PAY RISE AS AN EXTRINSIC REWARD ON EMPLOYEE PERFORMANCE: A CASE OF COMMERCIAL BANKS IN NAIROBI CITY COUNTY, KENYA.

Abstract

In the banking industry, where effectiveness and service delivery are essential to success, employee performance is a crucial factor in determining an organization's competitiveness. This study looked at how employee performance at a few commercial banks in Nairobi City County, Kenya, was affected by pay rise as an extrinsic reward. This study is anchored by Equity theory. A sample size of 112 respondents was selected from a target population of 155 frontline staff using stratified sampling techniques was adopted to ensure equitable representation. A descriptive research design was used for assessing current relationships between pay rise and employee performance among the six selected commercial banks. A high response rate of 85.7% was obtained from the 96 individuals who successfully filled out and returned the questionnaires. Descriptive and inferential statistics techniques analyze quantitative data. The results showed that most respondents thought pay was fair and related to steady yearly percentage pay rise, with promotion chances frequently being linked to more frequent pay increases. With a correlation coefficient (R) of 0.504, regression analysis showed a somewhat positive relationship between employee performance and pay rise. Pay rise was responsible for 25.4% of the variation in employee performance, according to the coefficient of determination (R2 = 0.254), with other factors explaining the remaining variance. The model's statistical significance (F = 31.962, p < 0.05) confirmed that one of the main predictors of performance was pay rise. Although they are not the only factors influencing performance outcomes, the study finds that pay rise greatly improve employee motivation, morale, and productivity. In order to maintain employee commitment and enhance organizational performance in a competitive setting, it is recommended that commercial banks to implement equitable and consistent pay rise structures that are combined with other reward systems