Academic journal article Global Business and Management Research: An International Journal

The Impact of Compensation System on Pay Satisfaction in the Banking Industry in Malaysia: A Proposed Framework

Academic journal article Global Business and Management Research: An International Journal

The Impact of Compensation System on Pay Satisfaction in the Banking Industry in Malaysia: A Proposed Framework

Article excerpt

Introduction

There is much academic support for the view of employees as the most important asset for an organization in delivering good performance and high productivity. Sustainability and availability of the right employee at the right time and right place is essential to an organization's success. Employers in well maintained employees' relationship not only sustain competitive advantage but promote a positive organization culture through the retention of good employee at the workplace. Retention of good employees in an organization, is dependent on the role of compensation & benefits systems, as having a very strong significant effect on their work as well as pay satisfaction (Ghazanfar et al., 2011).

If employee are not satisfied or unhappy on their benefit and pay, they will not stay long in their workplace there is no incentive to do more or perform better to service the customer. Neither can he nor she provide the best service to the customers. Employees will feel motivated and stay longer with their employers who provide good compensations such like pay, wages, incentive, profit sharing, bonuses and also intrinsic rewards to their employee. Happy employee will always perform the best in an organization and stay longer in an organization.

In general, a satisfied employee will always provide the best services in an organization and always smile and happy when on the way going to work. Employees who working in banking industry especially customer service and tellers are the ambassadors of the bank. Their jobs are not only perform front line transactions with the customer but at the same time, they need to create a rewarding experience for their customers to capture their customer loyal with their service provided. This in turn can generate more profit to the bank from its various product offerings like deposit, loans, wealth products, credit card, personal loan and so on. Therefore, the compensation benefit is very important to the employee in banking industry, and the aim of this study is to investigate the impact of compensation system on pay satisfaction in the banking industry in Malaysia.

This research study is guided by four research objectives which are namely: to consider the impact of pay determinant on pay satisfaction in Banking Industry in Malaysia; to consider the impact of pay equity on pay satisfaction in Banking Industry in Malaysia; to consider the impact of pay structure on pay satisfaction in Banking Industry in Malaysia and to consider the impact of pay mix on pay satisfaction in Banking Industry in Malaysia.

Literature review

Overview of Banking Industry in Malaysia

In Malaysia, banking industry is one of the fast-growing industries among others. In banking industry includes financial institutions, non-banking financial intermediaries and also financial market. The banking industry can be clarified into commercial bank, retail banks, investment bank, finance companies, foreign bank representative office, discount house and offshore bank.

However, commercial bank is the largest group and also the main player in Malaysia banking industry. They are engaging the full range of services such like provider of liquidity, insurance, monitoring of services and also producer of information (Santos, 2000). A total 27 commercial banks are operating in Malaysia which included local and foreign banks. Besides commercial local banks, total 19 banks are providing the same level of services in Malaysia. In October 1998, the Banking and Financial Institution Act (BAFIA) has served a framework in order to supervision of the banking system in Malaysia.

Overview of an Organization's Compensation System

Nowadays, all the organizations are facing a lot of competitive pressures; they are looking to do more with less manpower but with better quality. Compensation is one of the human resource management function that dealing with all types of reward individuals in exchange for performing organizational tasks, with all the outcome of the employees who are attracted to work, satisfied and motivated to do a good job for employer (Armstrong, 2008). …

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