve the return on their Human Resources investment by aligning reward

systems with business strategy and improving the value delivered to employees. The

manners in which the organization handles or manages these extrinsic factors are

important in employees’ motivation that further stimulate level of satisfaction and

finally increase level of employee performance.

5.3.2 Effect of Intrinsic Rewards on Employees Performance

They offer an effective and low cost way for organizations to engage employees and

derive long lasting benefits. These rewards can create a sense of joy, fulfillment,

happiness and satisfaction among employees, which in turn will drive greater

performance. A person’s intrinsic enjoyment of an activity provides sufficient

justification for their behavior. At its core, fostering intrinsic rewards is about

helping employees become more productive, engaged and happier in their work,

Over the long term, this contributes to better organizational performance and enables

workers to develop and lead more independently. The employees who are

appreciated by intrinsic rewards within the organization not only perform well but

also get motivated positively for the welfare of organization.

5.3.3 Effect of Feelings of Equity on Employees Performance

The opportunities afforded by an equitable work place motivates employees to

perform. Believing that rewards will be commensurable with efforts, employees with

ability and strive to shine. This behavior is explained by equity theory, which links

fairness to employee effort. When people receive bonuses, pay and promotions at a

job that equitably rewards merit, the company ends up with the right places doing the

right things, equity then sets the stage for a dynamic culture of achievement.

5.4 Recommendations

5.4.1 Reviewing Salary

Government is advised to amend the current salary scale in line with persuading

economic environment and set suitable and competitive salary scale. This will not
only motivate employees but also increase employees’ performance.

5.4.2 Adhering to Rules and Regulations

.Also organization should adhere to rules and regulations when dealing with

employees affairs, the study revealed that many employees were not paid over time

payment if they work extra hours, payment of over time is right to employees as

stipulated by Standing orders for the Public Service 2009 Third Edition.

5.4.3 Recognizing Outstanding Performer

This facilitates outstanding performances to be recognized on timely manner,

regularly and for the right reasons, also recognition system should be transparence to

all employees and organization should not rely on one category of rewards.

5.4.4 Providing Equal Rewards

Management should provide equal rewards to all employees who are in the same

level, the finding from the study revealed that there was inequality in providing

rewards, especially for employees who are in the same level of work.

5.4.5 Providing Compensation Manual

Also compensation manuals should be given to all employees , majority of

respondents were not sure if were treated equally in organization

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 APPENDICES

APPENDIX 1: RESEARCH QUESTIONNAIRE

Introduction part

Dear Respondents,

The researcher is a student pursuing Masters in Human Resources Management at

Open University of Tanzania. The purpose of this study is to determine effect of

compensation on employees performance case study of public health sector in

Mbulu Town Council, required for partial fulfillment of award of masters at Open

University of Tanzania. The responses are for academic purpose and not otherwise.

Please you are requested to respond accordingly.

General Information

(Please tick (√) the box which is applicable

SECTION 1: Respondents profile

1.1 Levels in Management: Top level [ ]

Middle level [ ] Lower level [ ]

1.2 Sex: Male [] Female [ ]

1.3 Age: 18 – 30 [] 31 – 40 [ ]

41 –50 [] 51 – 60 [ ]

61-65 [ ]

1.4 Department: Gen. Admin Dept. [ ] Records Department [ ]

Pharmacy Department [ ] Nursing Department [ ]

Medical Department [ ]
Accounts [ ]

1.5 Length of Service: Less than 1 year [ ] 1 – 5 years [ ]

6 – 10 year [ ] above 10 years [ ]

1.6 Education level: Certificate [ ] Diploma [ ] Degree [ ]

Masters and above [ ]

SECTION 2: The effects of extrinsic rewards on employees performance

Please tick the box that best fits your opinion for each statement:

1. = Strongly disagree 2 =Disagree 3 = Not sure 4 = Agree 5

= Strongly agree

NO STATEMENT SCORING
1 2 3 4 5
Strongly Disagree Not Agree Strongly
disagree sure agree
1 I receive other payments apart from
the salary that I am paid
2
If my basic pay increase I will
perform better
3 I receive over time payment if I work
extra hours

4The over time paid to me motivates

me to perform
5.The benefits I receive motivates me to
perform
6.I am aware of what the conditions of
service manual contain
7My basic pay motivates me to perform

SECTION 3: The effects of intrinsic rewards on employee performance

Please, tick in the box that best represents your opinion for each statement: 1 =

strongly disagree 2 =Disagree 3 = Not sure 4 = Agree 5 = strongly agree

NO STATEMENT SCORING
1 2 3 4 5
Strongly Disagree Not Agree Strongly
disagree sure Agree
1 I am praised for the work well done
2 Employees are given enough respect and
this motivates me to perform
3 There is clear path for career
advancement
4 There is a system of recognition, where
outstanding performances are recognized
on timely manner, regularly and also for
the right reasons.
5 The recognition system motivates me to
perform.
6. Management normally involves staff in
decision making.
7. Communication seems good within the
organization

SECTION 4: The effects of feelings of equity on employees performance

Please tick the box that best fits your opinion for each statement: 1 = Strongly

disagree 2 =Disagree 3 = Not sure 4 = Agree 5 = Strongly agree

NO STATEMENT SCORING
1 2 3 4 5
Strongly Disagree Not Agree Strongly
disagree sure agree
1 Organization provides equal
compensation for all employees who are
in the same level.
2 If Compensation is managed to ensure
that all employees receive equal
compensation for the same kind of work I
feel motivated to perform
3. The basic pay is balanced for all people in
the same level in this organization
4. The benefits in the organization does not
discriminate against employees in the
same level in the organization
5. Policies in organization treats all
employees equal
6. My basic pay is well balanced compared
to the work I do
7. My basic pay varies from others in from
the same level of employment
SECTION 5: Please rate yourself on the way you perceive your own work performance
NO STATEMENT SCORING
1 2 3 4 5
Strongly Disagre Not sure Agree Strongl
disagree e y agree
1 I perceive my
work as being
of high quality
2 I perform my
duties timely
3 I am always
careful when it
comes to
managing cost
4 The output of
my work has
always being on
the increase

Thank you for your time spend on this study

APPENDIX 2: LETTER OF ACCEPTANCE