The Role of Variable Pay Systems and their Effects on Employee Motivation in Saudi Arabian Companies

Abstract

Human Resources Management (HRM) practices have been evolving across the globe, and in the face of fierce competition for skills and talent, HRM has been looking at ways to attract and retain motivated employees within firms. Variable Pay Systems (VPS) has come a long way from when it was first introduced by HRM managers and has now become central to how majority of organisations are compensating their workforce for services rendered. The dynamics of VPS has taken centre stage as to how firms are being run and its after-effect on the diversity, productivity, and motivation of employees. For scholars and practitioners alike, performance and motivation remain central to a firm’s success which is why VPS has gained momentum in the literature and attracts significant scholarly interest. When it comes to VPS though, most studies are based in western context which has generated theoretical domains and knowledge for scholars. Against such a backdrop, the current study takes the lead and puts together a mixed method study. This study is contextualised in Saudi Arabia (SA) which is at the cusp of transforming its economy through diversifying its operational activities. Despite a flurry of economic revolution and transformation, the country remains ignored in the literature. It offers unique opportunities for scholars especially due to its religious, cultural, and human resources elements. Utilising all of this, this thesis sets out to explore the dynamics of a diverse workforce in SA firms wherein VPS plays an important role in determining the organisational performance and productivity. Multiple data collection methods have been employed to develop a holistic view of the phenomenon under consideration and develop a comprehensive view of VPS in some of the firms determining the overall productivity of the country. The research delivers through its systematic research design and contributions in the form of theoretical framework. Quantitatively, surveys have been used to identify key indicators around the research objectives. Semi-structured interviews have contributed to qualitative investigative approach and have helped build a framework grounded in data. Both sets of findings point to multiple strands determining VPS understanding and adoption amongst SA firms. Cultural and religious notions, which are deeply embedded in the country’s corporate environment, are key determinants and when considering VPS, and these notions impact employee motivation, decision-making and organisational performance. The work overall is an important step towards highlighting VPS in a non-familiar context and, considering the contributions, can open up avenues for further research at both organisation (macro) and individual (micro) level.