The Impact of Remunerations and Working Conditions on Organizations Productivity

The Impact of Remunerations and Working Conditions on Organizations Productivity

In corporate organization and company’s nowadays, working conditions and compensations have been large, especially since world war 11.  The statement that working conditions and employee’s compensation are the live wire of an organization is not an over-statement.

Frederick Herzberg in his two factor theory of motivation classified working conditions and compensation under “hygiene” factors.  He further stressed that when these factors exist in the environment of work both in quantity and quality, the workers will experience no dissatisfaction.  He went further to stress that the lack of existence of these factors will cause a feeling of dissatisfaction.

Ifeanacho and Egbue (1977) in their work, “ a practical approach to personnel management” uphold the fact that a fair compensation programme is one that is responsive to the managerial and economic objective and also ensures acquisition and maintenance of a regular and adequate supply of labour.  They further stressed that an idea compensation structure is the one that is designed to compensate workers adequately for their contributions and at the same time enables the firm make reasonable profit.


According to Flippo (1960), compensation is the equitable remuneration of employees for the contribution towards the attainment of the corporate goal.  There are many forms through which the workers are to be compensated for their efforts.  Compensation is grouped into direct and indirect.

–        DIRECT COMPENSATION:-       This is the financial payment made at or near the time work is performed.  Example of direct compensation are wages, salaries over-time pay, commissions, and bourses, wages are usually distinguished from salaries, and refer to direct compensation received by a worker paid according to hourly rates while a worker paid on monthly, semi-monthly, or weekly basis receives his pay regardless of the specific number of hours to he works.

–       INDIRECT COMPENSATION:-   Indirect compensation is also called deterred payment or compensation.  These are the benefits as paid during vacation days and holidays, health care, insurance and pensions.

According to Ifeanacho and Egbue (1997), indirect compensation are referred to as fringe benefits.  Fringe benefits are additional or extra payments to workers aimed at motivating them to superior performance.  Fringe benefits embrace such things as:-

1.      SICK PAY:-        This scheme allows workers with the required sick certificate to be receiving payment when they are absent from work because of ill-health.

2.      MEDICAL FACILITIES:-    Provision of free medical services to employees and their families.

3.      SUBSIDISED MEALS:-        Many firms have canteen which provides food to workers at subsidized rates.  Other firms for example banking institutions give lunch on vouchers to their employees for full or part payment of meals in restaurants.

4.      ORGANISAITON’S GOODS AT A DISCOUNT:-   Employees are given opportunity to buy goods at reduced prices.  Firms in transportation business for example grant such benefits in from of reduced fairs e.g railway, airlines.

5.      COMPANY CARS:-    In many firms official cars are attached to some positions either because of the elevated status of the job holder or because of exigencies of his job e.g sales representatives, P.R.O etc.

6.      RECREATIONAL SERVICES:-   Recreational facilities are among the facilities enjoyed by employees in most firms (shell, ELE, N.P.A etc) have good play grounds for football, lawn tennis and clubs for relaxation.

Other fringe benefits include:- paid vacations, redundancy payments, retirement benefit etc.


It is a known fact that certain factors influence compensation programmes wages/salary administration.

Flippo (1960), identified the following factors as the ones that influence to significant extent compensation programme in an organization: viz.

a.       The Prevailing Wages/Salary in the Industry

Organizations should ensure that wages/salary administered in the firms is in line with the wage/salary paid in firms of similar nature.  It is necessary for the following reasons.

–       To avoid the ugly experience of incessant labour turnover, that is, to avoid losing their employees to competitors and

–        To motivate employees to supervisor performance.

b.      Condition of Labour Market

Wage/salary is the price paid for the service rendered by employees.  Organizations need these services and must therefore pay a price that will bring forth the supply, which is actually controlled by individual employee or by a labour union.

The compensation attached to a particular labour is determined by the market forces of demand or supply where a particular labour or skill is scarce “as a result of restriction by a particular labour union, there will be a tendency to increase compensation”.  Again where the demand for labour increases as a result of expansion for example, it’s price “providing other factors do not intervene will rise and vise-versa.

c.       Firm’s Financial Situation

A firm’s financial position also determines the pay to be attached to various jobs.  An organization that has a sound financial muscle, for example, can afford to pay even above the going or competitive rate to attract and while a firm that is in financial crises may not even pay the competitive rate and such a firm is likely to experience high labour turnover.

d.      Labout Unions

The compensation structure or working conditions in a particular organization may be influenced by the activities of the labour unions for example, agitation and protest by such unions for higher pay resulting in strike actions and lock-outs may influence management to yield to their demands for a better compensation and working condition.

e.       Government Minimum Wage        

Government can stipulate the minimum wage/salary to be administered by firm in a particular country.  A typical example is of three thousand, eight hundred and twenty naira (N3820) approved by the Nigerian government.  This is done so that the workers can take care of their economic needs.  The rational is to check employers excesses, that is, to protect the workers from the exploitative tendencies of the shy bad employers.

f.       Lost of Living

In a hyper-inflation any situation as is being experienced in Nigeria and most countries presently, workers naturally will agitate for enhanced salary package to cushion the effect of an inflation……………………………………


—-This article is not complete———–This article is not complete————

  This article was extracted from a Project Research Work Topic


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The Impact of Remunerations and Working Conditions on Organizations Productivity

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