The Role of Effective Compensation and Reward System on Employee Performance in the Case of Commercial Bank of Ethiopia

Compensation and reward management is one of the ways used by organizations for attracting and retaining suitable employees to improve their performance. The main objective of this study was to determine the role of effective compensation and reward system on employee performance in Commercial bank of Ethiopia. The population of this study was 12,622 employees of the organization who works in Addis Ababa.. In this study, both primary and secondary sources of data were used. The primary data were gathered through questionnaires from 388 sample respondents from Commercial Bank of Ethiopia using simple random sampling. A total of 388 sample sizes were selected from employees of the commercial bank of Ethiopia and a total of 381 employees completed the questionnaire properly. This study used journals, books, internet sources, and other references were used as secondary sources of data. Data was analyzed using descriptive statistics such as frequency tables and inferential statistics such as correlations and regression analysis using SPSS version 20. The findings of this study indicated that there was a significant relationship between compensation and reward system with employee performance. The study also indicated both financial and non-financial compensation and rewards have a significant relationship with employee performance. The non-financial compensation and rewards were found to be a more motivational than the financial rewards in Commercial Bank of Ethiopia. It was also found out that total rewards of CBE had an impact on employee performance. Therefore, creating competitive and effective compensation and rewards should be developed to motivate employees' performance.