Performance Based Pay Practices Among Small and Medium Enterprises in Nairobi Central Business District

Abstract

Performance based pay is employee remuneration based on performance achievement of predetermined target, aimed at encouraging and rewarding superior performance. With the acceleration of globalization, the small and medium enterprises have had to compete in the global market by developing competitive advantages which are affected by costs and quality. This study was to determine and shed light on the various types of performance based pay practices applied in small and medium enterprises in Nairobi Central Business District and better understand the processes and challenges involved in the design, implementation and evaluation of the practices and their link with the enterprises’ policies. This study used cross-sectional descriptive survey design. The population comprised the 1,565 small and medium enterprises in Nairobi Central Business District which is the area between Uhuru highway, Haille Sellasie, Avenue, Moi Avenue and University way. This research study used 10% of the population as the sample size, which results to 156 from the population of 1,565 where simple random sampling technique was applied. Primary data was collected using a questionnaire. As data collected was mainly quantitative, descriptive statistics were used to summarize the data by use of percentages and frequencies. The study concludes that there are various performance based pay practices that are used in small and medium enterprises. There are various methods used to determine the effectiveness of performance based pay practices in the enterprises. There is need for the small and medium enterprises to be more innovative in selecting the performance based pay practices aimed at increasing employee satisfaction. The Government needs to initiate administrative support and financial incentives to induce small and medium enterprises to adopt such performance based pay systems. There is need of establishing an effective performance based pay system linking remunerations to productivity and or performance which is crucial among small and medium enterprises as it will ensure a Win-win situation for both employers and employees.