e-Proceeding of the Social Sciences Research (ICSSR 2016)

THE RELATIONSHIP BETWEEN REWARD SYSTEM WITH

EMPLOYEES’ PERFORMANCE
Erratul Shela Eshak, Nur Faithzah Jamian, Munirah Mohd Jidi & Norlida Zakirai@Zakaria
Faculty of Business & Management
Universiti Teknologi MARA
errat449@melaka.uitm.edu.my

ABSTRACT

This study explained factors that influence employees’ performance in Islamic Religious Council. The
objective of the study was to identify if there’s any relationship between Intrinsic Reward and
Employees Performance and to determine if there is any relationship between Extrinsic Reward and
Employees Performance. For this research, the selection of sample was based on the convenience
sampling technique. The instrument used in this research was a questionnaire and the validity of
instrument used by researcher is pilot test and actual test. The results from this study provided useful
information to employees at that particular organization. The researcher found that there is positive
and significant relationship between Intrinsic and Extrinsic Reward with Employees’ Performance.
However, based on the findings the researcher found that Intrinsic Reward factors have more
influence toward employees' performance on employees rather than Extrinsic Reward factors.
However both the reward factors have positive relationship and significant results and also influence
the employees’ performance. At the end of this report, the conclusions and recommendations were
made based on the results from the findings and analyses by the researcher.

Keywords: Intrinsic Reward, Extrinsic Reward and Employees Performance.

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1. Introduction

Nowadays an organization’s achievement depends on employees’ performance. Performances of

employees play an important role in the customer's perception about the company. So, it is most
important for a company to find out what factors that influence employees’ performance. According
to Hashim et al. (2014) the way to monitor employee's performance is Performance Appraisal. By
performance appraisal, employer can monitor the quality of performance of an employee.
Monitoring performance can be conducted by using this broader performance management system
that links: 1. Organization objective; 2. Day by day performance; 3. Professional development; 4.
Rewards and incentives. Performance cannot depend on past performance of employee working
experiences in organization.

2. Employee Performance

According to Akanbi (2011), in Nigeria, interest in effective use of rewards to influence workers
performance to motivate them began in the 1970s. The performance of workers has become
important due to the increasing concern of human resources and personnel experts about the level
of output obtained from workers due to poor remuneration. Measuring performance is of great
importance to an incentive plan because it communicates the importance of established
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organizational goals. : what get measured and rewarded gets attention” (Bohlander et al, 2001).
Measuring employee performance must include quality that can be measured by percentage of work
output that must be redone or is rejected. Besides that, customer satisfaction that can be measured
by the number of royal customers and customer feedback, and also timeliness, measured in terms of
how fast work is performed by the employee when given a certain task and absenteeism/tardiness
observed when employees absent themselves from work and achievement of objectives measured
when an employee has surpassed his or her set targets, then considered to have performed well to
achieve objectives (Hakala, 2008). Other than that, performance of workers has become important
due to the increasing concern of human resources and personnel experts about the level of output
obtained from workers due to poor remuneration (Puwanenthiren, 2011). Furthermore Payam, et.
al. (2013) supported that rewarding has been found to be one of the main organizations’ policies
which can increase the performance of staff and increase the outputs of organizations. Reward had
been seen to be a vital instrument in employee performance and a well-rewarded employee feels
that he or she is being valued by the company that he 12 or she is working for (Sajuyigbe, et al.
2013). According to Nelson (2004) praise and recognition are the most efficient intrinsic reward that
enhances employees’ performance. And also Jensen et al (2007) see intrinsic reward as a tool that
motivates employees to perform as expected.

3. Reward

According to Baron (1983) reward can be extrinsic or intrinsic. Extrinsic reward is tangible reward
and these rewards are external to the job or task performs by the employees. Extrinsic reward can
be in terms of salary or pay, incentives, bonuses, promotion and job security. While intrinsic rewards
are intangible rewards or psychological reward like appreciation, meeting the new challenges,
positive and caring attitude form employer and job rotation after attending the goal. Luthans (2000)
highlights two types of rewards which are financial (extrinsic) and non-financial (intrinsic) reward
and both can be utilized positively to enhance employees performance. Financial rewards mean pay-
for-performance such as performance bonus, job promotion, commission, tips, gratuities and gifts
etc. Non-financial rewards are non-monetary/non cash and it is a social recognition, praise and
genuine appreciation etc. Recognition and appreciation are another integral component of a
winning strategic reward system. Recognition is to acknowledge someone before their peers 13 for
desired behavior or even for accomplishes achieved, actions taken or having a positive attitude.
Appreciation on the other hand centers on showing gratitude to an employee for his or her action.
Such rewards help employees to gauge their performance and know whether they are doing good
and bad (Sarvadi, 2010). Thomas (2009) also said that extrinsic rewards are now less important, as
day to day motivation is more strongly driven by intrinsic rewards. While, according to Hasaan Fazal
(2011), intrinsic rewards actually fulfill employee’s intrinsic factors or motivation and thus motivate
him. Example include; giving challenging task, involving in decision making process, giving a higher
rank in hierarchy etc all these rewards do not required to have increased salary as well and
employee may be working at higher management rank without an increase in the salary and still
more motivated. Reward had been seen to be a vital instrument in employee performance and a
well-rewarded employee feels that he or she is being valued by the company that he or she is
working for (Sajuyigbe, et al. 2013).

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5. Theoretical Framework

Figure 1: Theoretical framework of the study

Based on the objective of this study that is to examine the relationship between reward system with
employees’ performance (Figure 1). The instrument used was adopted from Payam. et al. (2013).

6. Methodology

6.1 Sample and data collection method

Researcher focus on sampling size which is 120 respondents from the total employees in that
particular Islamic council. The sample size which was larger than 30 and less than 500 were
appropriate for most research (Salkind, 2006). The sample size was determining for a given
population from the table of "Small Sample Techniques" from Krejcie and Morgan, (1970) A
structured group-administered questionnaire using 5-point Likert scale was used in assessing the
students’ self-reported experiences and feedbacks.

6.2 Instrumentation

Questionnaires were used as a research instrument to collect data from the respondents in order to
identify for this research. The total distributed questionnaire for employees' was 130 and the total of
returned of the questionnaire was 120. The questionnaire contains four main sections with are
section A measured the demographic information of the respondents and section B consisted of
dependent variable which is employees performance, section C consisted a reward as an
independent variable.

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Table 1: Questionnaires table

7. Finding & Discussion

7.1 Correlations

The result from Table 2 below shows there was a positive relationship between rewards and
employee performance to strongly support and agree with the hypothesis 1. According to table 4.8,
the correlation coefficient of rewards which is (r=.679**, p=.000) is moderate relationship (Elifson &
Haber,1998). Since the level of significance at 0.000 < 0.05, H1 is accepted. Meaning that Intrinsic
reward have significant relationship with employee's performance. Intrinsic reward has positive
relationship with each other (Puwanenthiren,. 2011).According to Serena et al, (2012) the
correlation coefficient show a strong relationship between reward and employees performance.

Table 2: Correlations between Intrinsic Reward with Employee Performance

In fact, the result from Table 3 below mentioned there is a positive relationship between rewards
and employee's performance. Rewards have positive relationship with each other (Puwanenthiren,
2011).According to Sinclair (2005) the motivational power such as money has the power to attract,
retain, and motivate individuals towards higher performance of employees.

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Table 3: Correlation between Extrinsic Reward with Employees Performance

7.2 Descriptive statistics & analysis

The findings showed that the distribution of gender was higher for females with a total of 71 female
respondents (59.2%). On the other hand, there were 49 male respondents or 40.8 percent out of the
total respondents. The age of the respondents showed that most of them were 33 years old, 22.5%
were 31 to 35 years old and the rest were above 21 years old. Most of the respondent had worked
less than 5 years are 54 respondent (45%), followed by 43 respondent (35.8%) which is 5 years to 10
years, followed by 19 respondent (15.8%) which is more than 15 years, and lastly followed by 4
respondent (3.3%) which is 11 years to 15 years.

8. Conclusion and Future Recommendation

From, the findings, it shows that the questions that had been used in the study are reliable through
the reliability test conducted earlier. It can be concluded that, majority of the respondents in this
study are female. It had been found that, age between 26 to 30 years old are the majority age group
of the respondent and majority of respondents have a degree level of educational background. It
had been found that, most of the respondents had worked less than 5 years of current experience
while the rest of the respondents are more than 5 years. In answering research question 1, it was
found there was positive relationship between Intrinsic Rewards with employee's performance. The
result shows there was a positive relationship between Intrinsic Rewards and Employees’
Performance. Therefore, research question 2, researcher found there were positive relationship
between Extrinsic Reward with employee's performance. The result shows there was a positive
relationship between Extrinsic Rewards and Employee Performance.

Researcher recommends that an organization takes a deep care about their employees matters even
if the matters look simple. Employees are the main sources to achieve organization goals, so the
organization need to make sure reward system is fairly given to the right person to make employees
feel that company is appreciated of him or her. Organization should be ensure rewards are not bias
given to the person by performing their task with successful and with excellence discipline.

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