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School of Business | Department of Finance | Finance | 2013
Thesis number: 13178
Employee preferences for compensation practices in the Finnish setting
Author: Railosvuo, Jenni
Title: Employee preferences for compensation practices in the Finnish setting
Year: 2013  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; työ; work; työntekijät; workers; palkka; pay; palkkiot; remuneration; motivaatio; motivation; tyytyväisyys; satisfaction
Pages: 94
Key terms: compensation; kompensaatio; motivation; motivaatio; job satisfaction; työtyytyväisyys; reward preferences
The purpose of this study is to examine the preferences employees have regarding rewarding practices and what factors are impacting these preferences. I will test how career stages and risk attitude explain the individual differences in rewarding preferences. I will also look into job satisfaction and some facets impacting it.

The company sample consists of interviews with eight HR or other managers to get insight in rewarding in Finnish companies, and surveys conducted in two of these, in one company for management and in the other one for personnel. In addition, a student sample was collected to complement the company samples. The samples are analyzed partly separately and partly together. The total sample size is 152 persons. For the management and student samples the data was collected via internet-based survey and for the personnel sample the survey was conducted by snail mail.

According to the interviews, in many companies they have in place quite a broad variety of HR and rewarding practices. However, it seems that when companies interviewed discuss the rewarding system, only the monetary ones are straightforwardly considered as rewarding in all the cases, and often even the benefits but particularly the non-monetary practices are seen outside of the scope of the comprehensive rewarding scheme. Still based on the survey results, non-monetary rewards are more important for employees than monetary rewards and benefits.

Findings of the study indicate that some of the differences in preferences can be explained by career stage and risk tolerance. Higher risk tolerance has a strong impact on the preference for pay for performance, while lower risk tolerance influences the preference for benefits that are not based on performance.

Findings also show that individuals with preferences for the new career contract or boundaryless career value significantly more HR and rewarding practices that provide the most flexibility and leisure. However, against the expectations, earlier career stages do not explain the preference for learning and development opportunities and provided only partial support for lower preference for monetary incentives. In addition, full support is not found for the hypothesis that people in later career stages prefer benefits. Also, the preference for long-term rewards in later career stages gains only partial support.

Additionally, findings suggest that individuals who are more motivated by a variable pay system than a fixed monthly salary and have a variable pay system employed in the organizations they are working, are significantly more satisfied and have lower withdrawal cognition.

Finally, there seems to be evidence of the endowment effect; individuals give higher ratings to the rewards practices they have or that are used in their companies, even if they are not entitled to them.
Master's theses are stored at Learning Centre in Otaniemi.