Employee Compensation Practices In Industrial Enterprises Of Bangladesh Economics Essay

Compensation is one the most of import maps of human resource direction ( HRM ) . The present survey aimed at researching differences between the public and private sector industrial endeavors of Bangladesh with regard to overall position of compensation patterns. Datas collected from 20 six public and 30 four private sector industrial enterprises show that the overall position of compensation patterns of the private sector industrial endeavors is significantly better than that of the public sector industrial endeavors in Bangladesh. Some deductions are besides offered for overall betterment of the compensation patterns of the public and private sector industrial endeavors of Bangladesh.

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Keywords: Compensation, Public Sector, Private Sector, Industrial Enterprises.

JEL Categorizations: M12

Introduction

Employee compensation is one of the major maps of HRM. Dessler ( 2007 ) defined employee compensation as the “ all signifiers of wage or wagess traveling to employees and originating from their employment ” . Compensation is an of import for both employers and employees. It is of import to the employees because it is one of the chief grounds for which people work. Employees ‘ life position in the society, motive, trueness, and productiveness are besides influenced by the compensation ( Aswathappa, 2008 ) . Again, it is really of import for the employers because it creates significant hard currency out flow of an endeavor ( Weeratunga, 2003 ) . Compensation includes both fiscal and non-financial benefits ( Aswathappa, 2008 ) . Fiscal elements comprise of two elements viz. direct and indirect signifiers of payments to the employee. Direct compensation includes hourly and monthly rated rewards or wages, and inducements such as fillips, committees, and net income sharing programs. Indirect compensation includes benefits such as provident fund, tip, and wellness insurance, paid foliages, holidaies, company auto, furnished house, retirement benefits, stock option, and the similar. Non-financial benefits comprise of disputing occupation, duties, grasp, working environment, authorization, and others.

The compensation that an organisation provides may be based on either rank ( occupation ) or public presentation ( accomplishment ) . In the traditional system, employees are paid on the footing of occupation or rank that has no connexion with the employee ‘s or organisation ‘s public presentation. On the contrary, in the instance of public presentation or skill based wage, employees are compensated with regard to their public presentation, abilities, and cognition. In pattern, public presentation may be a minor determiner of compensation though academic theories extend the position that public presentation based compensation leads to high motive of employees ( Decenzo and Robbins, 1999 ) . Compensation, one time determined, should non stay same for old ages. It should be reviewed and changed after certain period through proper wage study. Compensation serves many maps. Sound compensation can pull, actuate, and retain competent employees of an organisation ( Werther and Davis, 1996 ) .

Statement of the Problem and Rationale of the Study

In 1971, Bangladesh started its journey as an independent and autonomous state. During that clip merely 4 % gross domestic merchandise ( GDP ) came from industrial sector, most of which were chiefly little graduated table industries ( Ahmed and Patan, 1979 ) . The socialist prone doctrine and immense immobilized abandoned industrial units of the non-Bengali communities led the nationalisation of industries shortly after the independency. The investing policies of 1973 and 1974 gave farther accent on public sector oriented industrialisation and were in against of the enlargement of the private sector. Nevertheless, the populace sector industrial endeavors, unluckily, did non execute good. Rather, they have been emerging as a white elephant through incurring immense losingss in every twelvemonth ( Abedin, 1988 ; Hoque, 1994 ; Khan and Alauddin, 1995 ) . On the other manus, from December 1975 to till now all the authoritiess have been stressing on the development of the private sector industrial endeavors through the investing policy of 1975, and industrial policies of 1982, 1986, 1991, 1999, and 2005. However, it is besides found that the public presentation of the private sector industrial endeavors has non besides achieved ultimate success ( Aowrangazab, 2005, Sikder, 1996 ) . A figure of issues are apt for such province of personal businesss in the populace and the private sector industrial endeavors of Bangladesh where uneffective compensation patterns are reported to be one of them ( Ali, 1989 ; Khan, 2007 ) . Therefore, a survey to measure the comparative position of compensation patterns in the populace and the private sector industrial endeavors of Bangladesh can be pertinent and worthwhile. The research findings would assist the populace and the private sector industrial endeavors in Bangladesh to better their compensation patterns towards making a sustainable competitory advantage based on human capital. The research findings would be besides utile for the academicians, research workers, policy- shapers, and practicians of HRM.

Literature Review

Compensation has been researched from different positions in place and abroad. Rab ( 1991 ) , in a survey on 24 little endeavors runing in Dhaka, identified that most of the endeavors ( 87.5 % ) paid one or more types of allowances in add-on to salary. He found that about 7 % endeavors paid festival fillip, 20 % paid medical allowance, and 20 % provided wage increase. A instance survey ( Taher, 1992 ) on the overall forces direction ( HRM ) patterns of Khulna Hard Board Mills Ltd unearthed unequal compensation as one of the chief jobs of that endeavor. Chowdhury ( 2000 ) in a book reappraisal mentioned that compensation has been a really of import facet of HRM in a underdeveloped state like Bangladesh where employees are normally low paid with small or no fringe benefits. A research survey ( Mamun and Islam, 2001 ) examined the HRM patterns of the ready made garments ( RMG ) enterprises. The survey identified that compensation and labour productiveness of workers in Bangladesh were really low in comparing to viing states. Ernst and Young, and Metropolitan Chamber of Commerce and Industry ( 2007 ) in a study on HR patterns in Bangladesh found that most of the surveyed organisations have in-house paysheet processing. It besides found that gross revenues inducements and pay based on single public presentation were non widely practiced in the surveyed organisations. Uddin, Habib, and Hassan ( 2007 ) depicted a comparative scenario of HRM patterns with regard to two public and the private sector organisations of Bangladesh. The survey found that most of the employees of Wartsila, the private sector organisation, were satisfied with their wages whereas most of the employees of Bangladesh power development board ( BPDB ) , the populace sector organisation, were extremely dissatisfied with their wages. A survey ( Huda, Karim, and Ahmed, 2007 ) on the HRM patterns of 20 non-government organisations ( NGOs ) of Bangladesh observed that unequal fiscal inducements was one of the chief grounds behind the occupation dissatisfaction of the employees. The survey recommended for finding entry-level wages and benefits decently to pull qualified campaigners. Khan ( 2007 ) flatly mentioned that the populace and the private sector establishments of Bangladesh failed to dispatch their responsibilities decently due to incorrect enlisting and choice of employees, politicization of publicity and poster, low compensation, and uneffective preparation.

Hoque ( 1994 ) investigated 10 industrial endeavors ( 5 populace and 5 private ) located in Chittagong. He found that human resource development ( HRD ) had positive impact on organisational effectivity ( OE ) . He measured HRD in footings of investings in HRD in the signifiers of employees ‘ compensation, their preparation and development disbursals. And OE was measured in footings of growing and net income effectivity. The empirical survey depicted that with regard to the wide staffing ( HR ) form, qualities of employees, deputation of authorization to subsidiaries, decentalisation of determination and policy devisings, and span of supervising ; the private sector endeavors were in a much better place than the public sector endeavors. The survey identified that low investing in HRD had created lower growing and net income in the populace sector endeavors, unlike private sector 1s. He eventually recommended that any endeavor, particularly the public sector industrial endeavors, should develop their human resources through more investing in the signifiers of compensation, and preparation and development disbursals.

A survey ( Ali, 1989 ) on the employees of nine public sector industrial endeavors identified wage construction as the premier ground behind the dissatisfaction of the workers. The other grounds for dissatisfaction of workers were occupation security, publicity system, and work liberty. The employees in the mentioned houses were extremely dissatisfied with wage and benefits. A big figure of employees were even found to be ready to give speedy publicity, occupation security, and friendly co-workers for higher wage and periphery benefits. Therefore, the survey challenged the western belief of actuating workers more by the intrinsic wagess like liberty, and undertaking individuality. He opined that unless salary and benefits met the basic demands, the intrinsic wagess might non work in Bangladesh.

Through an in-depth survey on 178 industrial endeavors of Greece ; Katou and Budhwar ( 2007 ) found that HR patterns such as enlisting, preparation, publicity, compensation, engagement, and safety and wellness were positively related with the elements of organisational public presentation such as invention and satisfaction of stakeholders. Then, employee compensation, particularly the public presentation based compensation system, resulted in better organisational public presentation in Indian houses ( Singh, 2004 ) . Huselid ( 1995 ) investigated the impact of HRM patterns such as enlisting and choice, preparation, compensation on turnover, productiveness, and corporate fiscal public presentation in USA. He found that investing in HRM patterns was associated with lower employee turnover, greater productiveness, and higher corporate fiscal public presentation. Huang ( 2001 ) , in a survey on the yesteryear, nowadays, and future challenges of HRM patterns of Taiwan, demonstrated compensation as the 2nd most of import maps of HRM in accomplishing organisational aims. Yeganeh and Su ( 2008 ) examined the HRM patterns including compensation of Persian public sector endeavors. They found that in Persian public sector endeavors, employee compensation was fundamentally determined on the footing of senior status and instruction. Performance based compensation was non that much prevalent in Persian public sector.

Therefore, the above literature study indicates that compensation has been investigated from different positions around the Earth as an of import pattern of HRM. It is besides apparent that really limited figure of comparative surveies were conducted on compensation patterns with regard to the populace and the private sector industrial endeavors of Bangladesh. Furthermore, no particular survey was found on employee compensation in Bangladeshi context. The present survey is, hence, an enterprise to make full up this obvious research spread.

Aims

To research the differences between public and private sector industrial endeavors of Bangladesh with regard to overall position of compensation patterns.

To set frontward policy deductions for overall betterment of the compensation patterns of the public and private sector industrial endeavors of Bangladesh.

Hypothesis

Hypothesis 1: H0 = There is no difference between the populace and the private sector industrial endeavors of Bangladesh with regard to overall position of compensation patterns.

Research Methodology

Research methodological analysis is defined as the common approaches the research worker uses in transporting out the research undertaking ( Leedy and Ormrod, 2005 ) . Research methodological analysiss of the present survey are outlined below.

Sample

A sampling frame of 155 public and private sector industrial endeavors was prepared comprising of 64 public sector industrial endeavors ( running ) under all the six state-owned industrial corporations ( GOB, Ministry of Finance, 2007 ) such as Bangladesh Chemical Industries Corporation ( BCIC ) , Bangladesh Steel and Engineering Corporation ( BSEC ) , Bangladesh Sugar and Foods Industries Development Corporation ( BSFIDC ) , Bangladesh Forest Industries Development Corporation ( BFIDC ) , Bangladesh Jute Mills Corporation ( BJMC ) , and Bangladesh Textile Mills Corporation ( BTMC ) , and 91 private sector industrial endeavors ( CSE, Annual Report, 2007 ) listed under Chittagong Stock Exchange ( CSE ) . Assorted established attacks are used in finding sample size such as utilizing a nose count in instance of little population, copying a sample size of correspondent surveies, utilizing published tabular arraies, and utilizing expressions to cipher a sample size ( Israel, 2003 ) . For the present survey, the published tabular array method was used in the finding of sample size. Israel ( 2003 ) developed the tabular array by utilizing the expression of Yamane ( 1967 ) , which is presented in Table 1.

Table 1: Sample size for A± 5 % , A± 7 % , A± 10 % preciseness degrees where assurance degree is 95 % and P = 0.5

Size of Population

Sample Size ( N ) for Precision ( vitamin E ) of

A±5 %

A±7 %

A±10 %

100

81

67

51

125

96

78

56

150

110

86

61

175

122

94

64

200

134

101

67

Beginning: Adapted from Determining Sample Size by Israel, 2003 )

Table-1 shows that a sample size is executable and valid at different preciseness degrees. From the field study it was found that the entire population for the present survey was 155 that autumn within the population scope of 175 in the tabular array. Sing the sample size to be determined at 10 % preciseness degree, it can be seen that the sample size for the present survey came to 64 within the preset population scope of 175. Since the survey was directed towards comparing the position of compensation patterns between the public and private sector industrial endeavors of Bangladesh, the graded random trying technique was applied here to acquire a representative sample. In choosing samples from the both sectors ( stratums ) – the populace and the private, the present survey besides used ‘proportionate allotment method ‘ ( Kothari, 1990 ) . Therefore, the following overall sample size was obtained for the present survey.

Sector

No. of Unit of measurements

Public

26

Private

38

Entire Sample Size

64Table -2: The overall sample size of the survey

Beginning: Survey informations

Data Collection

Questionnaire study method was used to garner informations in the present survey. Compensation was measured by a graduated table ( Cronbach ‘s I± = .97 ) composed of five points on five- point Likert type graduated table ( where 1 = strongly disagree to 5 = strongly agree ) . To measure the cogency of the graduated table of the present survey, content cogency was used. It is a “ subjective but systematic rating of how good the content of a graduated table represents the measuring undertaking at manus ” ( Malhotra, 2007 ) . For this intent, the contents of the questionnaire were prepared with the aid of prima literature, theoretical accounts, theories, and texts refering to the topic and inquiries of research. After necessary alterations, the content cogency of the graduated table was approved by a panel of experts. As HR directors are the most competent individuals to supply informations related to any HR pattern such as compensation ( Huselid and Becker, 1996 ) , the structured questionnaire was sent to the HR directors of all the 64 surveyed industrial endeavors. Finally, 60 functional questionnaires were obtained for the survey ( 26 from public sector and 34 from private sector ) .

Analysis

To analyse the information, this survey used descriptive ( average, standard divergence ) and difference illative statistics ( Leech, Barrett, and Morgan, 2005 ) such as t-test, F- trial. All statistical computations were carried out by SPSS version 11.5, the most widely used set of plans for statistical analysis in the societal scientific disciplines ( Bryman and Cramer, 2003 ) .

Findingss and Analysiss

The position of compensation patterns of the populace and the private sector industrial endeavor was assessed by five points ( Cronbach ‘s I± = .97 ) . The descriptive statistics of the five points are shown in Table-3.

Table 3: Descriptive statistics of the points measuring the position of compensation patterns

Se.No

Item

Type of the Organization

Nitrogen

Mean

Std. Deviation

Std. Error Mean

1

Salary and benefits are competitory

Public

26

1.23

.587

.115

Private

34

4.71

.676

.116

2

Salary and benefits are offered on the footing of competences or abilities of the employees

Public

26

1.19

.567

.111

Private

34

4.85

.359

.062

3

Compensation is linked to public presentation

Public

26

1.35

.846

.166

Private

34

4.88

.327

.056

4

Pay study is conducted on a regular basis

Public

26

1.35

.562

.110

Private

34

4.41

.892

.153

5

Non-financial benefits are emphasized

Public

26

2.54

1.208

.237

Private

34

4.53

.896

.154

Beginning: Survey informations

Table-3 shows the sample size ( N ) , mean ( M ) , standard divergence ( SD ) , and standard mistake mean of all the five points used to measure the position of compensation patterns in the populace and the private sector industrial endeavors of Bangladesh. From the agencies of points, differences were observed between the populace and the private sector industrial endeavors of Bangladesh. To be certain whether these differences were statistically important, independent-samples t-test was carried out for every point. The consequences are presented in Table -4.

Table 4: Independent-samples t-test for the points measuring the position of compensation patterns

Levene ‘s Test for Equality of Discrepancies

t-test for Equality of Means

Item

F

Sig.

T

df

Sig.

( 2-tailed )

1

Salary and benefits are competitory

Equal discrepancies assumed

.408

.526

-20.878***

58

.000

Equal discrepancies non assumed

-21.277

56.993

.000

2

Salary and benefits are offered on the footing of competencies/abilities of the employees

Equal discrepancies assumed

.954

.333

-30.508***

58

.000

Equal discrepancies non assumed

-28.789

39.876

.000

3

Compensation is linked to public presentation

Equal discrepancies assumed

11.084***

.002

-22.338

58

.000

Equal discrepancies non assumed

-20.195***

30.739

.000

4

Pay study is conducted on a regular basis

Equal discrepancies assumed

12.950***

.001

-15.342

58

.000

Equal discrepancies non assumed

-16.268***

56.167

.000

5

Non-financial benefits are emphasized

Equal discrepancies assumed

4.873**

.031

-7.336

58

.000

Equal discrepancies non assumed

-7.053***

44.489

.000

Beginning: Survey informations ; **p & lt ; .05. ***p & lt ; .01.

Item-wise reading of Table-4

Item 1: Wage and benefits are competitory.

Equal discrepancies were assumed for this point. Consequently from the t-test, the difference between the populace and the private sector industrial endeavors of Bangladesh with regard to offering competitory wages and benefits to the employees was found to be important ( t = -20.878, P & lt ; .01 ) . Hence, it can be inferred that the private sector endeavors ( M = 4.71 ) are in significantly better place than the public sector endeavors ( M = 1.23 ) with regard to offering competitory wages and benefits to the employees.

Item 2: Wage and benefits are offered on the footing of competences /abilities of the employees

Equal discrepancies were assumed for Item 2. Consequently from the t-test, the difference between the populace and the private sector industrial endeavors with regard to offering wages and benefits on the footing of competencies/abilities of the employees was found to be important ( t = -30.508, P & lt ; .01 ) . Therefore, it can be inferred that the private sector endeavors ( M = 4.85 ) are in significantly better place than the public sector endeavors ( M = 1.19 ) with regard to offering wages and benefits on the footing of competencies/abilities of the employees.

Item 3: Compensation is linked to public presentation

Equal discrepancies were non assumed for this point as F = 11.084, P & lt ; .01. Consequently from the t-test, it was found that there was important difference between the populace and the private sector industrial endeavors with regard to offering compensation linked to public presentation ( t = -20.195, P & lt ; .01 ) . Hence, it can be inferred that the private sector endeavors ( M = 4.88 ) are in significantly better place than the public sector ( M = 1.35 ) endeavors with regard to offering compensation linked to public presentation.

Item 4: Pay study is conducted on a regular basis

Equal discrepancies were non assumed for this point as F = 12.950, P & lt ; .01. As a consequence from the t-test, important difference was found between the populace and the private sector industrial endeavors with regard to carry oning regular wage study ( t = -16.268, P = .000 ) . It can, hence, be inferred that the private sector endeavors ( M = 4.41 ) are in significantly better place than the public sector ( M = 1.35 ) endeavors with regard to carry oning pay study on a regular basis to reexamine the wages and benefits of employees.

Item 5: Non-financial benefits are emphasized

Equal discrepancies were non assumed for this point as F = 4.873, P & lt ; .05. So from the t-test, important difference was observed between the populace and the private sector industrial endeavors with regard to stressing on non-financial benefits ( t = -7.053, P & lt ; .01 ) . It can, therefore, be inferred that the private sector endeavors ( M = 4.53 ) are in significantly better place than the public sector ( M = 2.54 ) endeavors with regard to stressing on non-financial benefits.

Testing of Hypothesis

Next, the difference between the populace and the private sector industrial endeavors of Bangladesh with regard to overall position of compensation patterns was investigated. The hypothesis mentioned below was developed for proving.

Hypothesis 1: H0 = There is no difference between the populace and the private sector industrial endeavors of Bangladesh with regard to the overall position of compensation patterns.

Holmium: Aµ1 = Aµ2

H1: Aµ1 a‰ Aµ2

Table 5: Descriptive statistics of the position of compensation patterns

Type of the Organization

Nitrogen

Mean

Std. Deviation

Std. Error Mean

Compensation

populace

26

2.0385

.52769

.10349

private

34

4.8235

.38695

.06636

Beginning: Survey informations

Table 6. Independent-samples t-test for position of compensation patterns

Item

Levene ‘s Test For

Equality of

Discrepancies

t-test for Equality of Means

F

Sig.

T

df

Sig.

( 2-tailed )

Compensation

Equal discrepancies assumed

.003

.954

-23.598***

58

.000

Equal discrepancies non assumed

-22.654

44.134

.000Source: Survey informations, ***p & lt ; .01.

To prove the above hypothesis, independent-samples t-test was run with SPSS. Before t-test, Levene ‘s trial for equality of discrepancies was carried out to be certain about the homogeneousness of discrepancies of the comparing groups. From the Levene ‘s trial for equality of discrepancies, it was found that discrepancies were equal. Consequently, independent-samples t-test showed that the difference between the populace and the private sector industrial endeavors with regard to overall position of compensation patterns was statistically important ( t = -23.598, P & lt ; .01 ) . As a consequence, the void hypothesis was rejected and it can be concluded that overall position of compensation patterns of the private sector industrial endeavors ( M = 4.8235 ) is significantly better than that of the public sector industrial endeavors ( M = 2.0385 ) of Bangladesh.

Summary and Deductions

Compensation is identified as the most vulnerable side of the HRM patterns of public sector endeavors. In every facet of compensation patterns such as fight of salary and benefits, competence based compensation, public presentation based compensation, regularity in wage study, and non- fiscal benefits ; the populace sector endeavors are in worse place than the private sector endeavors. This is due to the ground that in the populace sector, compensation is offered with regard to senior status and place. Pay reappraisal in the populace sector besides by and large takes topographic point after several old ages. These generate misdirection, hapless motive, and corruptness in the populace sector endeavors. The inequality of compensation between the populace and the private sector is now so prevailing that an entry degree officer of a private sector endeavor is acquiring more salary than even a top degree director of a public sector endeavor. The undermentioned deductions may be utile to see in bettering the overall position of employee compensation patterns of the populace and the private sector industrial endeavors of Bangladesh.

Deductions of the Findings for the Public Sector Industrial Enterprises

The most unimpressive side of HRM patterns of the populace sector endeavors of Bangladesh is unequal compensation bundle for the employees. That is why it is now a yearss barely possible for the populace sector enterprises to acquire and to maintain capable employees. As money is the premier incentive, the populace sector endeavors of Bangladesh should offer competitory wages and benefits to their employees. Salary and benefits must be linked to the makings, accomplishments, cognition, and public presentation of the employees. It is reported that wage graduated table alterations in the populace sector after every 5 to 10 old ages, which is quite irrational and frustrating. Regularity in wage reappraisal should be maintained through wage study to offer wage that is just and consistent with the society ‘s altering demands. Non-financial benefits should besides be provided to the employees who devote clip, attempts, cognition, expertness and everything for the improvement of the organisations.

Deductions of the Findings for the Private Sector Industrial Enterprises

The private sector endeavors should widen fiscal and non-financial benefits to their employees. Besides fiscal wagess, non-financial wagess such as disputing occupation, authorization, acknowledgment, occupation security, better working conditions should besides be provided to the employees. Fringe benefits and fringe benefits such as provident fund, tip, medical attention, wellness insurance, paid vacations, conveyance, lodging, stock option strategies should be offered for overall wellbeing of the employees and their dependents.

Restrictions and Directions for Future Researches

No survey in societal scientific disciplines can be error free ( Huq, 2005 ) . Consequently, the present survey besides has a figure of restrictions that are outlined below.

The information was obtained in the signifier of perceptual steps of compensation patterns, although nonsubjective steps are more desirable.

Lack of sufficient informations and little sample size were the chief restrictions of the present survey.

The survey was based on informations collected from industrial endeavors. Therefore, the deductions of the survey should be restricted to industrial houses merely.

As the questionnaire was chiefly constructed with Likert Scale, there could be the opportunity of cardinal inclination prejudice, acquiescence prejudice, and societal desirableness prejudice.

The survey was confined to roll uping informations merely from the HR directors of the several endeavors.

There are a figure of countries where future surveies can be directed such as:

A longitudinal survey may be undertaken to measure the alterations with regard to position of compensation patterns in the populace and the private sector industrial endeavors of Bangladesh.

Case surveies may be undertaken on compensation patterns of selected populace and private sector industrial endeavors for thorough analysis.

In-depth surveies may be conducted to measure the impact of compensation patterns on organisational public presentation.

Surveies may be carried out on compensation patterns of service sector endeavors.

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