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

  • Kuan Mei Yang
  • Rusli Ahmad
  • Siti Mariam Abdullah

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.

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

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.

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

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

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

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.

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

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.

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

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

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

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

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