An investigation into the impact of the disparity in incentive payment on the psychological contract of employees: the case study of Midlands State University

Abstract

The present study examined the investigation into the impact of disparity in incentive payment on the psychological contract of employees. The case of Midlands State University from January 2010- January 2014. A part of 81 part-time, full time and contract employees participated in this study. Results showed that incentives had a significant effect on one’s job satisfaction, intention to remain and perceived organizational support. Additionally there is a significant interaction between psychological contract and employee commitment and performance, morale, turnover, incentives and trust between the employee and the employer. An incentive develops organizational citizenship behaviour which varied depending on psychological contract. Organisations provide incentives in order to attract, return, maintain and stand competition. Most of the employees at Midlands State University (MSU) are extrinsically motivated as they are highly concerned with the incentives provided by their employer. The practice motivates employees and affects employees’ level of engagement as well as job performance. The disparity in incentives affects commitment and performance of the majority of employees. The cross analysis of the link between the disparity of incentives payment levels and firm commitment and obligation fulfilment shows both a negative and positive relationship. Employees in different grades have different motivators. Incentives boost employees’ morale and lead to low employee turnover. Major causes of disparity on remuneration and psychological contract used at MSU were indicated as employee grade, qualifications, status, experience and employee performance. The research found that the scheme has both negative and positive effects to the employer and employee.

The provision of the scheme leads to low employee turnover, boost employee morale, attract more and competent employees to the organization and leads to trust between the employer and the employee. However the disparity in incentive payment leads to dissatisfaction. The concept of psychological contract is closely linked or associated with the concept of incentives. Lower incentives have ripple effects to the organization .Research found that majority of respondents ware fulfilling their obligation to the organization very well irrespective of the grade of incentives they were receiving.