CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

In recent decades, turnover has become a trend in industrial and organization field. In fact, turnover can give negative impacts to the organization. The cost effect is the main problem turnover brings. Organization should spend a lot of money in separation process and replacement (Kreitner & Kinicki, 2010). Some studies showed that in every 10% increasing of turnover rate would cause decreasing of organization outcome (Dolton & Newson, 2003; Park & Shaw, 2013). It causes organizations to consume more energy in maintaining the stability of the organization input and output (Shaw, 2011). If the occurrence of this the turnover, particularly the voluntary one, is not controlled, the organization will lose its assets and much cost (Pinder, 2008).

For many organizations, employee turnover is a key concern because of the time and money involved in addressing this issue, among other factors. It is the importance of this phenomenon, in part, that has led to turnover attracting immense scholarly attention. As Holtom, Mitchell and Lee (2008: 232) note, “…it is not surprising that turnover continues to be a vibrant field despite more than 1500 academic studies addressing the topic.” From a financial perspective, turnover can be very costly. When an employee leaves an organization, it forces it to spend scarce resources – both time and money – to either replace the employee, or get others to cover the work. Organizations spend a significant portion of their budgets recruiting and training new employees; estimates for the losses range from a few thousands to more than two times the person’s salary (Cascio, 2000; Hinkin and Tracey, 2000; Holtom, Mitchell and Lee, 2008). Some costs, such as the disruption of the organization’s daily operations and the emotional stress and, at times, the work overload it causes those who remain, are difficult to capture in monetary terms. Undesirable turnover can also project a negative image of the organization – both internal and external; thus, it is not surprising that voluntary turnover continues to attract the attention of scholars and practitioners alike.

Pay satisfaction is of primary concern to both employers and employees. For employees, pay is of obvious importance in terms of satisfying their economic needs. It is important that they are satisfied with their overall pay as this may impact their attitudes and behaviours. As Heneman and Judge (2000: 85) concluded, “research has unequivocally shown that pay dissatisfaction can have important and undesirable impacts on numerous employee outcomes.” Employee dissatisfaction with pay, for instance, can decrease commitment to the job, increase stealing, and catalyze turnover (Currall et al., 2005; Greenberg, 1990; Miceli and Mulvey, 2000). For employers, some of whom may spend as much as 70-80% of their budget in wages and benefits in the service sector, the issue has implications for the survival of the organization if they do not get decent returns on their investments. Furthermore, an organization’s reward system is increasingly viewed as a strategic tool in aligning the interests of workers and management and improving firm performance; that is, organizations may use their pay system to motivate strategic behaviours (Lawler, 1971, 1990; Milkovich and Newman, 2008), making it crucial that employees are satisfied with their pay.

1. STATEMENT OF THE PROBLEM

There are three outcomes when employees compare their input/output ratio with referent others that may influence their performance. In situations where the outcomes or outputs are perceived to exceed inputs, the individual is being over-rewarded. On the contrary, if inputs are perceived to exceed the outputs, the individual is being under-rewarded. The optimal situation is when inputs equal outputs and the reward is considered equitable. If the input-output ratio is not in balance, individuals will experience distress caused from guilt of being over-rewarded or the feelings of resentment from being under-rewarded, and these feelings will serve as a motivational factor leading to restoration of equity (Greenberg, 1987, 1990; Huseman, Hatfield and Miles, 1987; Huseman and Hatfield, 1990). Employees who feel under-rewarded will attempt to restore equity by reducing inputs such as increasing absenteeism, coming late to work, taking longer breaks, and decreasing productivity, or by leaving the organization, all of which are very costly for an employer (Greenberg, 1990).

Given the foregoing, we can rationalize that pay satisfaction is caused, in part, by perceptions regarding the equity of one’s pay. Pay satisfaction can be seen as a surrogate for fairness and justice, which in return has a direct impact on employees’ motivation and therefore their job satisfaction (Eby et al., 1999). Fairness and perceived pay equity, in addition, are linked to organizational commitment and turnover (Brooke, 1986; Greenberg, 1987; Rhodes and Steers, 1981; Williams, McDaniel and Nguyen, 2006). Hence, the degree to which an individual is committed to their employer can be enhanced by an individual’s perception of how they are rewarded for their inputs.

There is a large body of literature on the pay and job satisfaction relationship (Ago, Mueller and Price, 1993; Tremblay, Sire and Balkin, 2000; Weiner, 1980) and the job satisfaction-turnover relationship in the management and industrial relations literature (see for instance, Lum et al., 1998; Mobley et al., 1979). In the light of the above, the study will try to investigate the effect of pay satisfaction on turn over intention.

1. AIM AND OBJECTIVES

The aim of the study is to investigate the relationship effect of pay satisfaction and turn over intention.

Specifically, the study will seek to:

1. Ascertain the causes of lack of pay satisfaction on turn over intention
2. Assess the extent of turnover
3. Assess the level of job satisfaction and its determinants
4. Examine the relationship between the job satisfaction and turnover.
5. Examine the negative and positive effect of pay satisfaction on turn over intention

1. RESEARCH QUESTIONS

Arising from the research objectives, the following research questions will be critically addressed:

1. What are the causes of lack of pay satisfaction on turn over intention?
2. What is the level of   extent turnover?
3. What is the level of job satisfaction and its determinants?
4. What is the relationship between the job satisfaction and turnover?
5. What is the negative and positive effect of pay satisfaction on turn over intention?

1. RESEARCH HYPOTHESIS

The following hypothesis will be formulated and tested as follows:

H0 there is no significant effect between pay satisfaction and turn over intention.

H1 there is significant effect between pay satisfaction and turn over intention.

1. SIGNIFICANCE OF THE STUDY

This study would be beneficial to all banks and organizations operating in Nigeria and the world in general.

Banks and organizations therefore will have knowledge of identifying the factors influencing employees’ job satisfaction and turnover intention, and human resource managers can redesign their retention strategies and formulate appropriate policies and reviewing the existing ones, in order to reduce employee turnover rate.

1. SCOPE OF THE STUDY

The study focuses on the effect of pay satisfaction on turn over intention of Guarantee Trust Bank.

The study focuses on the positive and negative effect of pay satisfaction, relationship between the job satisfaction and turnover, causes of lack of pay satisfaction, extent of turn-over and the level of job satisfaction and its determinants.

1. LIMITATION OF THE STUDY

TIME CONSTRAINTS: One the challenges experienced by the researcher is the issue of time; the research will simultaneously engage in departmental activities like seminars and attendance to lectures. But the researcher was able to meet up with the deadline for the submission of the project.

FINANCIAL CONSTRAINTS: Every research work needs funding; however lack of adequate funds might affect the speed of the researcher in getting materials for completion of the project.

1. DEFINITION OF TERMS

Job Satisfaction

Job satisfaction is the attitudes and feelings people have about their work. Positive and favourable attitudes towards the job indicate job satisfaction. Negative and unfavourable attitudes towards the job indicate job dissatisfaction (Armstrong, 2006). Employee job satisfaction is the fulfilment, gratification, and enjoyment that come from work. It is not the money or the fringe benefits, but the feelings employees receive from the work itself (Asegid, et al., 2014).

Turnover Intention

Turnover intention is defined as the intention of workers to leave their job. Intention to turnover may affect organization in achieving its objectives, which in turn lead to a reduction in the overall level of innovation, quality of customer service and a negative psychological effect on the employees that remain in the organization (Ayinde and Adegoroye, 2012).

Employee Turnover

Turnover is the opposite of retention, refers to percentage of employees leaving the organization for whatsoever reasons (Phillips and Edwards, 2009). According to Phillips and Edwards (2009), total turnover is total number of employees leaving the organisation during a given period divided by average number of employees during that period.