The impact of direct and indirect compensation on employee commitment: Evidence from Kena Woreda Health Organizations, Ethiopia

Temie Alehegn; Karsho Gedeno; Gedisha Katola; Assefa Deginew; Bizuayehu Admassu; Etabez Ayaye; Hilena Goshme

doi:10.21744/irjmis.v13n4.2602

Authors

Temie Alehegn
temiealehegn34@gmail.com
Injibara University, College of Agriculture, Department of Agricultural Economics
Karsho Gedeno Arba Minch University, College of Business and Economics, Department of Management
Gedisha Katola Arba Minch University, College of Agricultural Science, Department of Agricultural Economics
Assefa Deginew Woldia University, College of Agricultural Science, Department of Soil and Watershed Management
Bizuayehu Admassu Arba Minch University, College of Agricultural Science, Department of Agribusiness and Value Chain Management
Etabez Ayaye Arba Minch University, College of Agricultural Science, Department of Agribusiness and Value Chain Management
Hilena Goshme Arba Minch University, College of Agricultural Science, Department of Agribusiness and Value Chain Management

Keywords:

commitment dimensions, direct compensation, employee commitment, indirect compensation

Abstract

This study investigated the impact of direct and indirect compensation on employee commitment in Kena Woreda Health Organizations, Ethiopia. Grounded in Adams’ Equity Theory (1963), the research explored how perceptions of fairness and equity in rewards influence organizational loyalty. A cross-sectional research design was employed, utilizing a structured Likert-scale questionnaire to collect data from a sample of 128 employees selected via stratified random sampling, achieving a 96.09% response rate. Data analysis was conducted using SPSS version 25, utilizing Pearson Product Moment Correlation, regression analysis, and MANOVA tests. The findings revealed that the interaction of both direct and indirect compensation significantly influences combined employee commitment, with regression analysis showing a 28.4% and 17.9% significant positive relationship for each, respectively. Notably, their interaction yielded a stronger 36.1% positive relationship. However, MANOVA results indicated that direct compensation only significantly affected affective commitment, while continuance and normative commitments remained insignificant when tested separately against both compensation types. Consequently, the researcher recommends that organizations develop transparent, well-formulated compensation plans. Clearly communicating these policies to all staff is essential for ensuring a clear understanding of the system, ultimately fostering a more committed healthcare workforce.

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