MODERATING EFFECT OF REMUNERATION POLICY GUIDELINE ON THE RELATIONSHIP BETWEEN EMPLOYEE COMPENSATION AND PERFORMANCE OF COMMERCIAL STATE CORPORATIONS IN KENYA

Abstract

Commercial state corporations are established by the Government to offer efficient and effective citizen service delivery, whilst surrendering back investment income at the end of each financial year. Despite this, most of them have performed dismally over the years. The question of whether the performance of commercial state corporations in Kenya is related to the compensation structure of its employees and whether the extent of implementation of the public service Remuneration policy guideline in commercial state corporations affects the corporation‘s performance has not received any known scholarly attention. The main objective of this study was to evaluate the moderating effect of the Remuneration Policy Guideline on the relationship between employee compensation and the performance of commercial state corporations in Kenya. The theories applied in this study are the Equity theory of motivation, principal-agency theory, Dynamic capability theory, Expectancy theory of motivation and Resource-based view theory. A descriptive cross-sectional survey research design was used to conduct this study, targeting 612 managers of various cadres in the 68 commercial state corporations in Kenya. The (Yamane 1967) sampling formula was used to arrive at a sample size of 242 managers in these corporations. The reliability of the research instrument was done through the Cronbach Alpha test, and the reliability coefficient of the questionnaire was 0.8045, hence meeting the threshold value of 0.7. Content, face and construct validity was also tested by subjecting the data collection instruments to subject matter experts. Data collected through structured questionnaires was analysed using both descriptive and inferential statistics. The hypotheses were tested using multiple regression models and Hierarchical regression for moderation. The results of the hierarchical regression model on all the variables revealed that employees consolidated pay (β= 0.324, p= 0.000, p<0.05), employees facilitative allowances (β= 0.077, p= 0.000, p<0.05), employees retirement benefits (β= 0.132, p= 0.000, p<0.05), employees health benefits (β= 0.138, p= 0.000, p<0.05) had a significant positive relationship with performance of commercial state corporations. The augmented model also showed that the Remuneration Policy Guideline (β= 0.382, p= 0.000, p<0.05) had a positive relationship with the performance of commercial state corporations. The inclusion of the Remuneration Policy Guideline improved the variation of the model and explained it by 12.7 per cent (t=7.652, p=0.000), indicating that the Remuneration Policy Guideline moderates the relationship between employee compensation and the performance of commercial state corporations in Kenya. The study concluded that employee compensation affects the performance of commercial state corporations and that the Remuneration Policy Guideline strengthens the positive linkage between employee compensation and performance outcomes. These findings contribute novel insights into the influence of employee compensation on the performance of commercial state corporations. The study recommended that commercial state corporations should adopt and integrate the Salaries and Remuneration Commission‘s Remuneration policy guideline in their remuneration plans, assigning higher priority to employees consolidated pay, employee‘s facilitative allowances, employee‘s retirement benefits and employee‘s health benefits since they are crucial in enhancing their performance