THE EFFECT OF COMPENSATION AND REWARD ON EMPLOYEE PERFORMANCE: THE CASE OF WEGAGEN BANK, ADDIS ABABA CITY BRANCHES

Abstract

The purpose of this research is to examine the effect of compensation and reward on the performance of employees in Wegagen Bank Addis Ababa city branches. This research is conducted through descriptive design by employing quantitative research method. The stratified random probability sampling method was employed to select respondents for the questionnaire, in order to collect primary data about the matter. A total of 333 questionnaires were distributed to the employees in the selected branches and a total of 307 employees completed and returned the questionnaire properly. In addition to this, the analysis was done by the help of SPSS version 20 and presented using descriptive statistics. The findings of the study indicated that there is significant relationship between compensation and reward, and employee’s performance. The findings show that employees of the company are not happy and motivated with the compensation and reward system. Many are not satisfied with their salary compared to their contribution and they also don’t have a positive attitude towards the company’s benefit packages. It also shows that the reward system is not competitive with other banks, not well communicated and it cannot differentiate between high and low performers. The findings show that as a result the performance of employees is affected by the compensation and reward system of the bank. Therefore, since majority of employee’s performance is affected by the compensation and reward system of the company, the bank should review their compensation and reward system and work towards having an attractive and competitive compensation, reward and recognition system in place to encourage, motivate as well as get the best performance from employees.