THE IMPACT OF COMPENSATION SYSTEM ON EMPLOYEE RETENTION: A STUDY IN EDUCATION SECTOR IN PAKISTAN

Abstract

Purpose: Compensation system is very common problem nowadays, employees has also to deal with such kind of situations where they feel stress due to compensation system. The purpose of this study was to determine the variables which can impact on employee retention. The objective of this study was to check the impact of compensation system among the employees in educational sector in Karachi, Pakistan. Method and Design: The sample size that was selected was 265, and questionnaires that were distributed was 300, out of which 271 people responded to that questionnaires. Data is collected from the different sectors in Karachi. The questionnaire contains 15 questions with the Likert rating scale. The data is analyzed using IBM SPSS software version 22. Findings: The results show that direct compensation is significant relationship with the employee retention (0.000, p<0.05), has significant relationship with employee retention as the value is (0.020, p<0.05), job security has the value (0.000,p<0.05) which shows significant relationship with employee retention, and motivation has the value (0.021,p<0.05) which shows significant relationship with employee retention. Implications: The study concluded that direct compensation, indirect compensation, job security and motivation all ofthese have relationship or effects employee retention, due to which they are not being able to perform up to the mark. Stress and anxiety may affect employees mentally and physically due to this their performance is affected. Recommendations: Organizations should focus on employee’s well-being, because if employee is in stress, they will not be able to perform well. Management should clearly tell about their role and work processes. Work should be given according to the capability of the employee so that they can perform and can leads to organization excellence.