Relationship between Performance Based Pay, Interactional Justice and Job Satisfaction: A Mediating Model Approach

Abstract

This study was conducted to examine the influence of interactional justice in the relationship between performance based pay and job satisfaction using 334 usable questionnaires gathered from employees who work in Malaysian private institutions of higher learning (PRIVATE INSTITUTION), Malaysia. Exploratory factor analysis confirmed that the measurement scales used in this study met the acceptable standards of validity and reliability analyses. Further, the outcomes of Stepwise Regression analysis showed two important findings: First, performance based pay (i.e., participation in pay systems and adequacy of pay) significantly correlated with job satisfaction. Second, linking performance based pay (i.e., participation in pay systems and adequacy of pay) to interactional justice significantly correlated with job satisfaction. Statistically, this result demonstrates that interactional justice does act as a partial mediating variable in the relationship between performances based pays and job satisfaction in the studied organizations. In addition, discussion, implications and conclusion are elaborated.

Performance-based Reward Administration Enhancing Employees’ Feelings of Interactional Justice

“…The survey questionnaire consists of four parts: first, communication had 3 items adapted from performance based reward related communication Garib Singh, 2009). Second, participation had 3 items adapted from performance based reward related participation (Brown et al, 2010;Ismail et al, 2011a). Third, performance appraisal had 4 items adapted from performance based reward related communication (Ibeogu and Ozturen, 2015;Lira et al, 2016;Phin, 2015).…”

“…Second, participation in decision making had often been practiced between employees and administrators in determining awards based on employee performance. The willingness of administrators to involve the employees in determining and distributing rewards based on performance had enhanced the employees' feelings of interactional justice in the different organizations (Ismail et al, 2011;Lau, 2014). Third, performance appraisal had been used to measure employee performance and results of this appraisal were used to determine the type, level and/or amount of rewards to employees.…”

“…Several extant studies had been conducted using an indirect effects model to examine performance based reward administration in different samples, such as perceptions of 384 employees from Midwestern Public University in United State of America (Day, 2011), 334 employees from private higher institution in Malaysia (Ismail et al, 2011), 537 employees from 17 public and private organizations in Croatia (Susanj & Jakopec, 2012), 139 employees in United State of America (Lau, 2014), 100 bank employees in Cyprus (Ibeogu & Ozturen, 2015) and 2247 employees from public agency in Portugal (Lira et al, 2016).…”

“…Many scholars argue that this situation is due to several reasons: first, previous studies had much conceptually explained the definitions, purposes, significance and characteristics of the various kinds of performance-based reward in organizations Brown et al, 2010). Second, previous studies had largely utilized a simple survey and correlation analysis method to identify employee perceptions about various types of reward system, as well as simple variance analysis to differentiate the effect of each performance based reward components on various types of performance based reward (Ismail et al, 2011a(Ismail et al, , 2011bMcCausland et al, 2005). Finally, previous studies had much been affected by macro econometric data and statistical formula to design and administer wage and salary system; but these approaches neglect to measure the effect size and nature of performance based reward administration on interactional justice in the reward management research literature Sabeen & Mehboob, 2008;Sogra et al, 2009).…”

“…For example, the ability of administrators to appropriately implement communication, participation and performance appraisal in allocating reward based on performance may lead to stronger feeling of interactional justice among the employees of the organizations (Ismail et al, 2011a;Lau, 2014;Susanj & Jakopec, 2012).…”