Merit‐based rewards, job satisfaction and voluntary turnover: moderating effects of employee demographic characteristics

Summary

The paper "Merit‐based rewards, job satisfaction and voluntary turnover: moderating effects of employee demographic characteristics" by Froese, Peltokorpi, and Varma, published in the British Journal of Management in 2019, investigates the intricate relationship between individual merit-based rewards, employee job satisfaction, and the likelihood of voluntary turnover. Drawing on the reflection theory of compensation, the authors hypothesized that merit-based rewards would positively influence job satisfaction, which in turn would reduce employees' intent to leave the organization voluntarily. Furthermore, the study explored how employee demographic characteristics such as gender, age, and education level might moderate the effect of merit-based rewards on job satisfaction. To test these hypotheses, the researchers collected data from a sample of 636 to 639 employees in Japan. The data collection was conducted at three different points in time over a 12-month period, allowing for a more robust analysis of the relationships and potential causal links. This longitudinal approach is crucial for understanding how these factors evolve and interact over time within an organizational context. The methodology aimed to provide empirical evidence on how employees perceive and react to merit-based reward systems, and the subsequent implications for their satisfaction and retention. The study's findings indicate a direct and positive effect of merit-based rewards on job satisfaction. This suggests that when employees perceive their performance directly correlates with their salary increases or other rewards, their contentment with their job increases. Significantly, this boosted job satisfaction was found to have an indirect effect on reducing voluntary turnover. In other words, employees who are more satisfied due to merit-based rewards are less likely to leave their organizations. The research also uncovered critical moderating effects of demographic characteristics. Specifically, the positive influence of merit-based rewards on job satisfaction was found to be stronger among male employees and those with higher levels of education. These findings highlight that the effectiveness of a compensation system is not universal and can vary based on the demographic profile of the workforce. The practical implications suggest that organizations should strategically implement reward systems, recognizing that their impact on satisfaction and retention can differ among employee groups. For multinational firms, especially in contexts like Japan, understanding these demographic nuances is vital for tailoring human resource management practices effectively to attract, motivate, and retain talent.