The influence of compensation system design on employee satisfaction

Abstract

For years, small and medium enterprises have been the bases of economic development in Taiwan. However, with restricted domestic economic development, increasing manpower cost and severe pressure from the international operational environment, small and medium enterprises are now facing many obstacles due to inferior capacities. Many owners of small and medium enterprises have expressed the opinion that without the development of human resources, the economic sustainability of their companies will be jeopardized. Past studies on managerial models mostly treat large enterprises as subjects. However, can compensation systems of small and medium enterprises follow the same success model? Currently, there is a lack of related case data and studies in Taiwan. Therefore, this study treats small and medium enterprises as subjects, and intends to develop a successful compensation system design for human resource management and development in these subjects to enhance employee satisfaction. An empirical analysis demonstrates a positive correlation between employee satisfaction and job-based pay, skill-based pay and performance-based pay. In addition, some demographic variables reveal a moderating effect on this relationship. Key words: Compensation system design, employee satisfaction, compensation design.

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