Determinants of employee compensation: an exploratory study.

Abstract

Compensation is a discretionary concept and the determinants of compensation may not necessarily be the same for all organisations. This article reports on the extent to which a limited number of determinants of compensation identified for this particular study, namely job performance, external equity, job families, tenure and employee skill, determine employee compensation in an organisation. A purposive sample was drawn for this study. Three small and medium-sized organisations were included in the sample, namely a state-owned organisation in the aviation sector, a parastatal company in the finance development sector and a private company in the banking sector. A categorical multiple regression analysis was conducted. The findings of this study reflect a greater significance in four of the six variables as strong predictors of employee compensation, namely employee skill, employee performance, job family and job grade. The other predictors, namely external equity and tenure, can be considered to be of marginal significance as predictors of employee compensation. However, the results also seem to indicate that the four strong predictors may be more significant in state-owned and parastatal companies than in private sector companies.