Basic wages in the hospitality industry are often lower than other industries, which also cause lower equity ratios of input and output comparing to other industries. If all pay structure factors are positive related to pay satisfaction and task performance need to be questioned. This paper demonstrated the effects of pay structure in the hospitality industry and built a comprehensive model of pay structure, pay satisfaction, and task performance. 311 usable questionnaires from hotel employees were collected. The results show the direct and indirect relation among pay structure, task performance, and pay satisfaction. There are also moderation effects from the comprehension model.
Conclusion
This study provides both negative and positive evidence regarding the effects of pay structure on pay satisfaction and task performance. On the negative side, performance pay structure appears to discourage pay satisfaction, and task performance. Employees are less likely to perform well with strong emphasis on performance pay. This result is consistent with Herzberg's two-factor theory. Higher performance pay may crowd the fixed pay of employee compensation to control the compensation cost. Although employees can earn raises in the performance pay system, the risk damaging their hygiene pay. Furthermore, the separation of contribution makes the performance pay harms their reference of pay and product the crowd effects to satisfaction and performance.
Scholars emphasize that money can harm the intrinsic motivation (Perry et al., 2006). The performance pay system might decrease job enthusiasm. Performance pay only negatively effects hygiene satisfaction, indicating the importance of hygiene pay.
On the positive side, the hygiene factor is the only pay structure factor that positively relate to pay satisfaction; however, the position and skill pay structure are insignificant to pay satisfaction factors. Because the licenses of the hospitality industry do not product direct profits, employees have a difficult time producing a competitive advantage, reducing any bargaining advantage. Emphasizing skill or position pay does not reflect higher satisfaction and may cause employees to lose their goals altogether. Expectancy theory explains the valance, expectancy, and motivation. Expressing satisfaction is difficult if employees do not perceive the valance of the position pay.
According to the role behavior theory, interdependence is a key component of organization systems. Human resource management controls employee behavior to achieve organizational goals (Katz & Khan, 1978). This paper proposes mediating employee pay satisfaction via pay structure and task performance. The results show perfect mediation of the hygiene factor and performance factor, and partial mediation of the skill factor. After controlling the pay satisfaction, the skill factor decreases, and the hygiene factor and performance factor become insignificant. The human resource management affects organizational outcomes via role behaviors.
Another interpretation of the comprehension model is the contingency perspective. Different competitive contexts produce different performance reactions (Delery & Doty, 1996). The results show two significant effects of pay structure moderating pay satisfaction and task performance. The first is the moderated relationship between pay level satisfaction and task performance. When employees have a high paying position, they display higher task performance than employees in lower paying positions. Effective position pay encourages employees to perform well when they are satisfied with their pay level. Second is the moderated relationship between benefit satisfaction and task performance. Moderating the effect of skill pay encourages high benefit satisfaction, resulting in better employee performance. When employees have a high paying job, their performance is high. For lower paying jobs, the regression linear slope is almost zero, which means benefit satisfaction has little effect on task performance.
Only the above-mentioned two factors have moderating effects, which supports our hypotheses. The contingency perspective of human resource macro strategy affects the relationship between employee perception and performance. The agency theory focuses on satisfying the interests of shareholder. The pay for performance system was the most beneficial to principal interests (Eisenhardt, 1989). Although many researchers emphasize the effects of pay structure, it is not adequate for every business, particularly in the hospitality industry, which has a difficult compensation system. According to the contingency perspective, there is no universally acceptable management system. Our research demonstrates the contingency perspective by showing the positive effects of hygiene pay, negative effects of performance pay, and different pay structure contextual effects between pay satisfaction and task performance. This paper also presents a comprehensive pay model and task performance. Pay structure relates to goal achieving strategies, relate to task performance. Pay structures have direct effects on pay satisfaction and indirect effects on task performance.