Employees are a vital resource for organizations because they represent a crucial investment. Organizations depend on employees to achieve most, if not all, of their objectives. As a result, ensuring that employees are committed to their duties is crucial and can be a competitive advantage in the market. How employees remain focused on the organization’s objectives is dependent on several factors, among which are in the control of the management. For example, employees feel more valued when they receive fair treatment and incentives upon completing the assigned responsibilities.
Employee loyalty and commitment is the willingness to remain within an organization and work towards achieving its success while believing that doing so is the best option. Yet, loyalty can get influenced by another factor that is very common in modern workplaces, job satisfaction. Satisfaction is generally the positive effect that employees have on their job. Benefits and compensation affect how an employee feels satisfied or unsatisfied by a job using benefits and compensation packages. This paper aims to describe how compensation and benefits build job satisfaction, which forms the basis of loyalty and commitment of a worker towards their job.
How Compensation and Benefits Contributes to Job Satisfaction
Effective use of compensation and benefits by an organization on its employees improves job performance and satisfaction levels. An employee benefit is any form of reward that an employee receives from the organization other than wages paid either in whole or in part by the employer (Kadir et al., 2019). It comes in many forms, such as health insurance, retirement benefits, and savings. They make employees feel valued and gain morale to improve their productivity. While these benefits are in the form of non-monetary rewards, compensation is often monetary. For example, direct compensation includes wages, whereas indirect compensation might be welfare support to select employees. How employees perform at the workplace depends on several factors. One such factor is the motivation they get from the employer to do the job. It can result from compensation and benefits. They motivate employees to perform their duties and responsibilities and go beyond the limits.
Employee performance is the successful completion of responsibilities and duties based on some indicators or expected performance standards. Research suggests that monetary rewards and benefits play a critical role in influencing job satisfaction (Qasim, 2012). For instance, Qasim asserts that “Pay is one of the fundamental components of job satisfaction since it has a powerful effect in determining job satisfaction” (p. 82). As explained in Maslow’s law, compensation supports individuals to meet their basic needs. If present, it acts as an extrinsic factor that leads to increased satisfaction levels. If absent, it causes dissatisfaction as per the Herzberg theory. According to Frederick Herzberg, employee satisfaction is dependent on hygiene and motivators (Mahzan & Abidin, 2015). If hygiene issues, such as salary, have been addressed, the motivators raise their satisfaction levels significantly. Altogether, benefits and compensation are known to reduce absenteeism, boost productivity, and improve employee loyalty and commitment towards the organization’s objectives.
How Job Satisfaction Contributes to Employees’ Loyalty and Commitment
Job satisfaction has a significant impact on the loyalty and commitment of employees. Job satisfaction is the particular view of the work from the employees’ perspective. Influencing factors of job satisfaction range from favorable and unfavorable feelings to attachments of their work. If employees view their job as favorable, they are likely to feel happy to spend time working on their duties and responsibilities. “Employee’s happiness in his/ her career or willingness to stay or leave in the workplace depends on the level of satisfaction acquired in the organization” (Frempong et al., 2018, p. 95). Employees may receive offers from other organizations, and at times these offers have higher salary and compensation tags. Partly, job satisfaction influences their decisions in taking such job offers or looking for new jobs.
Focusing on factors that increase job satisfaction can reduce turnover rates and increase the retention of top talents. Organizations must consistently invest in their employees by paying attention to what makes them satisfied with the job. Either positively or negatively, factors that affect job satisfaction levels can significantly influence their loyalty and commitment. Researchers agree that job satisfaction is an antecedent to an employee’s commitment to their job, while others suggest vice versa. Nonetheless, researchers posit a positive association between job satisfaction and organizational commitment.
Job satisfaction is vital to employees in well-structured organizations. It is also a necessity for organizations because it is the key to unlocking the benefits of improved job performance in the workforce. If employees are not satisfied, it is possible to have an under-performing organization workforce. However, there are so many means of increasing job satisfaction. For instance, providing benefits and compensation boosts their performance in a significant manner. When employees feel satisfied with their job, they are more likely to focus on improving their performance. They feel disinterested in seeking out job offers from other organizations. In the process, they become focused on their duties and responsibilities and helping the organization achieve its objectives. It eventually translates to loyalty and organizational commitment. As organizations seek to expand their competitive advantages to remain sustainable, increasing job satisfaction remains such a viable option. Competitive organizations focus on the payoff of investing in high satisfaction levels instead of the financial burden posed by compensation and benefits.
Frempong, L. N., Agbenyo, W., & Darko, P. A. (2018). The Impact of Job Satisfaction on Employees’ Loyalty and Commitment: A Comparative Study Among Some Selected Sectors in Ghana.
Kadir, A., Humaid AlHosani, A., Ismail, F., & Sehan, N. (2019). The effect of compensation and benefits towards employee performance. Proceedings of the Proceedings of the 1st Asian Conference on Humanities, Industry, and Technology for Society, ACHITS 2019, 30-31 July 2019, Surabaya, Indonesia. https://doi.org/10.4108/eai.30-7-2019.2287551
Mahzan, N., & Abidin, A. Z. (2015). Examining navigators’ job satisfaction in royal Malaysian Air Force through the lenses of Herzberg’s motivation-hygiene theory. Journal of Economics, Business and Management, 3(8), 758-762. https://doi.org/10.7763/joebm.2015.v3.281
Qasim, S. (2012). Exploring factors affecting employees job satisfaction at work. IBT Journal of Business Studies, 8(1). https://doi.org/10.46745/ilma.jbs.2012.08.01.04