One of the most powerful tools for the employees’ satisfaction, involvement, commitment and finally retention is reward & compensation. Management attention and rewards & compensations are the strongest measures of the organizational culture (Hagberg & Heifetz, 2000).  Better rewards and compensation strategies are more able to make a superior organizational culture and healthier working environment. Rewards and compensation is not only the strategy for successful business but it is the strategy to execute all the strategies (Zingheim & Schuster, 2000). Datta, 2012 suggested that rewards and compensation packages drive the employees’ morale. He also concluded that Manager Decisions would not be ineffective, if the organization has excellent command to distribute reward compensation among employees. This approach shows that if there is proper management of distribution rewards and compensations, the organization would be successful in the implementation of all the decisions and plans. 

Contingent and non-contingent Rewards:

Rewards are contingent as well as non-contingent (Deci, 1972), contingent in terms of conditional and non-contingent in terms of without any condition. Suppose, some compensation terms associated with the technological staff and non-technical staff do not fall in that category. Sometimes, this term is associated with the level of productivity achieved by employees. 

Intrinsic Rewards and Extrinsic Rewards:

There is differences of opinion among researchers. Some think, Intrinsic Rewards are more powerful than extrinsic rewards  (Datta, 2012) and some consider extrinsic the more important. Intrinsic rewards contain psychological factors(intangible) and extrinsic rewards contain monetary, bonus and value addition factors(tangible). Whereas, it only depends upon the conditions. Sometimes, employees only want to be praised among their peers or want to attain promotion. And some only want the monetary rewards. The combination of both extrinsic and intrinsic is the best approach. In the era of dynamic technology and global village, the employees are paying more attention to the extrinsic rewards. As IT experts can attain their desired and competitive salaries, there is a high turnover rate among the IT experts and programmers. Commitment 

Work from Home and Flexible Working Hours:

Especially in the pandemic situation of COVID-19, the literate and technology based employees were work from home and can enjoy flexible working hours. This situation altered the entire world’s satisfaction levels. Everybody wants to have a relaxing and enjoyable working environment, as there is a dramatic rise in fuel prices. 

Organizational Citizenship:

This is another name for the intrinsic rewards. It is considered a physiological factor. Results of rewards are motivation (Deci, 1972; Farr, 1977), organizational citizenship (Moorman, 1991), emotion, communication and efficient performance (Staw, 1994) are altered by COVID-19 pandemic.  Effective reward system is a valuable asset to manage employees’ attrition and morale (Appelbaum, 2011; Balkin, 1992). But the over-emphasized efficiency rewarding system can become ineffective as it creates low employee morale and ‘zero sum game’ (Robbins, 2005); it discourages ultimately Corporation and teamwork. Organizational citizenship is the ‘you’ strategy to retain the human capital especially among the IT experts in the high-tech organizations.

Human Capital Portfolio:  

To balance reward distribution, it is most important to maintain the human capital portfolio. The high turnover rate among IT experts is the barrier in maintaining a good organizational portfolio. If there is proper and excellent maintenance of reward system, the turnover rate can be reduced.  Datta, (2012) proposed the model for the reward distribution system. That model contains input process and output constraints which is regardless of employee evaluation. He proposed that the organizations must have subsystems of reward distribution; ancient distributions systems can decompose all processes and systems. He also proposed that the reward distribution system is open and interactive with the external environment; if the performance measures are changed, then there would be automatic change in the reward distribution outcomes.so we can conclude that human capital portfolio are combination of intrinsic and extrinsic rewards. Ineffective reward distribution systems decrease motivation in employees (Datta, 2012), future performance and effectiveness (Ostroff, 1992), employee confidence in organization (Robbins, 2005) and increase employee turnover (Balkin, 1992) and overall concept of inequality (Datta, 2012). Whereas, an effective reward distribution system increases likelihood behavior (Balkin, 1992).

Innovation and Research for Strategic Intention:

Organizations must focus on the special compensation packages for the employees who take part and play an important role in the innovations and research & development. There must be Strategic intention to follow the innovative idea powered by the relative pay level, compensation time horizon and stock option plans. The role of the rewards and compensation cannot be ignored for the innovation development and for the creative workforce. If any employee takes part in the innovation and research, then he/she must be rewarded both in the intrinsic and extrinsic rewards and compensation levels. This not only encourages the idea of innovation and research but is also strategically important for the organization in the long run. Another way to encourage innovation and research is to encourage the employees in learning more and must be supported by the bosses and peers.

Shared goals and its Alignment:

To improve organizational effectiveness, the organization’s business strategy must be linked and aligned to the compensation system (Gerhart, 2000). If the employees of the high technology organization know that their efforts are recognized by the special compensation packages, then they would be more innovative, satisfied, involved and committed with their organization. In Swiss financial institutions, there is significant correlation between business strategy and compensation system (Boyd & Salamin, 2001). Due to this linkage of management, the organization is able to get more committed workforce. Combination of business strategy and compensation system resulted in better organizational performance (Montemayor, 1996). In other words, if the proper linkage is defined by adopting certain steps that ‘performance would be rewarded’, then there would be continuous improvement in employee job satisfaction, involvement and commitment. Data, 2012 concluded that ineffective rewards distribution sometimes leads toward the dissatisfaction, biasness, conflicts, turnover and attrition of employees. So the reward & compensation system must be objective based and influential enough to encourage employees’ motivation for the future needs. Reward system must be formal so that it must reduce the litigious behavior and encourage decision-making and goal seeking behavior. All these behaviors would encourage managing the human capital asset portfolio.

Competitive salaries:

High technology organization specifically IT organization lay much emphasis on the compensation packages of employees, as the retention of employees is one of the major issues for software houses. Salaries and compensation structure changes for the programmers of the IT sector with the country inflation rate (Arora et al., 2006), as the IT programmers’ salaries are linked to the competitive environment. The management of rewards & compensation is considered the best retention strategies for IT experts. In-depth analysis of compensation in the IT sector is required to analyse the human capital endowment and determinants of compensation depend upon the firm’s size, industry and sector. Whereas, the study by Levina and Xin (2007) was about the multilevel analysis of IT worker compensation. Level of compensation can directly be determined by education and experience and indirectly determined by institutional factors. They also found that Institutional factors have modern effects; so IT companies are paying more to highly educated IT professionals.

Variation in Compensation Level:

The government policies, unemployment rate, unionization rates and employee turnover have much more influence on the compensation structures. The differences can arise, if different type of organizations have different compensation policies this is considered an institutional effect. Higher paying organizations hire those employees who are more productive. In the software houses, there is a need for highly efficient and productive software developers with the maximum retention rate for the effective utilization of resources and time. Research studies in the USA by Laster (1967), Mellow (1982), in Japan by Idson (1992) and in Europe by Loveman & Sengenberger (1991) showed that the level of compensation increases with the larger organizations. Strategic retention also requires long-term rewards and compensation plans. Software houses’ rewards and compensation rises with the level of organizations.  The level of compensation also changes from profit to not for profit organizations, as the non-profit organizations would have lower compensation packages than for profit organizations. So, in-depth analysis is required to understand the level of compensation structure for the high-tech organization for the long term employee retention. Compensation strategies are the primary approach to attract and retain the employees. Levina & Xin, 2007 found that IT compensation is positively related to education and experience. The scope of compensation satisfaction can be defined according to salary level, salary increment, benefit level, pay structure and administration policies.

Institutional Factors:

The institutional factors of compensation suggest that IT professionals should pay significant attention in career planning (Levina & Xin, 2007). Career planning in alignment with compensation strategies play a significant role in the retention of software developers. If the compensation strategy is tied up with the retention of skills or talent, then it would be an effective improvement in employees psychological behaviours (Levina & Xin, 2007). So there must be a true match among employee satisfaction, involvement, commitment and retention strategies for the best achievement and utilization of resources and facilities. However, the direct wage or direct salary has the actual level of compensational satisfaction for employees. The components of compensation are related to each other. The best mixture of the compensation strategies results in the better way. The compensation level may change due to demand and supply of employees. The demand has increased for the software developers in the software houses. The compensation also depends upon the supply of employees  (Levina & Xin, 2007). Therefore, the best retention strategy must include the rewards and compensation packages according to software developers requirement to make them satisfied, involved, committed. The dimensions of pay level are more strongly related to one another (Williams et al., 2007). The basic need of compensation is to attract, retain and motivate the talented pool of employees. Walker (2001) found seven factor for talent retention of employee; compensation is the most important factor for talent retention. Pakistan Software Export Board, 2012 shows that Pakistan has compensation surveys for the IT sector. Rewards and compensation has 21% contribution to the total level of satisfaction in the IT sector Pakistan. There is a need for serious alignment of compensation strategies with the retention strategies, as the COVID-19 has increased the human resources management challenges. 

Data Analysis

Secondary data is used in the data analysis (Hussain & Saleem, 2014) about the software houses to understand the relationship between rewards & compensation, job satisfaction, job involvement, job commitment and job retention. Sample size is 260. Data is summarized through google survey and excel worksheets. The data was collected in the 5 likert scale 1= strongly disagree, 2= disagree, 3= neutral, 4= agree, 5= strongly agree

Figure 1.1 shows that there is direct as well as the indirect relationship between rewards and compensation with the employee retention strategies. In other words human capital can be retained through the effective rewards and compensation strategies as well as the mediation effect of job involvement, satisfaction and commitment.

In response, averagely 71.7% employees responded positively (agree and strongly agree), 18.46% responded neutrally, 9.86% responded negatively about salary and benefits packages. In short, most employees find their rewards and compensation attractive. Rewards and compensation is the most effective source to retain employees for a longer period of time.

Table 1.2 shows Rewards and Compensation (REWD) has the high correlation to Job Satisfaction (SATSF), Employee Job Involvement (INVOL), Employee Job Commitment (COMIT) and Employee Job Retention (RETNT) with r-value 0.823, 0.753, 0.658 and 0.721 respectively. The results are showing that Rewards and Compensation (REWD) is related to mediating variables of Employee Job Satisfaction (SATSF), Employee Job Involvement (INVOL) and Employee Job Commitment (COMIT). It means that if the rewards and compensation of employees are properly managed and controlled, then employees are satisfied, involved and committed with the organization. Rewards and Compensation (REWD) are directly as well as indirectly correlated with Employee Job Retention (RETNT). 

Conclusion

In high-tech organizations like software houses, talent retention is the most common problem. Employee turnover may be due to many factors that can be internal and external. In the world of capitalization, strategies of rewards & compensation can play a significant role in employee retention. Rewards & compensation are linked with job satisfaction, job involvement and job commitment directly. These job satisfaction, job involvement and job commitment are essential parts of employee retention. Shortly, there is a direct as well as indirect relationship between rewards & compensation with employees job retention. Organizational strategies are required to manage, maintain and improve the reward systems. rewards & compensation must be aligned with employees satisfaction and organizational vision. 

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