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COMPENSATION SYSTEM IN NIGERIAN CONSTRUCTION INDUSTRY

10,000 3,000

(A STUDY OF ARAB CONTRACTORS NIGERIA LIMITED ENUGU STATE)

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CHAPTER ONE

1.0   INTRODUCTION

1.1   Background of the Study

Although all manages are intimately involved in solving problems in their areas and are held responsible for problems arising from their areas, it is generally agreed that for consistency, efficiency and equity, a central unit stands a better chance of providing, supporting personnel services and guidelines for carrying out management personnel functions. These unit is called personnel department, human resource department, employee relations department and in some unionized organizations it is called industrial relations department (Ugwudioha, 2003:1).

In any organization, it is therefore, the personnel department that ensures that the organization provides adequate compensation and good working conditions, which will enable the employees to contribute highly to the organizational growth. The major functions of personnel department of any organization includes the following:

  1. Employment, placement and personnel planning
  2. Compensation and benefits

iii.     Training and development

  1. Health, safety and security
  2. Employee and labour relations
  3. Personnel research (Ugwudioha, 2003:1).

In dealing with personnel issues, personnel managers make use of personnel manual. Personnel manual contains a brief description of personnel policies. It is in form of a handbook describing every section of the policy guidelines in relation to personnel issues. It serves as a reference book in respect of personnel issues.

Compensation is one of the major issues involved in personnel administration. Some of use who are professional manages have identified personnel administration as one of the major tasks facing the management of any organization. This is because human resources management takes a different dimension and approach from the management of material resources. Human beings can think, move and respond to stimuli while material resources cannot. This makes it imperative for management of most successful organizations to incorporate in their policies adequate compensation and motivation for their employees in order to achieve their organizational objectives.

If human beings are not well compensated and motivated, they will not contribute effectively to the management and control of materials and other resources for attainment of organizational goals. Well compensated/ motivated employees contribute highly to he organizational growth and creation of wealth for the organization and is shareholders. Most successful organizations engage in total compensation for its employees for attainment of their organizational goals.

Total compensation involves the assessment of employee contributions to the organization in order to distribute fairly and equitably, direct and indirect rewards in exchange for the employee’s performance. Total compensation is made up of extrinsic and intrinsic rewards. Extrinsic reward is made up of direct and indirect rewards while intrinsic is related to job status and security (Dunn and Rachel, 1995:265).

This research work deals extensively with compensation system in Nigerian Construction firm with specific reference to Arab Contractors Nigeria Limited, Enugu State.

Arab Contractors Engineering Limited is a multinational organization and one of he construction giants in Nigeria. The company is rated number three in construction industry in Nigeria.

The company’s major line of business is construction and civil engineering works, with main emphasis on road construction. It’s major clients are the World Bank, African Development Bank, Federal Ministry and State Ministry of Works and Housing.

It has branch offices in many parts of the country. Organizations that pay attention to equitable distribution of rewards draw their roots from Mayo’s management theory, which is the beginning of human relations movement.

Eltaon Mayos’ theory of human relations. Courtland L. Brovee, John v. Thilli, Marian Burk Wood and George P. Dovel (1993:53); International ed.) sated that the controversy that trailed Howothrone studies prompted Mayo to search for a better understanding of human relations in organizations. Mayo was concerned that social order has come unglived by the move from agrarian, family-oriented society to a more chaotic, technological oriented industrial society.  He believed that management was more focused on satisfying material and economic needs than unfulfilling the human needs of individuals who work for the organizations. To restore meaning to work and to help employees feel more socially satisfied he believed that organization needed to consider individuals and heir interaction in the work place. The human relations movement that evolved from this thinking is the school of management thought that sees employees behaviour as responsive to the interpersonal processes within the work unit.

Mayo’s theory directs our attention to the following:

  1. That management should not focus emphasis on only economic and material needs, but should also lay emphasis on fulfilling human needs for individuals working in the organization.
  2. That organization should consider individuals and their interactions in a work place.

iii.     That the world has developed from agrarian society to an industrial, technological and now “an information age” with a more dynamic way o handling human and material resources.

The human relations movement that evolved from this thinking is a school of management thought that sees employees behaviours as being responsive to the interpersonal process within the work unit. To apply the human relations theories, however, managers would have to act more collaborately and would need good social skill as well as technical skill. Organizations that engages in total compensation tend to benefits the following:

  1. a) To attract potential job applicants in conjunction with recruitment and selection efforts; the total compensation programme can help to ensure that pay is sufficient to attract the right people, at the right time and for the right job.
  2. b) To retain good employees: Unless the total compensation programme is perceived as internally equitable and externally competitive, good employees (those the organization want to retain) are likely to leave.
  3. c) The motivate employees: While non-monetary awards may influence an employee’s motivation; performance – based pay has been shown to be the most effective motivator. Still, because of individual differences and preferences, organizations must determine the correct blend of monetary and non-monetary rewards.
  4. d) To administer pay within legal regulations because several legal regulations are relevant to total compensation, organizations must be aware of them and avoid violating them in their pay programmes.

Arab Contractors O.A.U Nigeria Limited was established in 1991 with the objective of contributing to the great developmental efforts taking place in Nigeria. Within a short period of ten years; we have the privilege of successfully completing several projects and giving employment to over 300 Nigerians. Dams, Bridges, Culverts and Protection, irrigation and Hydraulic structures such as Weirs, Builders, Spillways, Ducts and Channels, schools, Hospitals, Buildings.

 

 

1.2   Statement of the Problem

Personnel administration is very pivotal to the growth and wealth creation of any organization. Personnel administration is said to be good if it can compensate and motivate its employees to enable them to put in their best performances in the organization. Some of the problems associated with total compensation include the following:

  1. a) Negotiation and bargaining period of total compensation system is difficult. This is so because, some portions of total compensation are not backed up by laws/legislation but by negotiation and bargaining processes. Sometimes, the employer proves very difficult to negotiate with. While the employee wants the highest and the best package, the employer would like to minimize cost as much as possible for profit maximization.
  2. b) Bad and depressed economic condition in Nigeria makes it difficult to fully implement a total compensation system. The employers usually cite prior economic condition as their excuses. On the other hand, the employee who knows his worth usually cite his contributions to the growth of the organization as his reason for the demand for a better condition.
  3. c) Most employees of labour in Nigeria disregard labour laws and edicts. Sometimes, this situation leaves the dejected employees with no other condition than to accept what is offered to them, otherwise they will face unemployment consequences. There were some cases where employees were fired for not accepting paltry compensation.
  4. d) In Nigeria, especially expatriate firms, there are significances difference between the wages of expatriate staff and the wages of Nigerian staff. Sometimes, an expatriate staff having the same qualification and experience with Nigerian staff may be paid $4,000 (N550,000.00)/month while a Nigerian staff may be paid N300 (N430,000.00) month. This situation causes dissatisfaction between the expatriate staff and Nigerian staff and sometimes causes industrial unrests.
  5. e) Workers in construction industry are casual workers and thus cannot receive a total compensation package. They are not full employees and therefore cannot receive full entitlements. Efforts by Nigerian labour congress and construction workers union to regularize the conditions of all the casual workers who have spent up 90 days in any organization have proved abortive. This group of workers is up to 50% – 60% of construction workers in Nigeria.
  6. f) Fear of losing one’s job makes it impossible for him to demand for an improvement in his working conditions. Some workers may know their rights but they cannot demand for them for fear of losing their jobs.
  7. g) Each time government increases public service wages, private sectors are usually told to go and negotiate with their employers. This negotiation is difficult, as employers will always come out victorious most of the time.

1.3   Objectives of the Study

The broad/major objective of this research work is to examine compensation system in the Nigeria construction industry with reference to Arab Contractors Nigeria Limited in Enugu. Other specific objectives are as follows:

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