THE EFFECT OF COMPENSATION ON EMPLOYEE MOTIVATION: THE CASE OF AWASH WINE S.C

Abstract

The general objective of the study was to determine the effect of compensation on employee motivation at Awash Wine S.C. The study used descriptive research design and followed quantitative research approach. A sample of 243 respondents was selected out of the population of 610 employees using Simple random sampling technique. A structured questionnaire was used to collect data from the respondents. The data was analyzed using the Statistical Package for Social Sciences (SPSS). The study found that many of the respondents were not very familiar with the practice of compensation at Awash Wine S.C. With regard, to the extent to which financial payments affect employee’s motivation, the respondents were impressively aware of all entitlements both basic and other contingent payments. The level of motivation was relatively low, and the respondents felt that their motivation levels would be boosted if their basic pay was to be increased. In conclusion the study demonstrated that a proper compensation plan was lacking, and employees lacked some of the key information in employee compensation determination. The study also concluded that although the employees were highly motivated by basic pay and were aware of their compensation entitlements, the motivation was not driven by the basic employee motivators. The study recommends a system of compensation plan be developed, feedback mechanism should also be developed, and staff encouraged to use them. Further recommendation is that management should clearly document pay structures and effectively communicate the same to all.