Retaining and motivating employees. Compensation preferences in Hong Kong and China
| Date | 01 August 2002 |
| Published date | 01 August 2002 |
| Pages | 402-431 |
| DOI | https://doi.org/10.1108/00483480210430346 |
| Author | Randy K. Chiu,Vivienne Wai‐Mei Luk,Thomas Li‐Ping Tang |
| Subject Matter | HR & organizational behaviour |
Personnel
Review
31,4
402
Personnel Review,
Vol. 31 No. 4, 2002, pp. 402-431.
#MCB UP Limited, 0048-3486
DOI 10.1108/00483480210430346
Retaining and motivating
employees
Compensation preferences in
Hong Kong and China
Randy K. Chiu and Vivienne Wai-Mei Luk
Department of Management, School of Business, Hong Kong Baptist
University, Kowloon Tong, Hong Kong, and
Thomas Li-Ping Tang
Department of Management and Marketing, Jennings A. Jones College
of Business, Middle Tennessee State University, Murfreesboro,
Tennessee, USA
Keywords Compensation, Retention, Motivation, Employees, Hong Kong,
People's Republic of China
Abstract This paper reports two studies involving data collected from 583 participants in Hong
Kong and 121 participants in the People's Republic of China (PRC), and examines the most
popular compensation components offered by organizations to employees and participants'
perceptions regarding the five most important compensation components to retain and motivate
people in Hong Kong and PRC, respectively. Results suggested that in Hong Kong, base salary,
merit pay, year-end bonus, annual leave, mortgage loan, and profit sharing were the most
important factors to retain and motivate employees. In China, base salary, merit pay, year-end
bonus, housing provision, cash allowance, overtime allowance, and individual bonus were the
most important factors to retain and motivate employees. Results are discussed in light of
economic, geographic, and culture-related factors.
For the last several decades, the growing integration of the world economy into
a single, huge marketplace has increased the intensity of competition in the
world market to cut costs and increase profits in a wide range of manufacturing
and service industries (Hill, 1994). Only the most efficient and best-managed
organizations can survive. Money, benefits, and many different forms of
compensation have been used to attract, retain, and motivate employees and
achieve organizational goals in the USA and around the world (Barber and
Bretz, 2000; Chiu et al., 2001; Lazear, 1998; Milkovich and Newman, 1999; Rynes
and Gerhart, 2000; Tang et al., 1998, 2000a,b).
Organizations' reward systems involve monetary compensation and non-
monetary rewards. Further, under monetary compensation, there are direct
compensation and indirect compensation (benefits). In this study, we focus on
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Portions of this paper were presented at the Inaugural Conference of the Asia Academy of
Management, Hong Kong, December 28-30, 1998. Correspondence concerning this article should
be addressed to Thomas Li-Ping Tang, P.O. Box 516, Department of Management and
Marketing, Jennings A. Jones College of Business, Middle Tennessee State University,
Murfreesboro, TN, 37132 (HK-PRCPAY.PR.rtf: 7/25/2001).
Retaining and
motivating
employees
403
monetary compensation in organizations. First, pay level is related to two
objectives in compensation:
(1) controlling labor costs; and
(2) attracting, retaining, and motivating employees.
Other things being equal, the higher the pay level, the higher the labor costs.
Organizations with a high pay level may attract and retain a qualified work-
force (Williams and Dreher, 1992), and reduce training or recruiting costs
(Holzer, 1990). Further, higher labor rates may lead to lower labor costs due to
employees' higher quality and/or quantity of performance (Pfeffer, 1998). The
organization size, location, and the type of industry may influence the pay
levels (Tang et al., 2000a,c). Second, employee benefit costs have jumped from
25 percent of payroll in 1959 to just over 41 percent in 1993 (US Chamber of
Commerce, 1994). Organizations also need to strike the balance between wages
and benefits in order to satisfy employees' needs and stay competitive.
Money is the instrument of commerce and the measure of value. ``Money
isn't everything, but it is the best metric'' (Lazear, 1998, p. 379). It has been
suggested by researchers that money is a motivator (e.g. Lawler, 1973). Others
argue that money is not a motivator (i.e. a hygiene factor) (e.g. Cameron and
Pierce, 1994; Herzberg, 1987a, b; Kohn, 1993, 1998; Pearce, 1987; Pfeffer, 1998).
Money does improve performance quantity and does not erode intrinsic
motivation (Gupta and Shaw, 1998). However, the jury is still out regarding the
impact of financial incentives on performance quality.
The meaning of money is ``in the eye of the beholder'' and can be perceived as
their ``frame of reference'' in which they examine their everyday lives (Tang et
al., 2000a, p. 217). On the one hand, it is possible to simply pay higher wages
and lower benefits to satisfy employees' needs. On the other hand, some
benefits are quite important to employees. The same benefit does not suit every
worker. Workers do differ in their valuation of various benefits. Thus, a
cafeteria plan, for example, which gives a worker more flexibility in benefit
choices, can provide the most value to the worker for a given amount of
expenditure. Researchers and managers of human resources and compensation
need to identify the most important compensation components and satisfy
employees' needs.
A good match between resources (supply) and demands from both the
organizational and the individual perspectives will lead to a high level of need
satisfaction and job performance (Porter et al., 1975). Numerous researchers
have suggested that human need structures are virtually universal among
individuals (culture-free, etic) (e.g. Alderfer, 1969; Herzberg, 1987a, b; Maslow,
1970). Others have argued that need structures are culturally bound (culture-
specific, emit) (Ali and Ali-Shakhis, 1985; Bhagat and McQuaid, 1982; Hofstede,
1980; Nevis, 1983; Slocum, 1971; Smith et al., 1995; Tang and Ibrahim, 1998;
Tang and West, 1997). Thus, we cannot assume that all employees have
identical preferences for compensation components in organizations.
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