IMPACT OF PERFORMANCE BASED BONUSES ON EMPLOYEE JOB SATISFACTION THE CASE OF ETHIOPIA INDUSTRY INPUTS DEVELOPMENT ENTERPRISE

Abstract

This research investigates the impact of performance based bonus systems on employee job satisfaction at Ethiopian Industry Inputs Development Enterprise (EIIDE). Guided by four specific objectives, the research assessed employees’ awareness and perceptions of fairness in the bonus system, its influence on motivation, its effect on retention and commitment, and its overall contribution to job satisfaction. A quantitative design was employed using structured questionnaires distributed to 209 employees selected through stratified sampling, and the data were analyzed using descriptive statistics, correlation, and multiple linear regression. The findings revealed high awareness of the bonus system but low satisfaction with bonus amounts and fairness. Motivation and retention were only moderately influenced, while job satisfaction was more strongly associated with intrinsic factors. Regression results showed that awareness and fairness and retention significantly affected job satisfaction, while motivation was not statistically significant. Demographic analysis indicated that gender and education level significantly influenced job satisfaction, whereas age and length of service did not. The study concludes that performance-based bonuses affect satisfaction mainly when perceived as fair and aligned with organizational commitment, and recommends improving clarity, equity, and regular evaluation of the system.