Research Key

The Impact Of Remuneration On Employee Productivity In A Micro Finance Institution

Project Details

Project ID
International: $20
No of pages
Quantitative method
Analytical tool
 MS Word & PDF

The custom academic work that we provide is a powerful tool that will facilitate and boost your coursework, grades and examination results. Professionalism is at the core of our dealings with clients

Please read our terms of Use before purchasing the project

For more project materials and info!

Call us here
(+237) 654770619
(+237) 654770619



This research work is based on investigating the impact of remuneration of worker’s productivity in KUTCCUL Kumba found in the Meme Division of the South West region, which is the main objective. In order to carry out this study, the researchers hypothesized that remuneration does not have any bearing on the productivity of workers in KUTCCUL Kumba.

The instrument used for data collection was self-designed questionnaires which were administered to workers and management of KUTCCUL Kumba. In order for the hypothesis of this study to be tested and proven effectively, the Descriptive analysis was adopted to analyze the study which involves the use of bar charts, pie charts, percentages and correlation.

It was found that remuneration has a strong positive relationship with workers productivity. The results revealed a positive and significant effect of wages on worker’s productivity growth in an organization.

It recommends that micro finance institutions adopt and maintain a variety of remuneration schemes in order to optimize productivity from their workers, improve supervision and working conditions by providing adequate materials to workers and encourage team work among them which will lead to higher productivity from the workers.



1.0 Introduction

Remuneration of workers serves as a medium to boost productivity in micro finance institutions. In this regard, researchers have decided to focus on remuneration as an instrument to measure the performance and future potential of the institution.

This chapter will hereby give a brief idea of what the study is all about, the objective of study, the research questions, the hypothesis of the research as well as research design, statement of the problem, significance of the study, the delimitations of the study and an over view of the project including definition of terms.

1.1. Background of the study

For business organizations to survive in the face of stiff competitions, they must be able to attract and retain people who are able and willing to perform and go way beyond what is required.

The goal of most organizations is to maximize profits so in order to achieve this objective; these companies must efficiently manage their resources. Having in mind that even if an organization possesses the best technologies, capital, structure without having a motivated and upright workforce, this organization cannot achieve its overall goal.

The reward for labour is known as “wages”. This is the main factor for all of man’s efforts towards production (Carlos, 2012). This statement is very true as all over the whole people labour in various institutions for a reward (wage). These wages will differ greatly according to the nature of work the individual does and the number of time spent.

Wages originated from the barter system where items were exchanged in return for other commodities. During this time, wages were measured in terms of commodities while labour was rewarded with the equivalent commodity at the time (Crammer, 2008).

Following the emergence of money as medium of exchange, the effect of remuneration on worker’s productivity can be evaluated either in terms of the Time rate (hours of work) or the piece pay rate (productivity) (Sahay, 2005).

Creating a work environment in which workers can be comfortable gives more room for better productivity and efficiency of labour. Also, maintaining healthy employee relationships in organizations is pre-requisite for their success and one way of doing so is by placing lucrative remunerations to every work and task done by workers.

Apart from the monetary reward, non-financial benefits can be added to those in order that the workers of such organization will feel and remain valued.Employee benefits had their roots during the industrial revolution which created modern employment relationship.

As time went by, societies have to fight with the problem of low wages, labour issues, monotonous and dangerous work which later led to the formation of Labour unions which called upon the various organizations to pay their workers accordingly to avoid conflicts between employee and employer and ensure the stability of jobs in the economy.

In Cameroon today, the micro-finance institutions (MFIs) are no longer bound under the umbrella of Non-governmental organizations (NGO) as their boundaries have gradually been removed and they are gradually becoming affiliated to some commercial banks.

These micro finances can be traced down to the 1963 following the creation of the first Cooperative Savings and loans institutions (Credit union), at Njinikom North west region by a Roman Catholic clergy named Rev Father Anthong Janson from Netherland.

Cameroon being one of the most populated countries in the CEMAC zone with a population of about 19.8million, its micro financial activities continue to advance day by day with impressive records with about 1,4million account holders on.

According to current central bank statistical reports, 52% of MFIs are mostly situated at the urban areas and 48% in rural areas.The concept of the effects of remuneration on workers’ productivity has evolved over time from one country to another and from one sector to another (Abdullah, 2014).

A survey by Muogbo (2013), in Nigeria revealed that employee remuneration has impacted both internal and external forces in the organizational context which has necessitated both large and small firms to audit their remuneration policies in order to attract, develop and retain competent and skilled workforce.

According to Maxwell (2008), he observed that companies in the manufacturing sector in the United Kingdom were performing effectively based on the amount of money paid to employees or workers.

Ghansah (2011), learned that firms operating in the manufacturing sector in Ghana were capable of retaining employees based on the review of salaries from time to time. Habbash (2010), suggest that remuneration on workers’ productivity involves the reward or compensation given to the employees for their work.

Developing countries of the world and more especially in countries like Cameroon, Ghana, and Kenya, the microfinance sector has experience drastic changes in the microfinance sector due to changes of labour market conditions (Katua, Mukulu & Gachunga, 2014).

Dauda, Akingbade, and Akinlabi, (2010) state that the firms have continued to arrange their human resource strategies with the changing business environment despite the effects of competition, globalization, technology, consumer demands, costs of operation, workforce diversity are among the drivers of organizational change.

Performance of organizations in the global business environment is determined by internal and external factors that influence remuneration of employees (Ghazala & Habib, 2012).

Remuneration is one of the general factors known to many as to have an effect on the performance of employees in any given set-up (Baron & Armstrong, 2007). This has to a certain extent created a perception among the human resource professionals that employees consider pay to be the most important factors in their career.

When employees are motivated through attractive remunerations, their performance of work tremendously increases (Bohan, 2004). Well remunerated employees are more likely to work towards organizational objectives with minimal resistance.

Employee satisfaction of work depends on expectations and the environment in which they work. Employees with favourable pay structures are motivated to produce more while low pay leads to low motivation that translates to low output.

According to Armstrong, (2003) money provides the carrot that most people want. Money is the primary motivator to most people because it increases one’s purchasing power. Deb (2008) listed money as a hygiene factor rather than a motivator.

When people get fixed salaries or rates of pay they do not get a lot of satisfaction from it. But different people have different needs and wants and definitely money motivates them differently.

Guffey and Loewy, (2012) also pointed out that money should not be considered the primary motivator at the expense of other factors such as challenging work and favourable managerial and organizational climate.

Theoretically, this study was anchored on Human Capital Theory and supported by other theories which include; Agency Theory, Efficiency Wage Theory and strengthening human rights – enables people to move out of poverty.

Microfinance enables poor self-employed people to create productive capital, to protect the capital they have, to deal with risk and to avoid the destruction of capital. It attempts to build assets and create wealth among people who lack them (Otero, 1999).

Compensation issues were often confidential and govern by individual employer’s preferences and choices. In today’s competitive world, the compensation policies are more transparent and the employees take their own choices based on the compensation package.

Thus, balancing the cost of compensation and retaining the employees have become the most important priority for the organization (Bhattacharyya, 2009).

 The compensation is a substitute word of wages and salaries and it has recently originated. The literature of wages and salaries’ are enormous but it considers the issues from a legal viewpoint. Wages have now become very significant as a cost factor (Bhattacharyya, 2009).

Compensation is the remuneration received by an employee in returns of their contribution to the organization. The compensation management is an organized practice which is important for balancing the work and employee relationship by providing monetary and non-monetary compensation to employees.

Compensation includes all form of pay given to the employees which arise from the employment. The one of the strapping feature of the organizations is compensation management and they used it to attract and retain the most important and worthy assets.

The compensation management is considered to be a complex process which requires accuracy and precision and if not carried out properly may lead to employees’ dissatisfaction.

An ideal compensation policy motivates the employees to work harder and with more determination. It also helps the organizations to set the standards for job that it is related, realistic and measurable.

Compensation policies should have a sound integration with practices of HRM. One of the key functions of compensation management of any company is to create a hearty competition among the employees in order to attain more efficiently and provide growth opportunities to its employees (Khan, Aslam, Lodhi, 2011).

According to the principal-agent paradigm (Mirlees, 1976; Holmstrom and Milgrom, 1987), in the face of asymmetric information firms should tie the remuneration of employees to any verifiable (individual or collective) signal of performance.

Based on such a theoretical prediction, a number of studies in recent years have shown that, when implemented “wisely”, financial incentives have the potential to exert strong effects on indicators of firm performance, such as productivity (Lazear, 2000; Gielen 2009) and worker absenteeism (Wilson and Peel, 1991; Brown 1999).

It has also been argued that improperly designed monetary rewards are likely to spur dysfunctional behavioral responses on behalf of workers, especially by those who multitask (Holmstrom and Milgrom, 1991; Baker, 1992), are members of teams (Drago and Garvey, 1997) or are subjected to subjective evaluations by superiors (Prendergast, 1999).

Such inefficient reactions are believed to underpin the weak (or even negative) association of PRP schemes with organizational performance found by some researchers (Benson and Brown, 2000). Furthermore, many have stressed the free riding problems of “collective” incentive plans, such as profit-related pay and share ownership (Prendergast, 1999; Oyer, 2004).

For many years in Cameroon, the micro-finance sector has evolved and has been transformed into a system of provision of short term loans, savings, credits, money transfers, but thanks to various financial sector policies and programs undertaken by the government since independence.

MFIs now are the primary sources of funds to small and medium size enterprises in Cameroon and other countries in the process of economic growth.

The remuneration that one earns plays a fundamental role in motivating an employee towards improved performance. As such, management in the civil service needs to be reviewing the remunerations that their employees receive.

This is due to the fact that revised remunerations contribute to some extent in motivating workers to perform better at their places of work (Maxwell, 2008). The environmental working condition does affect employee performance.

Most employees find it not conducive and effective for their working as well as professional growth. Moreover, variables like age, gender and ethnic discriminations have provided a setback in the productivity of employees in organizations.

It needs to be noted that the working environment greatly affects performance of an employee. Good working condition helps to boost employee’s morale, improves the organization’s productivity hence service delivery (Guffey & Loewy, 2012).

The key element of recent incentives theory is the proposition that the addition of further incentives can ameliorate the measurement costs associated with individual incentives (Roberts, 2010). Additional incentives such as profit sharing may reduce manipulation by enhancing cooperation and commitment.

PS may also mitigate the agent’s pursuit of insurance where risk is uncontrollable by signaling that employees will benefit from future company performance. Measurement noise may be mitigated in interdependent work environments by collective schemes that focus on group rather than individual output.

Multiple incentives potentially soften distortion by rewarding a wider range of tasks and behavior and limit workers’ opportunity to game incentives. For these reasons a mix of individual and collective or combinations of group incentives may be more effective than individual incentives in many workplaces.

Creation of tasks that are beneficial to the company pays to create a good working atmosphere since every employee wants to feel that their job is making a difference and will work towards accomplishing the task. High Performance can be achieved through a good working environment.

This can be done by ensuring that majority, if not all, of the workers’ tasks have a direct benefit or contribution to the overall success of the organization. Strategically created tasks that directly affect the organization will energize and motivate the employee to bring out their best (Carell, 2006).

As observed by Luis, (2010), organizations should create an environment in which performance makes differences. Otherwise it may end up with a low achievement of organizational performance culture.

Before the introduction of performance contracting in the government institutions, the working environment was one of sluggishness and low productivity. However, the performance contracting concept has to some extent tried to turn around the environment into a more productive one.

Employee empowerment which involves giving an employee the authority to make and implement some decisions plays a key role in the promotion of employee morale to work.

Meyer and Smith, (2007) found out that remuneration and laborer fulfillment drive efficiency, by implication making benefit for a company. To them, these are stipulations for employee’s maintenance.

They conjointly found out that organizations with higher laborers maintenance rates region unit actually higher at holding data, which may result in higher execution and benefit for the business.

It is common information that nearly all laborers disturb for higher conditions of benefit, though managers complain of more efficiency. Specialists range unit interminably on the post for promotions on what they depict as higher occupations. These specialists range unit able to take off their employments for distinctive occupations.

Others utilize their blessing occupations to create the required aptitudes and information, a request for numerous occupations. Managers conjointly put in numerous locks in conditions of benefit and check out to make solid job situations in an endeavor to realize the engagement of specialists (Greenberg, 2005).

1.2 Problem statement

It is usually very difficult to manage the human resource in an organization as the level of “pay” is relatively problematic in all aspects. The goals of remuneration are to design the lowest cost pay structure that will attract, motivate and retain competent workers.

Poor remuneration may detract the ultimate goal of the organization by reducing productivity thereby, bringing in little or no profit on the other hand; good remuneration package brings about the realization of the organizations objectives.

Noble (2012) states that more attention should be paid in identifying and dealing with working environment because when employees have negative perception to their environment their productivity goes down.

In most micro finance institutions, better outcomes and increased productivity has been assumed to be the result of better remuneration and workplace environment.

Workers productivity on microfinance institutions has been directly associated with employee remuneration especially in cases of demotivated staff, decreased pay package, unfavorable labour laws, and high rate of unemployment in the labour market in the changing business environment despite internal and external factors that determine how much organizations should pay their workers in terms of wages and salaries (Onyancha, Munene & Muturi, 2014).

These factors range from labour law to labour/trade unions or internal policies of the micro finance institution on remuneration in Cameroon.

Therefore, it is as a result of these problems that adversely affect workers’ productivity that the researchers will want to study the extent to which remuneration affects workers’ productivity on micro finance institution case of KUTCCUL in Kumba I municipality.

To this effect, we can bring forth the following objectives:

1.3 Research objectives

1.3.1 General research objective

-To examine the impact of remuneration on the productivity of workers in KUTCCUL KUMBA

1.3.2 Specific research objectives

-To assess the remuneration system of KUTCCUL KUMBA.

-To evaluate how KUTCCUL Kumba measures their employee productivity.

– To assess how their remuneration affects worker’s productivity.

1.4 Research question

1.4.1 Main research question

What impact does remuneration have on worker’s productivity in the Kumba Town Credit Union Kumba?

1.4.2 Specific research questions

– What is the remuneration system of KUTCCUL Kumba?

– How is worker’s productivity measured in this micro finance institution?

– How does their remuneration system affect employee productivity?

Translate »
Scroll to Top