The Mediating Effects of Organizational Justice in Determining the Relationship between Performance-Based Pay and Employees’ Turnover Intention

Authors

Kuan Mei Yang
Rusli Ahmad
Siti Mariam Abdullah

DOI:

https://doi.org/10.33736/jcshd.183.2015

Abstract

This is a study on employees’ perception of justice towards performance-based pay and the effect of these perceptions on their turnover intention. This study aims to examine the mediating role played by distributive and procedural justice in linking pay distribution and pay procedure of performance-based pay to employees’ turnover intention. A review of past literature in this particular area has prompted the researchers to narrow the gaps in previous studies. Towards that, this study utilized questionnaires which were administered among 50 non-managerial employees currently working in a private company located in Kuching, Sarawak, East Malaysia. Data analysis was done using Statistical Package for Social Sciences (SPSS), Version 20.0. Pearson Correlation and Stepwise Regression were used to examine the relationship between the variables. The outcomes of Stepwise Regression revealed that distributive justice fully mediated the relationship between pay distribution and employees’ turnover intention in contrast to procedural justice which did not have a significant impact in the relationship. The findings of this study are useful references for organisation management of the pay system to improve employees’ performance.

Keywords: employees’ turnover intention; organizational justice; performance-based pay

References

Andrew, D. P. S., Pedersen, P. M., & McEvoy, C. (2011). Research methods and design in sport management.

https://doi.org/10.5040/9781492596417

United States of America: Human Kinetics.

Aslam, R., Shumaila, S., Sadaqat, S., Bilal, H., & Intizar, M. (2012). Organizational justice as a predictor of job satisfaction among teachers. Paper presented at The 2nd International Conference on Business Management, University of the Punjab, Lahore.

Al-Zawahreh, A., & Al-Madi, F. (2012). The utility of equity theory in enhancing organizational effectiveness. European Journal of Economics, Finance and Administrative Sciences, 46, 158-170.

Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182.

https://doi.org/10.1037/0022-3514.51.6.1173

Boachie-Mensah, F., & Doghe, O. D. (2011). Performance-based pay as a motivational tool for achieving organizational performance: An exploratory case study. International Journal of Business and Management, 6(12), 270-285.

https://doi.org/10.5539/ijbm.v6n12p270

Booth, A. L., & Frank, J. (1999). Earnings, productivity and performance-related pay. Journal of Labour Economics, 17(3), 447-463. https://doi.org/10.1086/209927

https://doi.org/10.1086/209927

Campbell, D. J., Campbell, K. M., & Chia, H. B. (1998). Merit pay, performance appraisal, and individual motivation: An analysis and alternative. Human Resource Management, 37(2), 131-146.

https://doi.org/10.1002/(SICI)1099-050X(199822)37:2<131::AID-HRM4>3.0.CO;2-X

Carraher, S. M. (2011). Turnover prediction using attitudes towards benefits, pay, and pay satisfaction

https://doi.org/10.1108/17465261111100905

among employees and entrepreneurs in Estonia, Latvia, and Lithuania. Baltic Journal of Management, 6, 25-52.

Chan, B. Y. F., Yeoh, S. F., Lim, C. L., & Osman, S., (2010). An exploratory study on turnover intention among private sector employees. International Journal of Business and Management, 5(8), 57-64.

https://doi.org/10.5539/ijbm.v5n8p57

Choong, K. F., Wong, E. S. K., & Tioh, N. H. (2010). The impact of organizational justice on employee's job satisfaction: The Malaysian companies perspectives. American Journal of Economics and Business Administration, 2(1), 56-63.

https://doi.org/10.3844/ajebasp.2010.56.63

Cropanzano, R., & Byrne, Z. S. (2001). Moral virtues, fairness heuristics, social entities, and other denizens of organization justice. Journal of Vocational Behavior, 58, 164-200. https://doi.org/10.1006/jvbe.2001.1791

https://doi.org/10.1006/jvbe.2001.1791

Faulk, L. H. (2002). Pay satisfaction consequences: Development and test of a theoretical model. Unpublished research report submitted for the degree of Doctor in Philosophy, Louisiana State University.

Folger, R., & Konovsky, M. (1989). Effects of procedural and distributive justice on reactions to pay raise decisions. Academy of Management Journal, 32(1), 115 - 130. https://doi.org/10.2307/256422

https://doi.org/10.2307/256422

Frerichs, R. R. (2008). Simple random sampling. Retrieved from http:// www.ph.ucla.edu/epi/rapidsurveys/

RScourse/RSbook_ch3.pdf.

Gilliland, S.W., & Chan, D. (2001). Justice in organizations: Theory, methods, and applications. In N. A. Anderson, D.S. Ones, H.K. Sinangil & C. Viswesvaran (Eds.), Handbook of industrial and organizational psychology, 2, 143-165. London: Sage Publications.

https://doi.org/10.4135/9781848608368.n9

Greenberg, J. S., & Cropanzano, R. (Eds.) (2001). Advance in organizational justice. California: Stanford University Press..

Harr, M. J., & Spell, S. C. (2009). How does distributive justice affect work attitudes? The moderating

https://doi.org/10.1080/09585190903087248

effects of autonomy. The International Journal of Human Resource Management, 20, 1827-1842.

Issac, J. E., (2001). Performance related pay: The importance of fairness. Journal of Industrial Relations, 43(2), 111-123.

https://doi.org/10.1111/1472-9296.00009

Kelly (2013). Pay for performance trend picks up: Kelly survey. Retrieved from http://www.digitalnewsasia.com/tech-at-work/pay-for-performance-trend-picks-up-kelly-survey.

Latham, G. P., & Pinder, C. C. (2005). Work motivation theory and research at the dawn of the twenty- first century. Annual Review of Psychology, 56, 485-516.

https://doi.org/10.1146/annurev.psych.55.090902.142105

Lazear, E. P., (1996). Performance pay and productivity. (No.5672). NBER Working Paper. Retrieved from http://www.nber.org/papers/w5672.pdf?new_window=1. https://doi.org/10.3386/w5672

https://doi.org/10.3386/w5672

Leritz, L. (2012). Principles of merit pay. Retrieved from http://www.erieri./PDF/Principles-of-Merit-Pay.pdf.

Lindenauer, P. K., Remus, D., Roman, S., Rothberg, M. B., Benjamin, E. M., A., & Bratzler, D. W. (2007).

Public reporting and pay for performance in hospital quality improvement. The New England Journal of Medicine, 356(5), 486 - 496. https://doi.org/10.1056/NEJMsa064964

https://doi.org/10.1056/NEJMsa064964

Leventhal, G. G., Karuza, J., & Fry, W.R. (1980). Beyond fairness: A theory of allocation preferences. In G. Mikula (Ed.), Justice and social interaction: Experimental and theoretical contributions from psychological research (167 - 218). New York: Springer-Verlag.

Luck, D. J., Taylor, W. G., & Robin (1987). Marketing research. Eaglewood: Prentice Hall.

Miller, D. C. (1991). The handbook of research design and social measurement (5th ed.). Newbury Park, California: Sage.

O'Donnell, M., & O'Brien, J. (2000). Performance-based pay in the Australian public service: Employee perspectives. Review of Public Personnel Administration, 20, 20-24. https://doi.org/10.1177/0734371X0002000203

https://doi.org/10.1177/0734371X0002000203

Olusegun, O. S. (2012). Influence of motivation on turnover of library personnel in some public universities

in South West Nigeria. Library Philosophy and Practice (PaperNo. 722). Retrieved from http://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1796&context=libphilprac.

Rusli, A., & Hasbee, U. (2011). Conducting research in social sciences, humanities, economics and management studies. Sarawak, Malaysia: RS Group Publishing House.

Samuel, M. O., & Chipunza, C. (2009). Employee retention and turnover: Using motivational variables as a panacea. African Journal of Business Management, 3(8), 410-415.

Schneier, C. E., Shaw, D. G., Beatty, R. W., & Baird, L. S. (1995). Strengthen the pay-performance relationship: The research. In G. Milkovich & C. Milkovich (Eds.), Performance measurement, management, and appraisal sourcebook (pp. 291 - 296). Massachussetts: Human Resource Development Press.

Santos, J. R. (1999). Cronbach's alpha: A tool for assessing the reliability of scales. Retrieved from http://www. joe.org/joe/1999april/tt3.php.

Salaman, G., Storey, J., & Billsberry, J. (2005). Performance - related pay. In J. Storey & K. Sisson (Eds.). Strategic human resource management: Theory and practice (pp. 177 - 184). London: Sage.

Van Maanen, J. (1983). Qualitative methodology. Beverly Hills: Sage.

Williams, M. L., McDaniel, M. A., & Nguyen, N. T. (2006). A metaanalysis of the antecedents and consequences of pay level satisfaction. Journal of Applied Psychology. 91(2), 392-413. https://doi.org/10.1037/0021-9010.91.2.392

https://doi.org/10.1037/0021-9010.91.2.392

Downloads

Published

2015-09-01

How to Cite

Mei Yang, K., Ahmad, R., & Abdullah, S. M. (2015). The Mediating Effects of Organizational Justice in Determining the Relationship between Performance-Based Pay and Employees’ Turnover Intention. Journal of Cognitive Sciences and Human Development, 1(1), 1–10. https://doi.org/10.33736/jcshd.183.2015

Download Citation

Issue

Vol. 1 No. 1 (2015): Journal of Cognitive Sciences and Human Development

Section

Articles

License

Copyright Transfer Statement for Journal

1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.

2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.

3) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.

4) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.

5) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.