Compensation, job satisfaction and employee retention among insurance companies in Kenya

Abstract

The insurance industry is one of the integral sectors that act as a pillar of Kenyan economy. However, employee retention remains to be a dominant concern for in insurance sector based on high employee turnover rates that has been witnessed over the last decade. Consequently, it is therefore important to probe whether employee retention is influenced by compensation and job satisfaction. The main objective of this study was to determine the influence of compensation and job satisfaction on employee retention among insurance companies in Kenya. The specific objectives were to: examine the influence of financial compensation on employee retention; establish the influence of financial compensation on job satisfaction; assess the influence of job satisfaction on employee retention, investigate the influence of non-financial compensation on employee retention; examine the influence of non-financial compensation on job satisfaction; determine the moderating influence of job satisfaction on the relationship between financial compensation and employee retention and finally to establish the moderating influence of job satisfaction on the relationship between non-financial compensation and employee retention. This study is anchored on Hertzberg’s motivation, expectancy and equity theories. The study adopted descriptive cross-sectional survey research design and the population of the study comprised of all 41 insurance firms. Cross-section data set was gathered using a structured questionnaire. The independent variable (compensation) was represented by financial and non-financial indicators; job satisfaction (mediator) was operationalized using intrinsic and extrinsic factors whereas employee retention (dependent variable) was measured by career development, commitment and passion at work. The relationship among the study variables was estimated using partial least squares-structural equation model (PLS-SEM). The findings showed that separately, both financial and non-financial compensation had a significant positive influence on employee retention. Similarly, financial and non-financial compensation were positive significant predictors of job satisfaction separately. Furthermore, job satisfaction positively and significantly influenced employee retention. Finally, job satisfaction mediated the relationship separately between both financial and non-financial compensation and employee retention. On theoretical grounds, the results complemented the key postulations of Hertzberg’s motivation, expectancy, equity and social exchange theories. On the policy implication, policy prescriptions were made on coming up with measures and policies to address the employee compensation issues that have bedeviled many organizations so as to retain the talented workforce. On practical perspective, the findings enable the mangers to understand that compensation is a key antecedent of employee retention. Finally, the study made suggestions for areas for further study such as using different metrics to operationalize the study variables; integrating moderators and replicating analogous study in a different context.