Effect of Compensation System on Employee Motivation: A Case Study of Pakistan Petroleum Limited

Abstract

In today's competitive business environment, organizations are constantly struggling to improve productivity, which ultimately leads to better performance of the organizations as a whole. It is, at this point, that various compensation schemes come into play, to motivate employees, which would reduce factors like job turnover, absenteeism, productivity, etc. and in turn, reduce costs. This study attempts to investigate the effectiveness of cash and non-cash award, reward, and recognition programs and to provide strategic guidance that will assist the organization in knowing when and where to utilize such programs, how to determine the type of motivation and award program that should be used. This study has been carried out among Pakistan Petroleum Limited employees. An analysis of 60 employees has been done to explore interesting trends related with employee motivation and types of compensation, management level viz lower, middle and upper management. The conclusions developed through this study has focused on developing an effective compensation system at PPL by identifying and understanding what motivates employees at each level in terms of cash and non-cash based rewards and allowing greater involvement of employees in selection of these rewards.