The Impact of Total Reward on Employee Turnover Intention in Saudi Arabia

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Background

Total reward refers to all the benefits, compensations, and remunerations that workers earn from an organisation. They include intrinsic and extrinsic factors such as wages, bonuses, recognition, career development opportunities, workplace flexibility, and promotions (Cemazar, 2020). Turnover rates refer to the ratio between workers leaving a job to the average number of staff during a certain period (Martinelli, 2017). Some of the examples of employee turnover are layoffs, retirements, termination and death.

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Each time a company finds a vacant position, they hire new employees. The same context includes labour turnover, which can be involuntary or voluntary, and it refers to the movement of workers in and out of a given business. Voluntary turnover refers to leaving employment at workers’ free will while involuntary turnover means the company decides to terminate the employment contract. Freedom of quitting a job can be triggered by adverse environmental factors or having spotted attractive employment opportunities outside (Abaker et al., 2019; Yoon, 2020; Belete, 2018, p. 1).

Turnover of employees should be a concern for every organisation. This research explores the perceived impact of total reward on employee turnover intention in Saudi Arabia using a case study of Jeddah Clinic Hospital (JCH). The findings and recommendations of this study will help the leadership of JCH focus on improving their total reward approach to reduce employee turnover intentions. This is because the hospital needs to establish any existence of employee turnover intention and thereafter incorporate strategies to reduce it. High turnover has negative implications because it leads to low productivity due to reduced staff capacity (Masfar, 2020).

There have been studies conducted on the relationship between total reward and employee turnover in the health care system. However, the topic is under-researched in Saudi Arabia because most of the studies do not cover all the aspects of the total reward of the employees in the industry. Therefore, this research establishes how each aspect of total reward influences the turnover intention of the employees in the health care industry of Saudi Arabia by researching Jeddah Clinic Hospital’s workforce. The study will involve both quantitative approaches and descriptive research to establish how total reward affects employee turnover intention. JCH and other Saudi Arabian hospitals can then improve their existing reward system or develop a new one by applying the total rewards model developed by this study.

To build a successful total reward system, a company should focus on a number of issues. Human resource management should think strategically and deploy relevant leadership models to help in developing the relevant compensation and benefit packages for the employees (Smith, 2018, p. 107). The benefit and compensation package can be a necessary component of the total reward system that enhances employee retention. However, it is not costly to employ these beneficial employee retention strategies (Nierman, 2016).

Therefore, the management of health care businesses needs to include the less costly reward strategies in their total reward system. The human resource managers in the hospital sector should improve on the communication between the organisation and its employees and conduct necessary trainings as part of building an efficient total reward system (Bander Sayaf, 2015). Improved communication between employees and the organisation may show social inclusion of health care employees.

Furthermore, the total reward system should consider the cost of rewarding the employees and how that cost impacts the company’s financial performance. As such, multinational corporations need to utilise accurate measures of financial returns and assess the impacts of employee retention, attraction, and engagement.

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Companies that recognise the value of more sophisticated analytics can apply total rewards optimisation to determine the proportion of primary expenses on talent segments and evaluate whether they affect employee behaviours and attitudes. Thus, they will avoid the problems of divesting in the programs that would limit employee rewards, leading to high turnover intentions. Based on this argument, companies involved in optimising the total reward system can have a competitive advantage concerning employee retention.

Business organisations are faced with unending competitions against one another. One of the aspects of these competitions is staff recruitment and retention where some companies go to the extent of poaching employees from their competitors (Nierman, 2016). Therefore, a company that deploys the best total reward approach is capable of attracting the best talents in the industry. The total rewards approach provides many benefits to the employers, such as high staff retention; it persuades employees to join the company, and it enhances productivity and performance among employees (Alhmoud and Rjoub, 2019, p. 2).

In this research, two variables that include total reward and employee turnover are to be considered. The variables are to be used to establish the perceived impact of total reward on employee turnover intention in Jeddah Clinic Hospital (JCH). The relationship between total reward and employee turnover intention in the JCH may be positive or negative. The objectives of this research include defining the turnover intention and total reward concept as part of HRM practice and determining the impact of perceived total reward on employee turnover.

The remaining chapters include literature review, research methods, results, discussion, and conclusions and personal learning reflection. Literature review describes how various researchers and scholars have discussed the effect of total reward on employee turnover. The research methods will entail various procedures, data collection methods and the research setting involved in the study. The results will be analysed and integrated, followed by recommendations and personal learning reflection chapter.

Literature Review

In this chapter, the literature is reviewed by considering the theoretical framework and conceptual framework of the study. Conceptual framework of this review will focus on employee motivation, job satisfaction and demographic considerations. Theoretical framework is used to outline the limits of the scope of the data relevant to the topic of study to focus on specific variable by defining and introducing the theories that are relevant to the study (Labaree, 2019).

In this study, the theoretical review is based on the total reward model by WorldatWork shown in Figure 1 (WorldatWork Total Rewards Model, 2008, p. 3). The model outlines the total reward strategy that consists of five elements such as compensations, benefits, career development and opportunities, employee performance and recognition and work life balance. Under compensations, this review examines the effects of base pay and merit-based pay strategies on turnover intention that have been studied by previous scholars.

The WorldatWork Total Rewards Model.
Figure 1. The WorldatWork Total Rewards Model.

Compensations

Various methods that a company implements to pay for the extra activities are considered as well as how they affect employee retention. Examples of compensation methods include commissions, allowances and overtime pay. According to Alferaih (2017, p. 3), employee compensations play a crucial role in encouraging and sustaining commitment among employees to ensure quality performance and staff retention.

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Organisational-individual agreements state that people enter the organisation with particular skill sets, goals, desires, and expectations of decent returns. Most companies in the United Arab Emirates have increased substantial improvement by adhering to labour laws and establishing well-balanced recognition and reward programs for employees (Abaker et al., 2019). They include tangible services, financial compensations, and personal benefits that workers receive apart from the agreements made with the organisation. Abukhalifeh and Chandran (2020, p. 223) state that there are various aspects describing whether a reward is attractive or not. These aspects include the value and quantity given to a particular reward.

Base Pay

Base pay is also referred to as remuneration and it is the basic financial pay that workers earn from working within a particular period in an organisation (Mahmud, Hidayah and Widhiastuti, 2018). Therefore, it can either be in salary, wage or daily payment for the service rendered. Payment for the work done is a major concern for employees as well as their employers and it satiates the economic needs of the former. Substantial research has been conducted regarding job pay, and concluded that poor remuneration is the primary contributor of staff turnover (Masfar, 2020).

This finding corresponds to Alzayed and Murshid (2017, p. 17) which state that lacking a defined remuneration system or motivation criterion contributes to more intentions to leave a job and seek better sites. Another study shows that low payment leads majorly to employee turnover because most of them are unsatisfied with low paying jobs (Al Mamun and Hasan, 2017). Thus, it is necessary to consider how employee remuneration affects their turnover rates and respond accordingly.

In the current job market, employees are interested in improving their pay. This is largely visible in their dissatisfaction with the low paying jobs. Therefore, employees will leave unsatisfactory compensation to join an organisation that provides competitive salaries. In Saudi Arabia, healthcare workers such as nurses can easily leave their jobs in a low paying hospitals and join other health care organisations that guarantee higher pay (Parveen, 2015, p. 86).

While much attention focuses on the fact that total rewards directly influence retention in terms of commitment, motivation, and performance, inconsistent results show that particular benefits are most instrumental in this regard. Masfar (2020) states that intrinsic rewards have a greater influence on turnover intentions. The author further asserts that financial incentives are materialistic and those alone cannot fulfill employees’ basic psychological needs.

Similarly, Lumen Learning (2019) states that most workers leave jobs because they do not find satisfaction from non-monetary benefits. Their primary unsatisfactory factors included unhappiness with supervisors, limited development opportunities, and organisational failure to recognise them. Therefore, a total reward strategy should be included, having a diver range of incentives to increase employees’ likelihood of remaining within the organisation.

Merit-Based Rewards

These are the rewards given to an employee for achieving various milestones in an organisation such achieving the set goals for each employee. A study by Froese et al., establishes the effects of merit-based rewards on employee retention. Merit-based rewards affect the job satisfaction of employees directly (Froese et al., 2019). The study further shows that merit based rewards indirectly affect the employee turnover because it positively influences the job satisfaction. However, job satisfaction negatively affects the employee retention. This means that if more merit based incentives are given then the company is likely to retain more employees.

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This research is in agreement with the Park and Sturman’s finding which stated that merit based-pay positively influences the employee behaviour and attitude at their place of work (Park and Sturman, 2016). These effects translate into a lower employee voluntary turnover and improved performance.

There is a theory that can shed light on merit based rewards. Equity theory explains that workers compare their output with the outputs of their colleagues at workplace. In case they believe their output exceeds the perceived output of his or her colleagues, they equate it by reducing on their respective inputs (Pohler and Schmidt, 2016, p. 11). The managers of the organisation can reduce this problem by delegating equal responsibilities to workers in the same area of specialisation.

Career Development and opportunities

Career development involves the decision-making and exploration at the personal level that a person makes to influence their career progress. It can be defined as the way a person chooses his or her career and makes decisions that advance that career (Mckay, 2020). According to Bander Sayaf (2015), research conducted on hospitals in the South Arabia’s southern regions indicates that the training of nurses and doctors motivates them and reduces their intention to leave their jobs. If a job responsibility only uses the existing skills, employees may consider quitting such jobs. Therefore, employers should consider integrating new technologies to their processes and train employees to keep the career-oriented workforce.

This finding corresponds to a study on the consequence of employee engagement. Barik and Kochar (2017) reported that if employees are given numerous grounds that allow them to improve their skills and knowledge, then chances of leaving their jobs are minimal. The research notes that if employees are engaged in career development activities like promotions, then their engagement improves. They then work harder to showcase their capabilities and retention is possible.

According to Fabiene and Kachchhap (2016), opportunities for training and development together with favourable working environment enhance commitment among healthcare professionals in Philippines (p.50). When the healthcare professionals are committed in their works, their intention to quit their jobs reduces. This study correlates with that of (Al-Manea and Hasan, 2017, p. 64). They reported that professional advancement, job satisfaction and organizational commitment affect the turnover intention by nurses in the psychiatric hospitals in Makkah Province of Saudi Arabia. Raeissi et al. (2019) state that nurses in the Iranian public hospitals are dissatisfied by the career development opportunities and are therefore likely to leave their jobs willingly (p. 5).

According to Alshareef (2019), Saudi Arabian nurses consider continuing to work in a given hospital if the hospital offers opportunities to further their education (143). All these literatures show that opportunities affect the turnover intention of nurses. However, one study contradicts these researches. Al-Ahmadi (2014) found that professional development does affect the intention of nurses in Saudi Arabia to leave their jobs because of them are foreigners who are mostly interested in employment and not career development (p. 426).

Employee Performance and Recognition

Employees are recognised by promotion and various rewards. While in the position they occupy, they can be encouraged and motivated by delegating some duties to juniors to reduce work pressure. This gives them a feeling of appreciation, which increases their job satisfaction and reduces turnover intentions (Hoole and Hotz, 2016, p. 10). Moreover, Mendis (2017) states that substantial rewards increase the level of staff efficiency in their work, promoting organisational success. His work also asserts that job specification and candidates’ work specification determine the compensations that will ensure fairness for employees and maintain a competitive advantage for the company.

A substantial affiliation exists between recognition and rewards, as well as job satisfaction and employee motivation, which affects turnover intentions. Masfar (2020) studied the hospitality industry in Saudi Arabia, and he agrees with this research by stating that there is a critical role played by rewards in ensuring organisational commitment and willingness to stay in a company. The research by Masfar (2020) can be useful even in the health care industry in Saudi Arabia because it was carried out in the same country. The components of the total reward system are likely to affect those in the hospitality and healthcare industries in Saudi Arabia in equal measure. Employees on the lower level can be recognised by praise and occasional breaks, such as paid sabbatical leave.

According to Alshareef et al. (2020), performance appraisal system that is deemed unfair by the Saudi Arabian nurses causes them to quit their jobs. Marie Edwards-Dandridge (2019) reports that high level of work load results into turnover intention among the nurses (p. 78). Based on this literature by Marie Edwards-Dandridge (2019), the desire by the nurses to quit their jobs can be attributed to the fact that high work load reduces the quality of performance of the nurses. When the nurses’ duties are in excess, they get exhausted and this can make them create more errors.

Work Life Balance

Work life balance involves the organisation prioritising both the work life and personal life of employees in equal measure (Sanfilippo, 2020). Alshareef (2019) states that high workload among the Saudi Arabian nurses increases their intention to voluntarily leave their jobs because of the mental exhaustion that comes with it (p. 155). According to Aamir et al., (2016), work life balance enables the nurses to balance their lives with the job demands, so policies promoting work balance should be provided to help retain employees (p. 489). This study corresponds to that of Khai-Lee, Woan-Ching and Bit-Lian (2020) which found that work life balance correlates with job satisfaction thereby promoting employee turnover. Based on the above studies, work life balance is a very important aspect of the total reward system that should be considered by hospital employers because it correlates with employee turnover intention.

Benefits

Benefits are initiatives used by the employer to increase the employee compensations such as insurance, job security, retirement benefits and paid holiday, and sabbatical leave (WorldatWork Total Rewards Model, 2008, p. 5). Based on this definition, some of the benefits such as paid leave are given as financial rewards while others, such as insurance, are non-financial rewards. According to De Gieter and Hofmans (2015), employee’s satisfaction with the financial rewards provided is negatively related to the turnover intention. However, their performance reduces which contradicts how financial reward and performance relate to job satisfaction.

Normally, an increase in financial rewards leads to improved job satisfaction, which further relates to improved productivity. Companies are advised to come up with non-financial rewards to enhance intrinsic motivation (De Gieter and Hofmans, 2015). These rewards can be offered by designing operational approaches that improve competency in employees.

According to Alshareef (2019), foreign nurses in Saudi Arabian are concerned about social support, such as payment of family visa fee that they get from their employers (p. 163). If they get such support, then they remain in their places of work. However, if this is not taken care of then chances of turnover are high among the foreign nurses (Alshareef, 2019, p. 163).

Employee Retention

Turnover intentions determine employee retention capabilities in an organisation. Hospitals ought not to lose their existing workers because new ones take time to adapt, thereby productivity reduces (Bander Sayaf, 2015). Therefore, employee retention remains the greatest challenge that companies and managers face today. According to Masfar (2020), firms in Saudi Arabia can lose up to $200000 due to an employee’s turnover, affecting maintenance and operating budgets.

Therefore, while companies seek to offer competitive rewards systems, others are struggling to retain workers. Companies are competing for talents, and the primary solution to retain them is to provide competitive rewards, both tangible and intangible ones. Each retention strategy should ensure employee satisfaction, better performance, and protection against turnover (Alhmoud & Rjoub, 2019, p. 1). When the retention strategies help better the employee output for a long time, the organisation benefits. A longer stay in a company is an organisation’s competitive advantage, increasing its performance and productivity.

Saudi Arabian firms implementing appropriate and adequate employee retention approaches will encourage employees to commit and work with their companies for longer periods, achieving organisational objectives. Some studies have highlighted the determining factors of employees leaving one job for another, such as dissatisfaction with the jobs and reduced career development (Masfar, 2020; Alshareef, 2019, p. 1). These issues arise due to the failure of human resource management systems. Therefore, companies are required to consider all the important factors of job satisfaction that will enable them to retain their employees.

Population Factors

Various demographic factors affect job satisfaction negatively, hence increasing employee turnover in the health care industry in Saudi Arabia. These demographic factors include language barrier, ethnicity, cultural barrier and gender (Parveen, 2015, p. 86).

The level of education as a demographic factor poses the greatest challenges, more emphasis on keeping highly educated employees, having attained master’s and bachelor’s education levels. These people are more likely to resign and go for more competitive jobs, requiring their knowledge and skills. Alshareef (2019, p. 2) found that such workers generally feel less satisfied with job rewards than their counterparts do. They might also lack the willingness to work under other people and decide to go for self-employment. Therefore, Saudi firms should provide more rewards for highly educated employees to satisfy their high financial expectations.

Organisational rewards are also affected by gender factors, contributing to turnover intentions. Organisations seem to offer higher rewards to male employees than females. Lack of satisfaction among women forces them to quit jobs and participate in homemaking roles while their spouses serve financial roles in the family. Moreover, married women employees are more prepared to quit jobs with low motivations and spend more time in household activities (Masfar, 2020).

Ogbonnaya et al. (2017, p. 94) also found that men seem to have higher job satisfaction due to better pays, reducing turnover intentions. Regarding overall marital status, engaged employees, including men, can tolerate poor rewards because they are faced with several financial needs. Therefore, a company will experience low turnover intentions, although the workers might demonstrate low productivity rates.

Demographic factors are influenced by various variables independently. The motivations in an organisation will affect the employees differently depending on their age, gender and education level. Junior employees can be highly motivated by appreciating them based on merit to put more efforts in their career development (Parveen, 2015). Similarly, this study by Parveen shows that the educated cohort in the organisation will experience a high self-satisfaction and job satisfaction when their effort contributes positively to the growth of the company.

Employee Motivation

Motivation is a constant factor that induces the energy, persistence and commitment to perform duties (Jouany and Martic, 2020). It psychologically stimulates, directs, and encourages the persistence of voluntary behaviour towards an established goal. The factors mentioned earlier, such as rewards and incentives, promote employee motivation. Similarly, job satisfaction is another significant phenomenon and it results from environmental circumstances and organisational-individual agreements. Achieved needs lead to complete motivation, and they correlate with employee performance and a company’s success factors (Belete, 2018, p. 1).

Promotion and a good pay provide significant employee motivation, and workers use extra efforts to perform well seeking promotion. Companies in Saudi Arabia implement merit pay systems to compensate workers for meeting particular needs, affecting their motivational levels (Masfar, 2020). Such organisations shall gain tremendous progress by adhering to their business strategy and providing a well-balanced motivation and reward program for employees. Well-motivated workers serve a company as a synergy for achieving high proficiency, organisational goals, performance, growth and business strategies. Therefore, according to Belete (2018, p. 1), the role of motivation of employees in improving their productivity cannot be ignored.

Various theories explain employee motivation. In his work, Badubi analyses that an organisation should use a mixture of motivation theories to motivate its employees (M. Badubi, 2017, p. 49). He further states that non-monetary motivational approach is as important as financial ones. According to Akhtar et al. (2015), some researchers have highlighted that motivation strategies do not always work in retaining the employees. Over reliance on financial rewards only as the motivation strategy, for example, will not stop employees from leaving the organisation (Akhtar et al., 2015). Therefore, it can be noted that motivation sometimes is dependent on the employee’s character.

Some employers have the intrinsic motivations to accomplish some duties in his or her work place. This kind of employees’ character may be boosted by personal goals to achieve organisational objectives. According to Pohler and Schmidt (2016), two main theories are associated with motivation, and they include equity theory and agency theory. However, they found little connection between the theories and motivation. They argue that another aspect of motivation has to be considered. The pay for performance motivation approach must be checked properly because its cost might exceed the benefits that come with it.

Job Satisfaction

Job satisfaction refers to the feeling that workers develop regarding their work environment and expectations towards work. It essentially describes what an individual wants or values from a job. Various motivational factors drive job satisfaction leading to diverse behaviours and objectives. Alhmoud and Rjoub (2019, p. 2) demonstrate that employees who reveal high levels of job satisfaction are encouraged by rewards and work engagement. Similarly, Masfar (2020) found that sensation from rewards in private and public enterprises is highly associated with job satisfaction. Other researchers posit that satisfaction at work is highly associated with monetary benefits, bonuses, and promotions (Pohler and Schmidt, 2016).

Variations in recognition and remunerations can exert positive changes in job satisfaction and work motivation. An employee can develop a positive attitude towards a specific job dimension or the whole project. This notion shows that workers are likely to maintain a satisfying and a motivating employer ad quit a dissatisfying one. Therefore, job satisfaction predicts significant behavioural outcomes, including turnover, leave seeking, and absenteeism.

Researchers such as Yoon (2020, p. 1827) and Ali and Anwar (2021, p. 205) have also considered the role of job satisfaction to measure turnover in healthcare, education, banking, industries, and administrative sector. Yoon (2020, p. 1827) found that nurses in healthcare facilities demonstrated high rates of turnover and absenteeism due to unsatisfactory working conditions. Such conditions included limited rewards, working overtime, and high employee-patient ratios. Similarly, Ali and Anwar (2021, p. 205) found that many banking employees received poor rewards, lowing job satisfaction and increased turnover rates. Working in heavy-duty industries also requires huge compensations to ensure that workers remain committed to the firm. Therefore, rewards have significant effects on turnover intentions, calling for strategic organisational decisions.

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