Page 208 - rise 2017

Effect of Administration of Pay for Performance Plans on Procedural Justice

1
3,
2
Mohd Zuhir Bin Abd Rahman , Azman Bin Ismail , Anis Anisah Binti Abdullah Wan Muna Ruzanna
Binti Wan Mohammad 4

1 Politeknik Nilai, Negeri Sembilan, Malaysia;
2, 3
Universiti, Kebangsaan Malaysia, Selangor

mdzuhir70@gmail.com

Abstract
This study investigates the relationship between administration of pay for performance plans and
procedural justice using self-administered questionnaires gathered from employees at fire and rescue
organizations in Kuala Lumpur, West Malaysia. The results of PLS-SEM confirmed that implementation
of communication and performance evaluation in pay for performance plans did not act as important
determinants of procedural justice. Conversely, implementation of participation in pay for performance
plans did act as an important determinant of procedural justice in the studied organizations. Additionally,
this study provides discussion, implications and conclusion. The results of PLS-SEM displayed that the
inclusion of COMT, INVOL and PERFEV in the analysis had contributed 17 percent in the variance of
PROJUST. This result shows that it provides moderate support for the model.

Key Word: Administration, Pay for Performance, Procedural Justice, PLS-SEM

Introduction
Pay for performance is an important human resource development and management issue. It is designed
and administered by employers to provide rewards for individual performance and group performance
(e.g., merit, knowledge, skills, competency and/or productivity), but not based on the nature of job
structures (Anuar et al., 2015; Martocchio, 2015). Many scholars said that a well-designed pay plans may
not be able to achieve their objectives if managers have not adequate competencies in administering the
pay plans (Anuar et al., 2015; Newman et al., 2016). A review of the recent literature pertaining to
workplace compensation system highlights that competent managers have sufficient capabilities to
implement three major roles: communication, involvement and performance evaluation (Salim et al.,
2015; Wainaina et al., 2014). In the administration of pay for performance plans, communication is
broadly viewed as delivery of information from employees to the organizations and from the organization
to employees. Implementation of this communication system may enhance employees’ understanding
about the value of reward and decrease their prejudices about pay policy and procedures (Henderson,
2009; Martocchio, 2015).
Meanwhile, involvement is usually seen as employees are allowed to participate in input (e.g.,
provide ideas in the establishment of reward systems), and output (e.g., provide suggestions to determine
the enterprise’s goals, resources, and methods, as well as share the organization’s rewards in profitability
and/or the achievement of productivity objectives). Implementation of this involvement system may
upgrade employees’ sense of responsibilities and acceptance of the pay for performance plans (Anuar et
al., 2014; Salim et al., 2015). Further, performance evaluation is normally understood as a formal
measurement method established and used by management to yearly assess employee performance,
determine performance ratings and use these ratings to allocate rewards based on employee achievements
(Deepa et al., 2014; Salim et al., 2015).
st
Unpredictably, a careful observation about pay for performance literature published in the 21
century reveals that communication, involvement and performance evaluation are important determinants
of work outcomes, especially procedural justice (Lau, 2014; Salim et al., 2015; Wainaina et al., 2014). In
an organizational behavior perspective, procedural justice is frequently interpreted based on the eyes of
beholders where if employees perceived that their superiors appropriately implement the process and