Abstract:
In today’s era, in order to sustain and be lucrative, an organization must be ambitious.
Organizations achieve their objectives through their workforce. Human resources are the
pivot of organizational effectiveness and the greatest asset that an organization can possess.
In fact, employee compensation is the vital ingredient underlying organizational
competitiveness. Compensation of an organization plays a key role in attracting and retaining
high yielding employees. The purpose of this research is to provide insight into the impact of
compensation on employee performance and productivity leading to organizational
effectiveness. The study describes the relationship between compensation and employee
satisfaction, motivation and performance. It was found that compensation has great impact on
organizational effectiveness. The findings of the study suggest that in order to implement
their strategies, organizations design and implement reward system to focus employees
attention on the specific behaviors that are consistent with strategic goals. A compensation
strategy that fulfills the employee requirements not only provides a competitive edge to the
organization but also is an important determinant of their satisfaction and forthcoming
performances. The study draws strong conclusions that compensation has significant effect
on employees satisfaction, motivation and performance and that the pay and reward system of
an organization impacts employee performance positively and boost organizational
performance and profitability.
