Excerpt
Table of Content
CHAPTER ONE
1. INTRODUCTION
1.1. Background of the study
1.2. Statement of the Problem
1.3. Obj ectives of the study
1.3.1. General Obj ectives
1.3.2. Specific Objectives
1.4. Research questions
1.5. Significance of the study
1.6. Scope of the study
1.7. Definition of key terms
1.8. Limitations
1.9. Organization of the Study
CHAPTER TWO
2. THE REVIEW OF RELATED LITERATURE
2.1. Theoretical Review
2.1.1. Job Embeddedness Theory
2.1.2. Maslow’s theory
2.1.3. Herzberg’s two factors theory
2.1.4. Adams Equity Theory (1965)
2.2.5. Concept of Human Resource Management
2.2.3. Concept of Employee Retention
2.2. Empirical Literature Review
2.2.1. Effects of Compensation on Employee Retention
2.2.2. Effects of Training and Development on Employee Retention
2.3.3. Effects Work-Life Balance on Employee Retention
2.2.4. Effects of Employee Engagement on Employee Retention
2.2.5. Effects of Work Environment on Employee Retention
2.3. Research Gaps
2.4. The Conceptual Framework
CHAPTER THREE
3. METHODOLOGY
3.1. Research Design
3.2. Research Approach
3.3. Population and Sampling Design
3.3.1 Target Population
3.3.2 Sampling Design
3.3.2.1 Sample Frame
3.3.2.2. Sampling technique
3.3.2.3. Sample Size
3.4. Source of Data
3.4.1. Primary Data sources
3.5. Data Collection Tools
3.6. Methods of Data Analysis and Presentation
3.6.1. Methods of Data Analysis
3.6.2 Methods of Data Presentation
3.7. Validity and Reliability Test
3.7.1. Validity Test
3.7.2. Reliability Test
3.8. Ethical Considerations
CHAPTER FOUR
4. RESEARCH FINDINGS AND DISCUSSIONS
4.1. Response Rate
4.2. Demographic Characteristics of Respondents
4.2.1. Sex Category of Respondents
4.2.2. Age Category of Respondents
4.2.2 Marital Status of Respondents
4.2.3. Educational Background of the Respondents
4.2.4. Experience of Respondents
4.2.5. Job Position
4.3. Descriptive Analysis of the Research
4.3.1. Employee Retention
4.3.2. Factors Affecting Employee Retention
4.3.2.1. Compensation
4.3.2.2. Training and Development
4.3.2.3. Work-life Balance
4.3.2.4. Employee Engagement
4.3.2.5. Work Environment
4.4. Inferential Analysis of the Data
4.4.1. Diagnostic Tests of Assumptions of Classical Linear Regression Model
4.4.1.1. Linearity Test
4.4.1.2. Autocorrelation Test
4.4.1.3. Multicollinearity Test
4.4.1.4. Homoscedasticity Test
4.4.1.5. Normality Test
4.4.2. Correlation and Regression Analysis of the Data
4.4.2.1. Correlation Analysis
4.4.2.2. Regression Analysis
CHAPTER FIVE
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1. Summary
5.2. Conclusions
5.3. Recommendations
ACKNOWLEDGEMENTS
- Even if there are no equivalent words to express, I would like to thanks Almighty God in
helping and leading me in every microsecond of my life.
- I would like to appreciate my advisor Zelalem T. (PhD) for his invaluable supervision,
academic feedback, support and endless patience throughout the project work.
- I would like to thank all the people who directly and indirectly helped me groom my
knowledge and taught me during the course of my study.
- And also wish to express my gratitude to Bole sub-city small tax payer’s branch office staff members for their willingness to respond to the questionnaires and share their experiences in the study.
- Words are not actually enough to express the degree of my indebtedness to my family for all their encouragement, support, love and prayers for my progress and success in my entire life especially in this Project work.
- Finally, this work is dedicated to my father, WonedemenehTeshager.
Yenesew Wonedemeneh September 2019 Addis Ababa, Ethiopia
List of Tables
Table 3.1 shows Reliability Statistics
Table 4.1 shows the sex composition of respondents
Table 4.2.Age Category of the Respondents
Table 4.3.marital status of the Respondents
Table 4.4. Educational Level of Respondents
Table 4.6.Job Position of Respondents
Table 4.7.Employee retention practice of the organization
Table 4.8. Level of compensation in Bole sub city small tax payers’ office
Table 4.9.Level of training and development in Bole sub city small tax payers’ office
Table 4.10.Level of work life balance in Bole sub city small tax payers’ office
Table 4.11.Employee engagement practices in their organization
Table 4.12.Working environment of the organization
Table 4.13.Durbin-Watson Result
Table 4.14.Variance inflation factor (VIF)
Table 4.15.Classification of the Strength of Relationship
Table 4.16.Pearson Correlation
Table 4.17.Model Summary
Table 4.18.Analysis of Variance Results of the Regression Analysis ANOVA
Table 4.19.Regression Coefficients of independent variables
List of Figures
Figure 2.1. Maslow hierarchy of Needs
Figure 2.2. Herzberg’s two factors theory
Figure 2.3. Conceptual framework
Figure 4.1. Sampled linearity graph
Figure 4.2.Scattered plot
Figure 4.3.Histogram
Abstract
The main purpose of this study was to assess the factors affecting employee retention in Bole sub city small tax payers’ office. The study also attempted to determine whether Compensation, training and development, Work-Life Balance, Employee Engagement and working environment affects employee retention in Bole sub-city small taxpayer’s branch office. In order to seek the research objectives data was collected through closed ended questionnaires. The target population for this study was438 employees working in the Bole sub-city small tax payers’ branch office. A sample of 210 respondents was drawn from the total population using simple random sampling technique. In order to analyze the data both descriptive and explanatory way of analysis were used to analyze the data. The descriptive analysis was analyzed facts using frequency, percentage, tables, figures, mean and standard deviation. However explanatory analysis was analyzed using correlation and regression. The findings revealed that the Compensation, Training and Development, Work Life Balance and Work Environment in the organization have significant and positive effect on employee retention (p-values<0.05). A unit change in Compensation, Training and Development, Work Life Balance and Work Environment affect employee retention by 55.6, 16.3, 27.3 and 14.9 percent respectively. Even if Employee Engagements have positive effect on employee retention, it has insignificant effect on employee retention. Based on these result the researcher recommended that improving human resource management practice were necessary to retain employees of the organization. Therefore the organization must appropriately measures to retain key employees.
Key Terms: Employee retention, Compensation, training and development, work life balance, employee engagement, work environment
CHAPTER ONE
1. INTRODUCTION
The main purpose of the study is to identify major factors that are affecting employee retention in Bole sub-city small tax payers’ branch office. Chapter one outlines the background, problem statement, research questions, main and specific objectives of the study. The chapter continues by highlighting the research questions, significant, scope, limitations, and the organization of the study.
1.1. Background of the study
An organization cannot survive as strong and competitive organization if its top performers leave it. It needs employees who are loyal and hard workers with full dedication to achieve the organization’s objective. It is essential for the management to retain its valuable employees who think in favor of the organization and contribute their level best (Dereje, 2017, p.2). Employees have been important resources to any organization. Based on their critical character, they can be termed the life-blood of an organization. Advancement in technology has caused most organizations to be more and more technology driven. However, this situation does not reduce the value of employees in an organization because technology requires human resources to operate. With issues such as globalization, competition is becoming keener and keener in most industries. This situation also affects the job market in the sense that organization demand in human resources to remain competition in their respective industries is higher. To remain more competitive, organizations need therefore not to only attract the best talents but also to retain them on the job for a long term. The toughest challenge that organizations encounter nowadays is not only how to manage the people but also how to keep them on the job as long as possible and how to maintain them vigorous and ambitious (Kossivi, Xu&Kalgora, 2016, pp. 261-262).
Mita, Aarti and Ravneeta, (2014, p.154) also noted that employee retention as: a technique adopted by businesses to maintain an effective workforce and at the same time meet operational requirements. People related issues, for example, compensation and benefits, hiring, administration, organizational development, employee motivation, wellness, benefits, safety, communication, performance management, and training are dealt by it. Human
Resource Management handles people, work place environment and culture in a strategic manner. In a bid to retain its workforce for enhanced performance, Gberevbie, (2008, p.21) put in place various mechanisms in the form of incentives and rewards. These include: regular staff training both within and outside the country, relatively good monthly salaries and condition of service, regular promotion, payment of outstation allowance, overtime pay, study leave with full pay, maternity leave with full pay for female staff, car and housing loan; payment of transportation allowance, staff unionism and job security.
Retention of good employees in an organization is one of the biggest challenges, which the organizations’ now a day are facing (Chew, 2004; Ng''ethe, Iravo&Namusonge, 2012). Management, top-level executives and HR departments of the companies are splitting their sweat and blood, spending their time, effort, and money to minimize turnover rate and to retain key employees.
Therefore, the main goal of this study was to examine major factors that have been affecting employees’ retention in Bole sub-city small tax payers’ branch office.
1.2. Statement of the Problem
Employee Retention involves taking measures to encourage employees to remain in the organization for the maximum period of time (Griffeth & Hom 2001). But many organizations are facing a lot of problems. Long-term retention requires fair employee treatment. This can be achieved by ensuring distributive justice, concerning the promotion of fairness, transparency, referring to the perceived fairness of intra-firm pay differentials, and procedural justice, and voice in decision-making, both are considered to be particularly salient for retention (Bloom & Michel, 2002).
Even though, employee retention is subject to employee turnover (loss of experienced staffs) as these are problems related to improper compensation scheme, lack of updated skills that comes from training and development, lack of work life balance, less employee engagement and un comfortable working environment. Studies on factors related to employee retention absence of adequate compensation is one of the main factors contributing to employee intention to leave (Rusbult& Farrell, 1983); Training and development programs increase retention when they meet the needs of the employees (Montgomery, 2006); Work-life balance programmes cover a variety of interventions and the main factor to increase retention (Lockwood 2006). Engagement is the willingness to invest oneself and expand one’s discretionary effort to help the employer succeed and to retain the employee (Macey & Schnieder, 2008) and working climate, positively influences employee retention (Robbins, 2007). All the above researchers show that there is a positive relationship between Employee Retention and factors such as, Compensation, training and development, work life balance, employee engagement and work environment. This emphasize on the factors will have a paramount importance in the retention of skilled and experienced staffs. However the practice in the sub-city seems to fail to work on retention of its employees. It has been registering 11.08 % (Bole sub city-annual report of 2018) a continuous out flow of experienced staffs and low stay of new comers in the sub-city that seems to increase recruitment cost and undermine the overall performance of the sub-city. Therefore this study assesses the factors that are affecting employee retention of Bole sub-city small taxpayer’s branch office.
1.3. Objectives of the study
1.3.1. General Objectives
The main objective of this study is to determine factors affecting employee retention in Bole sub-city small tax payer’s branch office.
1.3.2. Specific Objectives
The study set out to address the following specific objectives:
- To determine whether Compensation affects employee retention within Bole sub-city small taxpayer’s branch office.
- To find out whether employee training and development affects employee retention within Bole sub-city small taxpayer’s branch office.
- To determine whether Work-Life Balance affects employee retention with in Bole subcity small taxpayer’s branch office.
- To determine whether Employee Engagement affects employee retention with in Bole sub-city small taxpayer’s branch office.
- To examine whether working environment affects employee retention with in Bole subcity small taxpayer’s branch office.
1.4. Research questions
Based on the research problem and organizational facts of Bole sub-city small taxpayer’s branch office the researcher focused on factors of employee retention that the organization used in its working activities.
The research answered the following specific research questions in the study.
1. To what extent do Compensation scheme affect employee retention?
2. To what extent do training and development affect employee retention?
3. To what extent does Work-Life Balance affect employee retention?
4. To what extent does Employee Engagement affect employee retention?
5. To what extent does working environment affect employee retention?
1.5. Significance of the study
The study has a high significance to the academic purpose, Bole sub-city small tax payer’s branch office, and to the government strategist. The study provide a basis for researchers, future scholars and other stakeholders to use the results for reference while also enabling researchers to conduct more exploration on the topic of factors affecting employee retention. The study may also be important to functional managers of Bole sub-city to understand employee retention strategies of the organization to streamline the retention practices they have and give the company the required competitive advantage. On the other side the paper help the government to understand the factors that affect employee retention and to design strategy to retain energetic employees of the public sectors.
1.6. Scope of the study
The study aimed to assess factors affecting employee retention practices. The study focus on Bole sub-city small tax payers’ branch office, since access to data, manageability of the research and the problem of employee retention mechanism are the reason to focus on this study areas.
1.7. Definition of key terms
Employee Retention: is the ability of a firm to keep its valuable employees for longer than its competitors (Cardy & Lengnick-Hall, 2011).
Employee engagement: is desirable, which has an organizational purpose, and has both psychological and behavioral facets in that it involves energy, enthusiasm and focused effort.
Work environment: The physical layout of the work environment such as neatness, organization, convenience, attractiveness and stimulus like noise, air, hazards and so on (Noel, 2008)
Compensation: refers to the human resource management function that deals with every type of reward individuals receive in exchange for performing organizational tasks. (Mathis and Jackson, 2006)
Training and development programs: this is the programs that are given by the company to make promotion, to develop their work skill and add knowledge on their employees. Work-life balance: are program that cover a variety of interventions, and include such practices as dependent care leave, childcare subsidies, eldercare program, counseling and referral, and flexible working hours (Muchinsky, 1977).
1.8. Limitations
Lack of literature on the study area, some inappropriately filled questionnaires and unreturned research questionnaires are limitation of the study.
1.9. Organization of the Study
The paper is composed of five chapters. The first chapter outline introduction of the study that include background of the study, statement of the problem, objective of the study, scope and significance of the study. The second chapter of the paper is the literature review and the third chapter focus methodology and model specification part. Chapter four discusses Data analysis and Interpretation of the study. Finally, chapter five deals with conclusion and recommendation that given by the researcher based on findings.
CHAPTER TWO
2. THE REVIEW OF RELATED LITERATURE
This section reviews the relevant literature to form a basis for the study. It evaluates the effects of employee retention, the theoretical literature review, empirical literature review and the conceptual framework on factors affecting employee retention thorough reviewing of the different studies related to the topic.
2.1. Theoretical Review
A theory is a set of interrelated constructs or variables, definitions and propositions that presents a systematic view of a phenomenon by specifying relations among variables, with the purpose of explaining a natural phenomenon. This section reviews theories on motivation, turnover and retention.
2.1.1. Job Embeddedness Theory
Mitchell and his colleagues introduced the Job Embeddedness model in 2001. The model is based on Kurt Lewin’s field theory and the psychological concept of embedded figures. Field theory asserts that human interactions are affected by both proximal and distal connection in their life space. To name the model Embeddedness, Mitchell et al. (2001, p.1104) explains this word like “a web or net in which an individual can become stuck.” Applying this to organization context, this means the employees are connected firmly with the organization; thus, it will be more difficult to make decision regarding leaving.
This theory argues that the connections of employees to their organizations determine if they leave their positions or stay. For instance, where the employee feels fit for the job such as if they have the necessary job knowledge, personal skills, a favorable working environment and the connection with the community. Links with the community and the organization can make an employee to be stuck in an organization. Lastly, if the employee feels that they be sacrificing good relationships they have nurtured with their colleagues, or if they are forfeiting good projects or programs, they might stay (Mitchell et al., 2001).
Michell et al. (2001) states that Embeddednessconstruct has three dimensions:
The first dimension is organizational fit, which is the congruence of employee’s personal values and goals to those of the organization, and how employee’s abilities and knowledge support this compatibility. The greater the compatibility is, the greater the fit. Organizational fit is an important variable in recruiting and retaining employees. The increasing level of organizational fit comes along with the decrease of turnover and voluntary quit.
The second dimension is organizational links, which is the degree to which employees connect to other people and engage to activities in the organization. In Embeddedness model, these links are considered as the strands of the web. It is believed that the stronger the links are, the more embedded the employee may become.
The last dimension is organizational sacrifice, indicates the tangible or intangible benefits that employees have to give up in case of leaving. The tangible benefits include pension package, bonus, while intangible sacrifices refer to seniority, chance to work with great colleagues. This dimension identifies how the employee perceives the financial and psychological loss associate with the departure. The significance of those benefits varies from one employee to another, depending on factors such as their current financial situation, life goal, etc.
Unlike previous models, which mostly studied about the attitudes and perceptions of employees, Embeddedness focuses on aspects of organizations and community that the management has more influence. Besides, this model takes non-work factors, such as religious and community activities, into consideration. It also includes new facets of organization, such as teamwork, project groups, and other work-related connection.
2.1.2. Maslow’s theory
All human beings have needs that they want to satisfy. The primary needs refer to basic physical needs such as food, sleep and water. These needs are biological and common in every individual. The influences of these needs on behavior changes, thus, are easy to recognize. Meanwhile, the secondary needs, which belong to psychology, are more ambiguous. These needs arise at certain stage in one’s life, during learning and development, for instance, the desire to be loved or be connected. Identifying and explaining secondary needs are more complicated, because this type of needs varies depending on many external factors, such as the culture one grows up in. However, secondary needs are accountable for most of employee behaviors in the organization.
The psychologist Abraham Maslow introduced “Hierarchy of needs” for the first time in 1943 and this theory still remains popular in the present time. The hierarchy of needs is one of the most popular in content theories that highlights the factors that drive humans’ behaviors and motivate them. This theory is base on two principles: deficit and progression. The deficit principle states that the needs that are satisfied are no longer motivate the behaviors; people only act to fulfill the deprived desire. The progression principle defines that needs at certain level only come when the lower-level needs were satisfied.
Physiological needs are at the lowest level in the hierarchy. This level of needs consists of basic means of living, for example, food to east and shelter to live in. Though these needs are basic, Maslow emphasizes that they have the overall influence onto other needs. A person who is hungry tend to think about nothing but foods, and the desire to eat can be huge enough to push other needs to second priorities.When physiological needs are satisfied, the next level of needs emerges. Security needs are the need to be protected and secured from dangers. Applying to working life, these needs consist of the insurance, work safety condition, job security as well as financial benefit that assure certain living standards. The third level of hierarchy is social needs, which refer to the desire to love and beloved, as well as engage to the society. In working life, these needs can be translated to the relationship with coworkers and supervisors or the interaction with customers. These relationships, if managed effectively, satisfy employee social needs by creating sense of being connected. The esteem needs are the needs to be highly evaluated, by one self and others. Self-esteem needs refer to the desire for confidence, independence, competence and ability of to accomplish tasks. Besides, one also needs to be esteemed by other people expressing through the desire to be recognized and appreciated (Dessler 2005, p.438). The highest level of needs is selfactualization, which denotes the desire to develop and improve to become actualized in what one is potential. In organization context, these needs are the desires for development and promotion opportunities, or creative and challenging jobs (Dessler, 2005, p. 439).
Though Maslow’s theory and its principles were not verified and considered valid, the idea of this theory can be helpful for managers to understand employee needs. The highest level of needs defined in the hierarchy also portraits the ideal attitude and status of an employee. According to Greenberg & Baron (2003, p. 195), self-actualized employees tend to perform with highest productivity.
2.1.3. Herzberg’s two factors theory
Frederick Herzberg introduced the two factors theory in the book “Motivation to work” in 1959. The theory provides framework for management to understand factors that motivate and dissatisfy the employee. Base on a insightful research conducted by in-depth interviews with more than 200 employees about the moments of positive and negative feeling about their jobs, Herzberg came to the conclusion to divide behavior driven factors to two categories: hygiene factors and motivators.
Figure 2.2. Herzberg’s two factors theory
Abbildung in dieser Leseprobe nicht enthalten
Hygiene factors consist of factors where dissatisfaction can arise from, for instance, company policies, job security, employment relations and working conditions. Though these factors do not motivate people, they can lead to dissatisfaction if not managed effectively. Motivators include achievement, growth opportunities, the sense of recognition, and job responsibility. These factors are the keys to job satisfaction, which can motivate people to improve the performance. According to Herzberg, the opposite of dissatisfaction is no dissatisfaction, and the opposite of satisfaction is no satisfaction. The employee remains in neutral status in case there is no motivator, as well as they would be neither dissatisfied nor satisfied once level of hygiene factors is adequate.
In conclusion, Herzberg’s theory considers hygiene factors tools to prevent dissatisfaction. However, these factors cannot be based on to improve the satisfaction among employees. Only motivators are capable factors to rely on in terms of motivation and improve productivity.
2.1.4. Adams Equity Theory (1965)
The equity theory by Adams (1965) recognizes that individuals are concerned not only with the rewards they receive for their efforts, but also compare their rewards with what others receive. The theory is founded on people’s perception of fairness or equity which is usually subjective. The Equity theory posits that employees seek to maintain equity between the input that they bring into a job such as education, time, experience, commitment and effort and the outcome they receive such as promotion, recognition and increased pay against the perceived inputs and outcomes of other employees (Spector, 2008). Equity theory proposes that individuals who perceive themselves as both under-rewarded or over rewarded experience distress and that this leads to efforts to restore equity within the organization. Failing to find equity according to, Hellriegel, Jackson, Slocum, Staude, Amos, Klopper, Louw, &Oosthuizen (2004) may make them behave in ways that harm the organization. The retaliatory measures by employees who think they are unfairly rewarded may include, withholding effort and reducing work inputs, displaying feelings of hostility to co-workers and the organization itself, and seeking salary increases, challenging superiors about tasks assigned, as well as quitting the job and seeking an alternative elsewhere.
2.2.5. Concept of Human Resource Management
HRM is the process of acquiring, training, appraising, and compensating employees, and of attending to their labor relations, health and safety, and fairness concerns. The topics well discuss should therefore provide you with the concepts and techniques you need to perform the people or personnel aspects of your management job. These include: Conducting job analyses (determining the nature of each employees job), Planning labor needs and recruiting job candidates, Selecting job candidates, Orienting and training new employees, Managing wages and salaries (compensating employees),Providing incentives and benefits, Appraising performance, Communicating (interviewing, counseling, disciplining), Training and developing managers, Building employee commitment. And what a manager should know about: Equal opportunity and affirmative action, Employee health and safety, Handling grievances and labor relations (Dessler, 2005, p. 4.).
Since the mid-1980’s HRM has gained acceptance in both academic and commercial circles. HRM is a multidisciplinary organizational function that draws theories and ideas from various fields such as management, psychology, sociology and economics. There is no best way to manage people and no manager has formulated how to manage the people because managing people is not a straightforward thing. People are complex beings that have complex needs. Effective HRM very much depends on the causes and conditions that an organizational setting would provide. Although the nature of people at work and their complexities make their management a difficult task, it provides a unique opportunity for academic (e.g. universities) and professional bodies (e.g. Chartered Institute of Personnel and Development) to investigate human resource related issues and continuously aim to develop HRM practices and improve the way human resources are managed in organizations (Senyucel, 2009, p.14).
2.2.3. Concept of Employee Retention
Retention of good employees in an organization is one of the biggest challenges, which the companies’ now-a-days are facing. Management, top-level executives and human resource departments of the companies are splitting their sweat and blood, spending their time, effort, and money to stop turnover and to retain key employees (Haider, Rasli and Yusoff, 2015).
Young employees with, few year experience and high education level have low level of jobs satisfaction and have lower commitment to the organization, these negative attitudes are promoted with employees turnover intention. Individual aptitude is the key factors for employee turnover intention (Ma, Chen and Wang, 2003, p. 19).
The need for organizations to retain their talents is crucial for their ability to remain in business depends on it. Some factors such as organization culture, environment, promotion, training and development. The workforce of an organization for employee retention can be classified into three categories: directors, managers and employees (Kossivi and Kalgora, 2016, p. 265). Generally, employee-retention is the intention of employees to stay loyal to their current-work for a long period.
2.2. Empirical Literature Review
2.2.1. Effects of Compensation on Employee Retention
Several studies have addressed the impact of employee compensation and rewards on turnover and retention. Employee compensation includes all forms of pay and rewards received by employees for the performance of their jobs (Snell & Bohlander, 2007). Direct compensation includes employee wages and salaries, incentive-payments, bonuses and commissions. Whiles indirect compensation comprises the many fringe benefits provided by employers and non-financial compensation including health care, life insurance, leave policy, overtime, pension plan and transportation policies.
According to Willis (2000), direct compensation serves as the most critical issue when it comes to attracting and retaining talents. Parker and Wright (2000) also assert that there is an underlying assumption that money can influence behavior hence a fair remuneration is understood to be the cornerstone of the contractual and implied agreement between employees and employers. As a result, some companies may even provide remuneration packages which are well above the market rate to attract and retain critical talents (Parker & Wright, 2000). Most managers believe that money is the prime retention factor and many employees cite better pay or higher compensation as the reason for leaving one employer for another (Mathis & Jackson, 2004). Khan (2010) argues that comprehensive compensation and rewards augmented by an effectual system of disbursement can play an effective role in attracting the best candidates, shaping employee behavior and performance outcome, and facilitating retention of talents.
Indirect compensation such as benefits could also affect employee attraction and retention. The absence of adequate benefits is thus one of the main factors contributing to employee intention to leave (Rusbult& Farrell, 1983). Casper and Buffardi (2004) assert that an organization can compensate for moderate salaries in a form of non cash compensation, by offering a large amount of benefits. Mathis and Jackson (2004) argued that a balanced, fair and competitive compensation and reward system affect the retention of employees. This makes compensation and reward planning a vital dimension of effective HRM policies. Organizations must see rewards as essential and increase their commitment to the use it as an effective tool in retaining talents.
Milman and Ricci (2004) concluded that the most significant predictors of retention included intrinsic fulfillment and working conditions rather than monetary rewards. Similarly, the study by Walsh and Taylor (2007) revealed that although compensation is important, it is the absence of opportunity for professional growth and development that affects retention and turnover of management level employees. According to Zingheim et al. (2009), a competitive pay and benefit package is an important element to affect employee retention.
2.2.2. Effects of Training and Development on Employee Retention
Training and Development Training and development programs can increase retention when they meet the needs of the employees (Montgomery, 2006). Meeting employee needs through training programs occur when the information provided is perceived as useful, applicable and desirable by them. He further suggests that the keys to employee retention are skills development, competence of management, and rewards both psychological and financial. Organizations need to pay serious attention for their investment in training and development if they want to retain their key employees.
According to Doyle (1997) a well-functioning organizational career planning system may also encourage employees to take more responsibility for their own development, including the development of skills viewed as significant to the organization.
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