Consequences of Dissatisfaction with Compensation

Compensation is need for survival and human satisfaction. Pay dissatisfaction can lead to a number of individual and organization problems as discussed below:

  • High Turnover: If employees are not paid according to the position they hold, their skills, competencies and performance, then employees will become dissatisfied with compensation and search for jobs in the marketplace. This will increase the employee turnover of the organization and adversely affect its effectiveness.
  • Higher Absenteeism: Employees dissatisfied with their compensation tend to lose interest in their organizations and start absenting frequently from their workplace. This negatively affects the functioning and efficiency of the work unit/ department and ultimately the organization; resulting in loss of man-hours, dislocation of work and productivity.

  • More Grievances and Legal Complexities: Low or inadequate compensation is a cause of employee grievance. Aggrieved employees are unable to focus on their work and hence their performance goes down. Moreover, inadequate compensation system with gender biases (like Equal Remuneration Act, 1976) or paying compensation below the government regulations (like minimum wages under the Minimum Wages Act, 1948) could result into legal complexities such as court cases, intervention by government authorities etc.
  • Lower Corporate Citizenship: Employees aggrieved with compensation are more prone to argumentation, disobeying orders of ye superiors, low quality work, increased wastage of material and time, inciting fellow-employees or bad mouthing the management etc.

  • Stealing, Sabotage and Vandalism: Employees unhappy with their compensation indulge in stealing organization’s property, using officials time and resources for personal gains, deliberately damage equipments and properties of the organization (e.g ; running machines at speed which is more than designed for), and exhibiting militant and uncooperative behaviors.
  • Strike: Inadequate compensation is a major cause of strike in a country like India. Employees and their representative trade unions use strike as a weapon in their armory to press management to succumb to their demand for increase in compensation levels.
  • Poor Mental and Physical Health: Employees dissatisfied with their compensation tend to develop high mental stress and tensions which leads to poor physical health. Poor physical health leads to increase in accident rate and health care or insurance costs for the organizations.

The dissatisfaction with compensation is a major cause of organizational effectiveness and low productivity levels. Therefore, employees should be paid according to position, person and performance.

HR-Professionals 12 Compensation 12


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