EFFECTS OF COMPENSATIONMANAGEMENT SYSTEM ON EMPLOYEES’ COMMITMENT THE CASE OF COMMERCIAL BANKS OPERATING IN WOLKITE CITY

Abstract

Employee commitment is a critical factor influencing organizational success, yet many organizations struggle to retain a dedicated workforce due to ineffective compensation strategies. Compensation elements such as premium pay, job-related incentives, fringe benefits, and basic pay play a vital role in fostering employee commitment. However, there is limited empirical evidence on how these factors specifically impact commitment in the Ethiopian context. This study aimed to examine the effect of compensation components on employee commitment, focusing on premium pay, job-related incentives, fringe benefits, and life insurance. A quantitative research approach was employed, using a structured survey to collect data from 150 employees from commercial banks in wolkite town. The collected data were analyzed using descriptive statistics, correlation analysis, and multiple regression analysis to determine the relationship between compensation components and employee commitment. The results revealed that premium pay, job-related incentives, fringe benefits, and life insurance significantly influenced employee commitment. Premium pay was found to enhance job satisfaction and retention, while job-related incentives boosted motivation and engagement. Fringe benefits, including health coverage and retirement plans, contributed to employees’ long-term commitment. health and insurance benefits provided financial security, reducing employees’ stress and improving their trust in the organization. Based on the findings, it is recommended that organizations adopt well-structured compensation policies that align with industry standards to enhance employee commitment. Specifically, competitive salary structures, meaningful performance-based incentives, comprehensive fringe benefits, and adequate life insurance coverage should be implemented. Organizations should also ensure transparency and effective communication regarding compensation policies to improve employee satisfaction and loyalty. By addressing these factors, organizations can create a more motivated and committed workforce, ultimately leading to higher productivity and organizational success.