HR Practices and Employee Retention: Does Compensation matter?

Abstract

This research investigates the intricate relationships between Human Resource (HR) practices, specifically performance management, employee recognition, and employee engagement, and their impact on employee retention, considering the mediating role of compensation within organizational contexts. Through a comprehensive empirical analysis involving 149 cases, the study reveals significant correlations among HR practices, compensation, and employee retention, supporting hypotheses indicating the positive associations between well-defined performance management, fair recognition, increased engagement, and enhanced employee retention. Moreover, regression analysis indicates a perfect fit for the model, though the coefficients presented anomalies, potentially hinting at issues like overfitting or data discrepancies. Descriptive statistics and frequency tables unveil the distribution patterns and frequencies of the studied variables, showcasing varying degrees of dispersion and frequency across different levels of performance management, employee recognition, employee engagement, employee retention, and compensation. Statistical tests substantiate the substantial differences in mean values for all variables, emphasizing their significance and departure from a test value of 0, confirming their relevance within the study context. The findings highlight the pivotal role of compensation as a moderator between HR practices and employee retention, suggesting that effective HR practices partially explain retention through compensation, while also indicating that the quality of HR practices influences the impact of compensation on retention. This study contributes significantly to academia, theory, and practice within HR management. Academically, it extends current knowledge on the interconnectedness of HR practices, compensation, and employee retention. Theoretically, it advances understanding on how these elements interact and reinforce one another. Practically, it offers actionable insights for HR professionals and organizational leaders to design more effective HR strategies tailored to enhance employee retention and organizational success. Despite robust findings, the study acknowledges limitations and suggests future research directions including longitudinal studies, cross-cultural analyses, and exploration of moderating variables to deepen understanding of HR practices, compensation, and retention dynamics. Ultimately, this research underscores the transformative potential of well-crafted HR strategies in nurturing employee commitment and organizational success, serving as a foundational framework for future studies and practical applications in organizational HR policies and practices.