Pay is not everything. Differential effects of monetary and non-monetary rewards on employees’ attitudes and behaviours
| Pages | 311-327 |
| Date | 04 December 2017 |
| Published date | 04 December 2017 |
| DOI | https://doi.org/10.1108/EBHRM-07-2015-0031 |
| Author | Alessandro M. Peluso,Laura Innocenti,Massimo Pilati |
| Subject Matter | HR & organizational behaviour,Global HRM |
Pay is not everything
Differential effects of monetary and
non-monetary rewards on employees’
attitudes and behaviours
Alessandro M. Peluso
Department of Management and Economics, University of Salento, Lecce, Italy
Laura Innocenti
LUISS Business School, Rome, Italy, and
Massimo Pilati
Department of Economics, University of Modena and Reggio Emilia,
Modena, Italy
Abstract
Purpose –Monetary and non-monetary rewards have rarely been considered together under
the HRM perspective. Des pite the vast literature on HRM, there is still a lack of s tudies that explicitly
discuss the link between t he adoption of a total reward system (TRS) and emplo yee-related outcome s.
The purpose of this paper is t o investigate this important issue in order t o provide insights that can help
organisations devise compensation strategies that are ef fective in sustaining employees’po sitive attitudes
and behaviours.
Design/methodology/approach –Using a survey of 1,092 employees, the authors examine the effect of the
overall TRS on three outcome variables (i.e. job satisfaction, affective commitment, and innovative behaviour
at work). Furthermore, the authors examine the impact that each component of the TRS (i.e. base pay, training
and development opportunities, and positive work environment) has on the dependent variables.
Findings –The results confirm that t he adoption of a TRS exerts a po sitive influence on the
aforementioned outco mes. However, interest ing differences emerge d when looking at the individ ual
components in the over all sample.
Originality/value –This paper provides original insights into the complex relationship between TRS and
the employee-related outcomes of job satisfaction, affective commitment, and innovative behaviour at work.
Keywords Organisational behaviour, Human resource management (General),
Promotion and compensation
Paper type Research paper
Introduction
In any organisation, rewards play an important role in sustaining high levels of individual
performance, in addition to promoting employees’commitment and involvement. In order
to attract and retain skilled employees, companies have developed multifaceted
compensation systems. However, the ongoing economic crisis has forced many
organisations to rethink their reward strategies, leading them to combine monetary and
non-monetary rewards through the adoption of a total rewards system (TRS). This system
presumes that people are interested in partnering with organisations that provide not only
attractive economic conditions, but also a compelling future, individual growth, and a
positive workplace.
Organisations invest in both monetary and non-monetary rewards in order to signal
their interest in and appreciation towards their employees and, like any other form of
investment, rewards are often measured in terms of their return. Thus, organisations
have become increasingly interested in understanding the impact of their adopted
human resource management (HRM) practices on employees’attitudes and behaviours
(Appelbaum et al., 2000; Nishii et al., 2008; White and Bryson, 2013).
Evidence-based HRM: a Global
Forum for Empirical Scholarship
Vol. 5 No. 3, 2017
pp. 311-327
© Emerald PublishingLimited
2049-3983
DOI 10.1108/EBHRM-07-2015-0031
Received 20 July 2015
Revised 21 December 2015
1 June 2016
Accepted 20 June 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2049-3983.htm
311
Pay is not
everything
However, monetary and non-monetary rewards have rarely been considered together
from the HRM perspective. Despite the vast literature on HRM, there is still a dearth of
studies that explicitly describe the link between adopting a TRS and employees’
consequent attitudes and behaviours. Nonetheless, it might be useful to understand
whether organisations benefit more from adopting a whole TRS or just some of its
separate components. This is an important and under-explored issue that deserves
greater consideration, especially in the wake of increasing global competition.
The present study intends to fill this gap by investigating the impact of employees’
perceptions of TRS on a range of employee outcomes such as job satisfaction, affective
commitment, and the tendency to adopt innovative behaviours.
By addressing the relationship between TRS and employees’attitudes and behaviours,
we contribute to the HRM literature. More specifically, we explore the differential role of
three main components (i.e. fair base pay, training and development opportunities,
and positive work environment) that qualify monetary and non-monetary rewards.
Our findings support the notion that distinct compensation practices may be more
effective in fostering certain employees’outcomes than others. Therefore, our findings
contribute to the literature by providing useful insights on how to constitute coherent
bundles of reward and recognition practices that maximise the desired impact on
employees’attitudes and behaviours.
We adopted a structural equation modelling approach and tested our hypotheses using a
large sample of 1,092 employees from 12 Italian organisations.
Theoretical background
TRS and employee outcomes
Over the last 20 years, scholars have made significant progress in clarifying the association
between HRM practices and various performance measures. Research in this domain has
largely confirmed the existence of a positive link between organisations’HRM systems,
positive employee outcomes, and better organisational performance (Paauwe, 2009).
Moreover, there is empirical evidence demonstrating a causal chain between HRM practices
and organisational performance (Purcell et al., 2009). According to Purcell et al. (2009), in
order to positively influence an organisation’s performance, HRM practices need to
positively affect employees’attitudes and behaviours, which in turn will impact
organisational outcomes. Therefore, HRM practices are associated with organisational
performance through their influence on employees’attitudes and behaviours.
As monetary rewards constitute the traditional compensation that employees expect for
their efforts (Malhotra et al., 2007), previous studies have primarily focused on this reward
type, documenting its significant role in promoting task performance (Bonner et al., 2000).
Only recently have a few attempts been made to consider different forms of compensation
and their relationship to employee outcomes. Rafiq et al. (2012), for instance, highlighted the
different effects of intrinsic and extrinsic rewards on job satisfaction. Similarly, Dzuranin
and Stuart (2012) examined the effects of monetary and non-monetary incentives on task
performance and task attractiveness, as well as on performance and satisfaction.
The authors suggested that companies with existing monetary incentives may consider
adding non-monetary rewards to their performance incentive systems. Although they adopt
different theoretical models, these studies overall confirm a need to better understand the
consequences of different types of rewards on employees’attitudes and behaviours.
In an attempt to fulfil this need, the present study utilises a more systematic approach
by looking at the different components generally included in a TRS. A total reward
approach recognises that monetary rewards and benefits represent a necessary,
but insufficient condition for developing a committed workforce. Rather, this approach
suggests that the concept of rewards should encompass non-monetary forms of
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