The Effect of Non-Financial Compensation on Employee Performance

5675 Words Oct 18th, 2011 23 Pages
The Effect of Financial and Non Financial Compensation to the Employee Performance
Arik Prasetya† and Masanori Kato Graduate School of Asia Pacific Studies, Ritsumeikan Asia Pacific University Beppu-shi, Oita-ken, Japan
Abstract-- This study aims (1) to examine the employee responses in terms of their performance to an implementation of the compensation policy that includes both financial and non financial compensations, (2) to analyze the influence of both financial and nonfinancial compensation collectively and individually. This research was conducted at PT. Telkom Malang Regional Office, by a proportional random sampling technique with the sample size of 57 employees. The results of the descriptive statistical analysis of financial
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h. The principle of agreement in the sense that such compensation should be an agreed outcome or the result of negotiations between the employee with management. According to Sherman (1996) the general purposes of the compensation policy covers: 1. Respecting employees' performance 2. Maintaining a competitive labor market conditions 3. Maintain justice employee salaries 4. Motivating employee performance 5. Maintaining budget 6. Reduce employee turnover When employees are motivated, it is possible to achieve strategic goals for the organization. When the compensation scheme is based on positions or skills that are relevant to the position, the organization has a greater chance to attract, motivate and retain employees. Nonmonetary compensation is also important in achieving the target at the time of monetary compensation has to be decreased. Mondy & Noe (1993) states that compensation can be divided into two types, namely financial compensation and non-financial compensation. Financial compensation consist of direct financial compensation and indirect financial compensation. Direct financial compensation consists of salary, wages, bonuses, and commissions. The indirect financial compensations are also called benefits, which are all financial compensations not covered by the direct compensations. The non financial compensations consist of employee satisfaction, such as responsibility, opportunities for

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