ABSTRACT

Compensation and benefits are two of the best tools for companies to recruit and retain quality employees. Enticing benefits and compensation also help existing employees stay motivated to excel each day at work. This study analyzedthe influences of compensation systems on employee performance in the MFIs. The study guided by specific objectives which are to establish how salary, commissions and bonuses affect the employee performance of deposit micro finances in Nyeri. The study sought to answer various research questions to ascertain influences of compensation systems on employee performance of MFIs in Nyeri County. the study was guided by the following theories; Agency Theory, Equity Theory and Maslow Hierarchy of Needs Theory. The study adopted a descriptive survey design. The target population of the study was drawn from all deposit taking MFIs operating in Nyeri Central Sub-County. There are 15 registered deposits taking MFIs in Nyeri Central Sub-County. The respondents under consideration were managers, supervisors and employees in the micro finance institutions numbering 389. Systematic simple random sampling was applied to get the respondents. Every second respondent was provided with a questionnaire for a period of atleast 5 days in every MFI to arrive at a sample size of 189 respondents. Primary data was collected by use of semi-structured questionnaire. Upon collection of data, it was checked for completeness, consistency and errors. The data was further coded and entered for analysis using SPSS. The results of the study were presented using tables and figures. The study found that the variable that influenced the employee performance most is the salary of the employee. The payment of salaries to employees based on performance was highlighted as the most dominant form of compensation as well as the pay on a monthly basis reviewed occasionally. It can be concluded that salary greatly influences employee performance. The study concluded that commission significantly influences employee performance. The study concluded that bonuses to a great extent influences employee performance. The study also concluded that to a great extent job promotion influences performance of microfinance institutions in Kenya. The study recommends that firms should consider reviewing the salary pay on a yearly basis. The study also recommends that firms should consider finding a way of paying bonuses based on the time period one has worked in an organization. Finally the study recommends that microfinance institutions should promote their employees by changing their job roles and tasks.