ASSESSMENT OF COMPENSATION PRACTICE AND EMPLOYEE TURNOVER INTENTION IN SELLECTED PRIVATE COMMERCIAL BANKS IN ETHIOPIA

Abstract

This study assesses compensation practice and turnover intention of employees in selected private commercial banks in Ethiopia. The study is also tries to determine different types of compensations in practice on banks under study and analyze the type of compensation which attract employees more. In conducting the study both quantitative and qualitative methods were used to gather information through questionnaire and interview as primary source of data. Bulletins, Internet and other references like the banks’ procedure manuals had been used as secondary sources of data. Stratified sampling is applied in order to identify the number of sample employee selected from each bank under study, and Purposive sampling techniques was employed to select HR and compensation and benefit managers of each bank under study. 375 questionnaires were distributed to selected sample respondents of each bank under study, out of which 315 questionnaires were filled and returned. Exit interview and other documents obtained from the banks under study were useful in determining turnover trends and causes of turnover. Descriptive statistics data analysis method was applied to analyze quantitative data using SPSS version 20 and qualitative analysis method. The result of this study indicates that, there is no equity in pay system, the reward system does not take in to account the qualification and experience of employees, there is no stock option and profit sharing program and there is no carrier advancement. On the other hand employees are happy with assistance for housing, vehicle, personal and staff loans. In general direct financial compensation is one common cause of turnover and indirect financial compensation and non-financial compensation is less likely to cause turnover. The study recommended that banks under study has to revise their compensation strategy, offer attractive salary and benefit packages, provide enough career development or training opportunities, create conducive working environment, so as to retain their experienced and top talented employees and reduce turnover gradually.