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Voice of Research, Vol. 2 Issue 1, June 2013, ISSN No. 2277-7733

EMPLOYEES PERCEPTION TOWARDS COMPENSATION MANAGEMENT SYSTEM
A STUDY ON EMPLOYEES PERCEPTION TOWARDS
COMPENSATION MANAGEMENT SYSTEM IN SELECTED
BRANCHES OF SBI OF UJJAIN DISTRICT
Harish Shukla
Professor, Shri Vaishnav Institute of Tech. & Sc., Baroli, Indore
Shweta Tiwari
MBA, Shri Vaishnav Instt. of Tech. & Sc., Baroli, Indore
Abstract
Employee satisfaction is one of the most important aspects in the organization that cannot be ensured without proper
compensation management system. The present work is based on the study of Compensation Management System in
selected branches of SBI. SBI being the largest nationalized bank needs strong compensation management systems so
that it can achieve rapid growth at national as well as international level. The study aims at knowing whether current
compensation policy is able to attract, retain & motivate employees or not, whether it is effective, whether the present
employees are satisfied with current compensation policy or not, whether quality compensation policy is being
maintained in SBI or not. Most of the employees feel that the present compensation policy is able to attract, retain and
motivate employees. It is found that overall employee satisfaction with the current compensation policy of the bank is
low. Psychological and self-actualization needs of employees are not satisfied properly. It is found that most of the
employees feel that there is no match between individual objectives and objectives of compensation of bank. 35%
employees are not satisfied with the quality of compensation policies. There is a proper Job Evaluation Plan at
workplace and also employees feel satisfaction with current methods of compensation. There is effective audit
procedure to check effectiveness of compensation policies. Staff in Bank is aware of the importance & needs for effective
compensation policy. Needs for compensating employees are not identified on the basis of market trend and
competition.
Keywords: Employees Perception, Compensation Management System, SBI
Competent Employees are the greatest assets of an
organization. The proficiency of employees plays a vital
role in the context of diverse challenges faced by the
modern organizations. Compensation is the remuneration
received by an employee in return for his/her contribution
to the organization. It is an organized practice that
involves balancing the work-employee relation by
providing monetary and non-monetary benefits to
employees. Compensation is an integral part of human
resource management which helps in motivating the
employees and improving organizational
effectiveness.Compensation Management is an integral
part of the management of the organization. Compensation
is a systematic approach to providing monetary value to
employees in exchange for work performed. Compensation
may achieve several purposes assisting in recruitment, job
performance, and job satisfaction. To be effective, the
managers must appreciate the value of competitive pay,
theirhuman resources, and have an investment view of
payroll costs. Bhattacharya (2009) says that balancing the
cost of compensation and retaining employees has now
become the most important priority for todays
organization (p.2).
State Bank of India (SBI) is a multinational banking and
financial services company based in India. It is a state
owned corporation with its headquarters in Mumbai. As at
December 2012, it had assets of US$501 billion and 15,003
branches, including 173 foreign offices spread over 34
countries making it the largest banking and financial
services company in India by assets. Its products are-
credit cards, consumer banking, corporate banking,
finance and insurance, investment banking, wealth
management. Its total employees in 2012 were 2, 92,215.
Objectives
To study whether the current compensation policy is able
to attract, retain and motivate employees or not.
To study the employees perception about the
compensation management system of firm.
To understand the quality of compensation policy of the
bank.
To understand the impact of compensation management
on performance level.
To study relationship between compensation system and
employees job satisfaction.
To find out the types of compensation being given to
employees.
To find out the factors that affect employee compensation
in the banks.
To study the effectiveness of present system of
compensation in banks.
Rationale
The purpose of this project is to study of the
compensation management system of SBI. This study is
conducted to know the current quality of compensation
being provided to employees. It has now become
Voi ce of Research
Vol. 2 Issue 1
J une 2013
ISSN No. 2277-7733
...41... Voice of Research, Vol. 2 Issue 1, June 2013, ISSN No. 2277-7733
EMPLOYEES PERCEPTION TOWARDS COMPENSATION MANAGEMENT SYSTEM
imperative for large size organizations like SBI to balance
the cost of compensation and employee motivation (for
retention) to survive in a competitive world. SBI has to
remain ready to meet challenges arising due to global
competition in banking sector, FDI policies of government
in banking sector, internal competition from other
nationalized banks, competition from domestic private
banks as well as private international banks. SBI not only
requires persons who are well qualified but also they can
be retained in the organization. If the compensation
policies and systems are designed properly to satisfy the
needs of employees, SBI and other nationalized banks can
compete and grow properly. It is the area of growing
importance and thus research work is preferred on this
topic. Not much work has been done related to this area.
This inspired the researchers to opt this topic for study.
The results can be beneficial to the organization
concerned to review policies.
Review of Literature
Bowra, Sharif, Saeed and Niazi (2012) found that the
employee perceived performance and HR practices has the
positive and significant relationship. The regression
results indicate that the two HR practices: performance
evaluation and promotion practices are significant but the
compensation practices are not significant. Moreover, this
study provides help for top-management of banking sector
to design or revise their HR policies and make practices to
attain high employee performance. Singh (2004) argues
that compensation is a behavior aligning mechanism of
employees with business strategy of the firm. Tessema and
Soeters (2006) have concluded that positive correlation
exists between employee performance and compensation
practices. Shahzad, K., Bashir, S. and Ramay, M.I. (2008)
found positive relationship of reward practices with the
performance of university teachers in their research
results. Researchers can build up assumption by the help
of theoretical study that compensation practices are
related with performance of employees. In Hong Kong,
base salary, merit pay, year-end bonus, annual leave,
mortgage loan, and profit sharing were the most important
factors to retain and motivate employees. In China, base
salary, merit pay, year-end bonus, housing provision, cash
allowance, overtime allowance, and individual bonus were
the most important factors to retain and motivate
employees (Chiu, Luk, & Tang, 2002.) Reward and
recognition programs can positively affect motivation,
performance and interest within an organization. While a
little more problematic, team-based incentives, if designed
appropriately, can also encourage and support a range of
positive outcomes (Milne, 2007.) Promotion and wages
positively influence employees work motivation. A
comparison of the relative strengths of the effects reveals
that fair promotion was a more powerful motivator than
wage level and wage increase. The reason why fairness in
promotion was more effective than wage to motivate
employees was discussed in light of the unique career
system existing in Japanese companies and the agency
problems between companies and their supervisors.
(Takahashi, 2006) explores past and present attitudes of
employees concerning work-related motivational factors.
Understanding the factors that employees consider
motivating lends insight to the rewards to which they more
positively respond. It compares the results of four
motivation surveys conducted in 1946, 1980, 1986 and
1992. The comparisons revealed that employees
motivational preferences vary over time. In addition, the
results of the 1992 survey indicate that the factors that
motivate todays workers are more extrinsic than they used
to be. Although employees differ on how they rank these
factors, they overwhelmingly selected good wages as
the top motivator. A good wage is an extrinsic reward with
intrinsic potency. On the surface good wages seem to be
purely extrinsic. Yet, at a deeper level, monetary rewards
communicate what the company values and affect
employees emotional and familial wellbeing (Wiley, 1997).
Tahir, Ahmed, Sahoo, Ullah, Azam and Marwat (2011)
concluded that Compensation Management has a
profound direct positive relationship with employee
motivation level and intrinsic factors played important role
in the motivation process. Catanzaro (2001) described the
effects of compensation over employee motivation; he
stated that compensation has aprofound effect over
employee motivation. He also discussed several factors of
compensation which include both intrinsic and extrinsic
factors and their possible effects over motivation in detail.
He also emphasized that monetary values are not the only
motivators but non monetary factors have more
importance towards motivating employees.
Sharma and Sharma (2011) concluded that in case of work
content and recognition, managerial staffs were more
motivated than operative staffs but in case of payment and
general aspects operative were more motivated with higher
mean value. Further of the study revealed promotion,
payment, work content have no significant affect on the
employees motivation with reference to gender.
Research Design
The present study is descriptive in nature. It is primarily
based on primary data. However, secondary data is also
used for the purpose of study. Data through structured
questionnaire with responses Yes, No and Cant say was
collected from 71 employees who responded positively.
Response rate of the respondents was 47%. Simple
Random sampling method was used to collect data.
Percentage method was used to analyze and interpret
results and achieve research objectives.
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Voice of Research, Vol. 2 Issue 1, June 2013, ISSN No. 2277-7733
EMPLOYEES PERCEPTION TOWARDS COMPENSATION MANAGEMENT SYSTEM
S. No Statement Responses (in %)
Yes No
Cant Say
1. Current compensation policy is ableto attract, retain & motivatetalents. 59.15 19.71 21.12
2. Does thecurrent compensation management system allow employees for taking up
higher responsibilities?
46.47 38.02 15.49
3. Are you satisfied with current compensation policy? 29.57 21.12 49.29
4. Current compensation system allows you to put your efforts according to your
specified jobs.
64.78 22.53 12.67
5. Current compensation system fulfills thepsychological and self-actualizationneeds
of employees.
40.84 32.39 26.76
6. Compensation needs are theoutcomes of appraisal system. 70.42 15.49 14.08
7. Individual objectives are in-linewith compensation system objectives and need. 32.39 35.21 32.39
8. Compensation policy & programs areclearly and transparently designed &
understood by everyone.
42.25 23.94 23.94
9. Compensation programs are timely updated without affecting thecorewok. 54.92 25.35 19.71
10. Do you have aformal job evaluation plan in Bank? 53.52 19.71 26.76
11. Do you link pay to performance appraisal? 53.52 28.16 18.30
12. Appropriateinstrument/methods/tools are usedfor providing compensation. 53.52 23.94 22.53
13. Corrective measures are being used for auditing compensation policy effectively. 52.11 25.35 22.53
14. Staff is aware about the compensation policy. 71.83 19.71 8.45
15. Staff members are aware of the importance of compensation management policy. 73.23 12.67 14.08
16. Quality compensation policy is being maintained in theBanks. 43.66 35.21 21.12
17. Thecost indulged in compensation structure & policy is being maintained in the
audit.
45.07 21.12 23.94
18. Needs for compensating employees are identified on thebasis of market trend and
competition also.
30.98 36.61 32.39
19 Projected salary increases for a particular year. 36.61 30.98 32.39

Suggestions: Psychological and self-actualization needs
of employees should be properly identified and
accordingly these needs should be satisfied using various
motivational techniques. Employees should be paid proper
salary, incentives, facilities, training, developmental
opportunities, competency building plans, motivation,
working environment etc. on the basis of market trend and
competition so that they can be retained for a longer
period to achieve organizational objectives. Individual
objectives and objectives related to compensation policy
should be aligned properly so that both objectives are
achieved because these objectives supplement each other.
There is a lot of scope of improvement in the quality of
present compensation policy. Reward system, performance
bonus, Employee Stock Option Plan, merit promotion and
other benefits can be introduced.
References
Bhattacharay, Dipak Kumar. (2009). Compensation
Management, New Delhi, Oxford University Press.
Bowra, Z., Sharif B., Saeed A., & Niazi, M. (2012). Impact
of human resource practices on employee perceived
performance in banking sector of Pakistan. African
Journal of Business Management, 6(1), 323-332.
Finding and Conclusion: Most of the employees feel that
the present compensation policy is able to attract, retain
and motivate employees. It is found that only 30%
employees of bank are satisfied with the current
compensation policy of the bank. It can also be concluded
that psychological and self-actualization needs of
employees are not satisfied properly. It is found that most
of the employees feel that there is no match between
individual objectives and objectives of compensation of
bank. 35% employees are not satisfied with the quality of
compensation policies. There is a proper Job Evaluation
Plan at workplace and also employees feel satisfaction
with current methods of compensation. There is effective
audit procedure to check effectiveness of compensation
policies. Staff in Bank is aware of the importance & needs
for effective compensation policy. It is found that needs
for compensating employees are not identified on the
basis of market trend and competition. Compensation
policy is backbone of banks as these banks provide
service to all segments of society. These policies have to
be sound by respecting skill, knowledge, competence,
talent of their employees. Thus, banks can not only
provide better services to customers but also banks can
achieve growth.
...43... Voice of Research, Vol. 2 Issue 1, June 2013, ISSN No. 2277-7733
EMPLOYEES PERCEPTION TOWARDS COMPENSATION MANAGEMENT SYSTEM
Singh, K. (2004). Impact of HR practices on perceived firm
performance in India. Asia Pacific Journal of Human
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