THE PRACTICES AND CHALLENGES OF
COMPENSATION MANAGEMENT IN AIR TRAFFIC
CONTROLLERS IN ETHIOPIAN CIVIL AVIATION
AUTHORITY (ECAA)
By: GETAHUN SEIFESELASSIE
Advisor: DERIBE ASSEFA (PhD)
August 2020
Addis Ababa, Ethiopia
The Practices and Challenges of Compensation Management in
Air Traffic Controllers in Ethiopian Civil Aviation Authority
(ECAA)
A Thesis submitted to Ethiopian Civil Service University,
Department of Public and Social Security Management-in
partial fulfillment of the requirements for the Award of Masters
Degree in Public Management.
By: Getahun Seifeselassie
ID. No: ECSU1702207
Advisor: Deribe Assefa (PhD)
ECSU, Department of Public and Social Security Management
August 2020
Addis Ababa, Ethiopia
Declaration
I, Getahun Seifeselassie Registration/ID number ECSU1702207, do hereby declare
that this thesis titled “The Practices and Challenges of Compensation Management
in Air Traffic Controllers in ECAA” is my original work and that all sources of
materials used for this thesis have been duly acknowledged. This work has not
been submitted partially, or in full, by any other person for an award of a degree in
any other university or institution and I carried out the study under the guidance
and supervision of Deribe Assefa (PhD). The assistance and help received during
the course of this investigation have been duly acknowledged.
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The thesis has been submitted for examination with my approval as an advisor.
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The undersigned certify that we have read this thesis titled "The Practices and
Challenges of Compensation Management" and hereby recommend to the
Department Council, DPSSM, CFMD to consider as it as a partial fulfillment of
the requirements for the award of a Master of Arts Degree in Public Management.
Approved by Board of Examiners:
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ACKNOWLEDGEMENT
First of all I would like to express my deepest gratitude to the Almighty God for
his blessing and making every step of my life possible. Next I am greatly honored
to thank my advisor Deribe Assefa (PhD) for his valuable attention and advise to
correct my report and advising me for the better improvement of this thesis.
Thirdly, I am very grateful to thank my wife for everything she is doing for me in
every moment. And also, I would like to acknowledge and thank the participants
and individuals who have been contributing to the study for their willingness,
participation and valuable information. Finally, those individuals who have been
contributing a lot for the entire work deserve to be acknowledged.
THANK YOU ALL!!
GETAHUN SEIFESELASSIE
TABLE OF CONTENT
CONTENT
PAGE
Acronyms and abbreviations..........................................................................................................iv
List of tables and figures..................................................................................................................v
Definition........................................................................................................................................vi
Abstract.........................................................................................................................................viii
CHAPTER ONE: INTRODUCTION
1.1 Background of the study............................................................................................................1
1.2 Statement of the problem...........................................................................................................2
1.3 Research question......................................................................................................................4
1.4 Objective of the study................................................................................................................4
1.4.1 General objective..............................................................................................................4
1.4.2 Specific objective..............................................................................................................4
1.5 Significance of the study............................................................................................................4
1.6 Scope of the study......................................................................................................................5
1.7 Limitations of the study.............................................................................................................5
1.8 Structure of the thesis.................................................................................................................5
CHAPTER TWO: RELATED LITERATURE REVIEW
2.1 Conceptual framework...............................................................................................................6
2.1.1 Definition of compensation management......................................................................6
2.1.1.1 Compensation...................................................................................................6
2.1.1.2 Compensation management..............................................................................7
2.1.2 Objectives of compensation management.....................................................................9
2.1.3 Effects of compensation management.........................................................................12
2.1.3.1 Advantages of compensation management packages.....................................12
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2.2 Types of compensation............................................................................................................15
2.3 Factors affecting compensation system...................................................................................16
2.3.1 Internal factors.............................................................................................................16
2.3.2 External factors............................................................................................................17
2.4 Economic and behavioral issues in compensation...................................................................18
2.4.1 Economic and behavioral issues in compensation management...........................19
2.5 Wage and Salary and Motivators.............................................................................................20
2.6 Frameworks of compensation policies.....................................................................................20
2.7 Challenges of compensation....................................................................................................21
2.8 Recommendations of ICAO, IFATCA and ILO......................................................................23
2.9 Empirical literature..................................................................................................................24
CHAPTER THREE: METHODOLOGY
3.1 Research methodology and design...........................................................................................26
3.1.1 Research design.............................................................................................................26
3.1.2 Target Population...........................................................................................................26
3.1.3 Sampling technique and size..........................................................................................27
3.1.4 Types of data and source................................................................................................28
3.1.5 Methods of data collection.............................................................................................28
3.1.6 Data collection procedure..............................................................................................28
3.1.7 Methods of data analysis................................................................................................29
3.1.8 Validity and Reliability of the study..............................................................................29
3.1.9 Ethical Considerations...................................................................................................30
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND DISCUSSIONS
4.1 Descriptive analysis.................................................................................................................31
4.1.1 Demographic profile of the respondents.........................................................................31
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4.1.2 How does ECAA practices compensation management.................................................33
4.1.3 What are the major challenges of compensation management in ECAA.......................38
4.1.4 How often is the compensation package being reviewed...............................................43
4.1.5 How do the employees of ECAA perceive the compensation system............................45
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of findings................................................................................................................49
5.2 Conclusion...............................................................................................................................51
5.3 Recommendations....................................................................................................................52
References......................................................................................................................................55
Appendix I.....................................................................................................................................58
Appendix II....................................................................................................................................62
Appendix III...................................................................................................................................63
iii
ACRONYMS AND ABBREVIATIONS
AD:
Aerodrome Air traffic Controller
APP:
Approach Air Traffic Controller
AREA:
Area Air Traffic Controller
ATC:
Air Traffic Control
ATCs:
Air Traffic Controllers
ATS:
Air Traffic Service
CATCO:
Chief Air Traffic Controller
CNS:
Communication, Navigation and Surveillance
EATCA:
Ethiopian Air Traffic Controllers Association
ECAA:
Ethiopian Civil Aviation Authority
HR:
Human Resource
HRM:
Human Resource Management
ICAO:
International Civil Aviation Organization
IFATCA:
International Federation of Air Traffic Controllers Association
ILO:
International Labor Organization
SATCO:
Senior Air Traffic Controller
SPSS:
Statistical Package for Social Science
iv
LIST OF TABLES AND FIGURES
Table 3.1:
Sample size distribution
Table 3.2:
Pilot sample reliability test result
Table 4.1:
Demographic profile of respondents
Table 4.2:
Current compensation management practices
Table 4.3:
Challenges of compensation management
Table 4.4:
Review period of compensation packages
Table 4.5:
Employee perception on financial compensation
Table 4.6:
Grand mean score
Fig 2.1:
Challenges of compensation
Fig 4.1:
Mean of each compensation management practices
Fig 4.2:
Mean of each challenges of compensation management
Fig 4.3:
Most challenging issues of compensation
Fig 4.4:
Mean of each review period of compensation package
Fig 4.5:
Mean of each employee perception on financial compensation
Fig 4.6:
Grand mean score
v
DEFINITION
(Source: ICAO Doc4444 16th edition, 2016)
Air traffic service (ATS): A generic term meaning variously, flight information service, alerting
service, air traffic advisory service, air traffic control service (area control service, approach
control service or aerodrome control service).
Flight information service: A service provided for the purpose of giving advice and information
useful for the safe and efficient conduct of flights.
Alerting service: A service provided to notify appropriate organizations regarding aircraft in
need of search and rescue aid, and assist such organizations as required.
Air traffic advisory service: A service provided within advisory airspace to ensure separation, in
so far as practical, between aircraft which are operating on IFR flight plans.
Advisory airspace: Airspace of defined dimensions, or designated route, within which air traffic
advisory service is available.
IFR flight: A flight conducted in accordance with the instrument flight rules.
Air traffic control service: A service provided for the purpose of:
a) Preventing collisions:
1) Between aircraft, and
2) On the maneuvering area between aircraft and obstructions; and
b) Expediting and maintaining an orderly flow of air traffic.
Area control service: Air traffic control service for controlled flights in control areas.
Approach control service: Air traffic control service for arriving or departing controlled flights.
Aerodrome control service: Air traffic control service for aerodrome traffic.
Aerodrome traffic: All traffic on the maneuvering area of an aerodrome and all aircraft flying in
the vicinity of an aerodrome.
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Maneuvering area: That part of an aerodrome to be used for the take-off, landing and taxiing of
aircraft, excluding aprons.
Controlled flight: Any flight which is subject to an air traffic control clearance.
Control area: A controlled airspace extending upwards from a specified limit above the earth.
Controlled airspace: Airspace of defined dimensions within which air traffic control service is
provided in accordance with the airspace classification.
Aerodrome:
A defined area on land or water (including any buildings, installations and
equipment) intended to be used either wholly or in part for the arrival, departure and surface
movement of aircraft.
Apron: A defined area, on a land aerodrome, intended to accommodate aircraft for purposes of
loading or unloading passengers, mail or cargo, fuelling, parking or maintenance.
Taxiing:
Movement of an aircraft on the surface of an aerodrome under its own power,
excluding take-off and landing.
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ABSTRACT
The objective of this study was to explore the practices and challenges of compensation
management in air traffic controllers in the case of Ethiopian civil aviation authority. To meet the
objective, the researcher applied descriptive research design using qualitative and quantitative
data interpretation by applying a 5% precision level. 73 respondents were selected from the total
number of 90 air traffic controllers of ECAA. The researcher applied a stratified random
sampling technique to select respondents from the total number of employees who are located at
Addis Ababa. The primary data was collected through questionnaire with employees and
interviews with the management members and EATCA executive committee. The data has been
analyzed by using descriptive statistics, frequency and tables and the researcher identified that
the current compensation practice of the organization is not in a good position and the challenges
are not managed well; it is not reviewed in a regular manner as it is government budgeted
organization and established under civil service commission; ATCs perception towards the
current compensation is not adequate and majority of the employees are dissatisfied with
compensation system and the interviewees also confirmed it. The researcher recommended the
organization that it must revise its existing compensation package and also the management must
develop and show commitment that enable them to deal with the government bodies either to be
established as financial autonomous body or propose the government to separate the service
provider from the regulatory body so that the organization could satisfy and retain its employee.
Key words: Compensation Management, Practices, Challenges
viii
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Compensation is a systematic approach to providing monetary value to employees in exchange
for work performed. Compensation may achieve several purposes assisting in recruitment, job
performance, and job satisfaction. An ideal compensation management system will help
organizations significantly to boost the performance of employees and create a more engaged
workforce that’s willing to go the extra mile for the organization. With effective compensation
management organizations will also enjoy clearer visibility into individual employee
performance when it comes time to make critical compensation planning decisions. These
performance appraisals assist in determining compensation and benefits, but they are also
instrumental in identifying ways to help individuals improve their current positions and prepare
for future opportunities. Human Resource is the most vital resource for any organization. It is
responsible for each and every decision taken, each and every work done and each and every
result. Employees should be managed properly and motivated by providing best remuneration
and compensation as per the industry standards. The lucrative compensation will also serve the
need for attracting and retaining the best employees. (Patnaik and Padhi, 2012)
Compensation is one of the physical needs that motivates which in turn will affect the employee
performance. Job performance is influenced by many factors externally and internally.
Compensation is output and the benefit that employee receive in the form of pay, wages and
rewards like monetary exchange for the employee’s to increases the performance (Johnson et
al.,2008). Providing appropriate compensation within the meaning of fair and adequate to meet
the requirements is one of the personnel department functions that are difficult to implement.
Every organization needs a strategic compensation system for its employees that address
compensation, benefits, recognition and appreciation (Kim, 2005). Compensation includes the
returns to the services rendered by employees as part of employment relationships. It has a big
influence in the recruitment of employees, motivation, and productivity and employee turnover.
The level and magnitude of compensation should be of concern because the level of
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compensation will determine the lifestyle, self esteem, and the value of the company. (Cited by
Huguette and Patrick, 2017)
Compensation policies have also been found to have measurable effects on work place attitude
and behavior. According to Dessler (2013) workers receiving high wages are less likely to quit,
are more satisfied with their pay, and report that they work harder than they have to. Therefore
pay in one form or another is certainly one of the sources of motivation in our society. Griffin
(2012) defined that compensation is a financial remuneration given by an organization to its
employee in exchange for their work. The compensation scheme has to be such that it shall be
attractive to attract and retain competent workforce. Today's competitive conditions make it
more difficult for organizations to acquire and retain experienced and productive talent. Thus,
finding, motivating, developing, and keeping employees has become a strategic function of the
human resource departments of most organization. Chingos (2002) argues that to attract and
retain the right people, applying the right mix of pay, benefits and carrier are important.
Ethiopian Civil Aviation Authority (ECAA) is a government budgeted public organization which
is established in 1944 G.C. for the facilitation, promotion of safety, regulation, economic and
expeditious flow of air transport in Ethiopia. Study for salary increment in 2009 G.C. and BPR
implementation in 2007 G.C. in the Authority shows those Air traffic controllers (ATCs), who
cannot be available in the market and are 25% of ECAA employee works under the ATS
directorate, is one of the backbones of the aviation sector. Due to the unique nature of the job
ATCs are not readily available in the market. They shall pass through intensive training and day
to day exposure to the real job in order to attain their knowledge and skills which is given only in
ECAA training center. The organization is expected to motivate and retain them and this study
will investigate the practice and challenges of compensation management in ATC of ECAA.
1.2 STATEMENT OF THE PROBLEM
The ECAA has a goal of providing safe, efficient, expeditious, and an economic flow of air
transport. The International Civil Aviation Organization (ICAO) documents show that in the
aviation sector the integration of knowledge, skills, and attitudes of ATCs are used in order to
assure the above goal in addition to the standard procedures and reliable Communication,
Navigation and Surveillance (CNS) equipments. Study shows that a little mistake made by ATCs
2
(even slip of tongue) can result in death of hundreds of life and loss of millions of dollars.
Therefore the air traffic controllers who provide such a crucial service to the public shall be
carefully selected, trained, well paid and compensated and motivated according to International
Labor Organization (ILO) document.
According to Mohanta (2013) compensation and benefits affect the productivity and happiness of
employees, as well as the ability of organizations to effectively realize its objectives. It is
organizations advantage to ensure that employees are creatively compensated and knowledgeable
of their benefits. My pilot survey identified that ATCs forwarded their complaints to the top
management and to the government which resulted in strike in 2018. Ethiopian Air Traffic
Controllers Association (EATCA) also indicates that they aren't happy with the compensation
with respect to what they are doing and relative to other organizations in the sector and adjacent
countries for the same job. This may bring unsafe, inefficient and uneconomical flow of air
transport within the country, dissatisfaction and high turnover of ATCs. If any accident or
incidents happen due to inefficiencies of ATCs, it will affect the organization in addition to the
negative impact of the national and global aspects. The global community may develop a
negative attitude towards the safe flow of air transport in Ethiopia.
Different empirical results on this area argue that any organizations can be organized to
accomplish certain objective through human resources. Dagne (2018) argued that if
compensation is not tied to work, employees are likely to search for better paying job. Moreover,
Afroja and Rifayat (2013) argue that if employees are dissatisfied with the type of compensation,
their contribution towards goal attainment tends to be lower. Bethelhem (2015) and Huguette and
Patrick (2017) showed the significant role of compensation management practices on employee
performance to attain the objectives of the organization.
Due to these facts in response to the problem ECAA is expected to remunerate and motivate
ATCs who are performing such complex, risky and tough job. This study will propose to
investigate several options like separating the air navigation service provider from regulatory
body which may help the organization in order to get rid of the problems. Because a free minded
employee will maximize the objectives of the organization at country and global level.
3
1.3 RESEARCH QUESTIONS
This research tried to give answer and analyze the compensation practices and challenges.
Accordingly the following research questions were answered:
1. How does ECAA practice compensation management?
2. What are the major challenges of compensation management in ECAA?
3. How often is the ECAA compensation package being reviewed?
4. How do the employees of ECAA perceive the compensation system?
1.4 OBJECTIVES OF THE STUDY
1.4.1 GENERAL OBJECTIVE
In general the objective of this study is to examine the practice and challenges of compensation
management in ATC in ECAA.
1.4.2 SPECIFIC OBJECTIVES
More specifically the objectives of this study are the following:
1. To identify the compensation practices that is provided to ATCs by ECAA;
2. To evaluate the major challenges ECAA face to design and implement satisfactory
compensation package;
3. To explore in what period does the ECAA's compensation system is reviewed;
4. To analyze the perception of ATCs about the exiting compensation system of ECAA.
1.5 SIGNIFICANCE OF THE STUDY

The study could be used as an initiation for those who can be interested to make a
detail and comprehensive study regarding compensation management practices and
challenges for ATCs.

It also used as a feedback for ECAA managers to understand the ATCs attitudes
towards the organization compensation package.

If the problems identified in the study are solved accordingly to the recommendation
given, the study can also be important for aviation users and the government.
4

The Ethiopian Air Traffic Controllers Association (EATCA) can use the study as
ground to push the management and policy makers in order to improve the pay level.
1.6 SCOPE OF THE STUDY
The study focused the current compensation management practices and challenges of ECAA.
According to human resource management process as of December 2019 ECAA has about 588
employees from this number air traffic controllers are around 150 in number. Air navigation
service provider in ECAA is expected to provide the Air Traffic Service (ATS) in order to
achieve the objectives of the organization. This service is provided by ATCs and hence the scope
of this study was limited to only the issue of the air traffic controllers. The data which were used
are confined to only air traffic controllers i.e. it did not assess that of others directorate within the
authority.
1.7 LIMITATIONS OF THE STUDY
On the other hand the research has geographic, time and financial delimitation. On the
geographic delimitation, the case organization operates in Addis Ababa as well as in domestic
airports. Therefore the research was conducted on Addis Ababa (Head quarter) only because of
the following two reasons:

Firstly, the majority of the ATC (60%) is found and the main task work is covered at
Addis Ababa Bole International Airport and hence a representative sample was drawn
from this target population;

Secondly, the financial capacity and time constraint inhibited to cover the geographical
distance to domestic airports.
1.8 STRUCTURE OF THE THESIS
This research study have five chapters; the first chapter is about introduction part which contains
the background of the study, statement of the problem, research question, general and specific
objective of the study, significance of the study, and scope and limitations of the study; the
second chapter is all about literature review; the third chapter is about methodology and design;
the fourth chapter is about data presentation, analysis and discussions; finally the fifth chapter is
about summary of finding, conclusion and recommendations.
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CHAPTER TWO
LITERATURE REVIEW
2.1 CONCEPTUAL FRAMEWORK
2.1.1 DEFINITION OF COMPENSATION MANAGEMENT
Before going through the meaning of the concept, we shall first, take time to understand the
individual terms that it comprises of.
2.1.1.1 COMPENSATION
Compensation is any form of payment given to employees in exchange for work provided for
their employees. Schuller (1975) as cited in Kelechi (2013) says that compensation is the activity
by which organizations evaluate the contributions of employees in order to distribute fairly direct
and indirect, monetary and non-monetary rewards within the organization’s ability to pay and
legal regulations. Financial payment made at or near the time of work is performed is called
direct compensation; for example wages, salaries overtime, commissions and bonuses etc. Wages
refer to direct compensation received by an employee based on hourly piece rates while salaries
are pay regardless of specific hours worked and can be received weekly, monthly as the case
maybe. Compensation is a primary motivator for employees. People look for jobs that not only
suit their creativity and talents, but compensate the month in terms of salary and other benefits
accordingly. Compensation is also one of the fastest changing fields in Human Resources, as
companies continue to investigate various ways of compensating employees for performance.
Dessler (2013) in his book Human Resource Management, defines compensation in these words;
"Employee compensation refers to all forms of pay going to employees and arising from their
employment." The phrase 'all forms of pay' in the definition does not include non-financial
benefits, but all the direct and indirect financial compensations.
According to Teeseema and Soeters (2006) as cited in Kelechi (2013) compensation which
includes direct cash payment, indirect payments in the form of employee benefits and incentives
to motivate employees to strive for higher levels of productivity is a critical component of the
employment relationship. Compensation is affected by diverse forces such as labor market
6
factors, collective bargaining, government legislation and top management philosophy regarding
pay and benefits.
Compensation may be defined as money received for the performance of work plus much kind of
benefits and services that organizations provide their employee. Compensation is a systematic
approach to providing monetary value to employees in exchange for work performed.
Compensation may achieve several purposes such as assisting in recruitment, performance
evaluation and job satisfaction. (Kelechi, 2013)
2.1.1.2 COMPENSATION MANEGEMENT
Compensation Management is concerned with the formulation and implementation of strategies
and Policies that aim to compensate people fairly, equitably and consistently in accordance with
their value to the organization. Compensation management is an integral part of human resources
management approach to productivity improvement in the organization. It deals with the design,
implementation and maintenance of compensation system that are geared to the improvement of
organizational, team and individual performance. (Armstrong, 2005)
Compensation management is a segment of management or human resource management
focusing on planning, organizing, and controlling the direct and indirect payments employees
receive for the work they perform. Compensation includes direct forms such as base, merit, and
incentive pay and indirect forms such as vacation pay, deferred payment, and health insurance.
Compensation does not refer, however, to other kinds of employee compensations such as
recognition ceremonies and achievement parties. The ultimate objectives of compensation
management are: efficient maintenance of a productive workforce, equitable pay, and
compliance with federal, state, and local concomitant regulations based on what companies can
afford. (Kelechi, 2013)
The online (HR.-guide) as cited in Kelechi (2013) presents compensation management as a
systematic approach to providing monetary value to employees in exchange for work performed.
It further states that compensation can help in achieving several purposes assisting in
recruitment, job performance, and job satisfaction. The basic concept of compensation
management is rather simple: employees perform tasks for employers and so companies pay
employees wages for the jobs they do. Consequently, compensation is an exchange or a
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transaction, from which both parties employers and employees benefit: both parties receive
something for giving something. Compensation, however, involves much more than this simple
transaction. From the employer's perspective, compensation is an issue of both affordability and
employee motivation. Companies must consider what they can reasonably afford to pay their
employees and the ramifications of their decisions: will they affect employee turnover and
productivity? In addition, some employers and managers believe pay can influence employee
work ethic and behavior and hence link compensation to performance. Moreover social,
economic, legal, and political forces also exert influence on compensation management, making
it a complicated yet important part of managing a business.
Gomez-Mejia, Beronne & Franco-Santos (2010) as cited in Ombasa (2013) says one would think
that employees performing the same kind of work and located in the same working environment
would be compensated equally. An increasing number of organizations are trying to link pay to
performance, through programs such as variable or incentive pay, where a percentage increase in
pay depends on the employee’s achievement of predetermined measurable goals; skill-based pay,
where employees are paid for the number of skills they possess; and most recently, competencybased pay, in which an employee is paid for the range, depth and types of skills and knowledge
he/she is capable of using in the job rather than for the position they hold. The happier people are
within their job, the more satisfied they are said to be. Most times, job design aims to enhance
job satisfaction and performance and this could be achieved via job rotation, job enlargement and
job enrichment. Other influences on job satisfaction include the management style and culture,
employee involvement, empowerment and autonomous work position. Job satisfaction is a very
important attribute which is frequently measured by organizations and the most common way of
measurement is the use of rating scales where employees report their reactions to their jobs.
Compensation management is an important element of human resource practice that influences
decision of potential employee to join an organization and determines employer-employee
relationship after employee joins the organization (Ira, 2010). Psychological contract develops
between the employer and the employee that serves to determine the nature of mutual existence
during the period of employment. The contract is largely influenced by the development and
management of compensation policy and the resultant employee commitment (Kwon, 2001).
Compensation policy as an area of research has outcomes which are of interest to the
8
organization and to the employee. The outcomes of compensation policy includes: employee
commitment, organizational citizenship and organizational performance. Compensation policy is
an integral component of organization’s reward systems and corporate strategy which when
effectively utilized influences the level of employee commitment to the company and work
positively. (Armstrong, 2007)
Milkovich and Newman (2001) as cited in Kelechi (2013) say remuneration does not simply
compensate employees for their efforts- it also has an impact on the recruitment and retention of
talented people according to. They argue that compensation philosophies and objectives must
reflect the overall culture, philosophies and strategic plans of the organization. They posit that
there are two basic compensation philosophies, which should be seen as opposite ends of a
continuum. At one end of the continuum is the entitlement philosophy, at the other end, the
performance-oriented philosophy. Employees and managers who subscribe to the entitlement
philosophy believe that individuals who have worked another year are entitled to a rise in base
pay and that all incentives and benefit programs should continue unchanged regardless of
changing industry or economic conditions. On the other hand, in case of performance-oriented
approach, no one is guaranteed compensation just for adding another year to organizational
service instead pay and incentives are based on performance differences among employees.
Employees and those who do not perform satisfactorily receive little or no increase in
compensation. It is therefore critical that organizations align their compensation practice with
performance to enhance the achievement of organizational goals and enhance competitive
advantage.
People are now seen as the primary source of a company’s competitive advantage. Therefore, the
way people are treated increasingly determines whether an organization will prosper or even
survive. Organizations are under constant pressure to enhance and improve their performance
and are realizing that an interdependent relationship exists between organizational performance
and employee performance. (Kelechi, 2013)
2.1.2 OBJECTIVES OF COMPENSATION MANAGEMENT
According to Kelechi (2013) the basic objective of compensation management can be briefly
termed as meeting the needs of both employees and the organization. Since both these needs
9
emerge from different sources, often, there is a conflict between the two. This conflict can be
understood by agency theory which explains relationship between employees and employers.
The theory suggests that employers and employees are two main stakeholders in a business unit,
the former assuming the role of principals and the latter assuming the role of agents. The
compensation paid to employees is agency consideration. Each party to agency tries to fix this
consideration in its own favor. The employers want to pay as little as possible to keep their costs
low. Employees want to get as high as possible. The compensation management tries to strike a
balance between these two with following specific objectives:Attracting and Retaining Personnel:
From organizations point of view, the compensation
management aims at attracting and retaining right personnel in the organization. In the Indian
corporate scene, there is no dearth of personnel at operative levels but the problems come at the
managerial and technical levels particularly for growing companies. Not only they require
persons who are well qualified but they are also retained in the organization. In the present day
context, managerial turnover is a big problem particularly in high knowledge based
organizations.
Motivating Personnel: Compensation management aims at motivating personnel for higher
productivity. Monetary compensation has its own limitations in motivating people for superior
performance. Alfie (2013) as cited in Kelechi (2013) has gone to the extent of arguing that
corporate incentive plans not only fail to work as intended but also undermine the objectives they
intend to achieve. He argues that this is due to inadequate psychological assumptions on which
reward systems are based. His conclusions are as follows:
Rewards punish people-their use confirms that someone else is in control of the
employee.

Rewards rupture relationships-they create competition where teamwork and collaboration
are desired.

Rewards ignore reasons-they relieve managers from the urgent need to explore why an
employee is effective or ineffective.

Rewards discourage risk taking-employees tend to do exactly what is required to earn the
reward, and not any more.
10

Rewards undermine interest-they distract both manager and the employee from
consideration of intrinsic motivation.
Notwithstanding these arguments, compensation management can be designed to motivate
people through monetary compensation to some extent.
Optimizing Cost of Compensation:
Compensation management aims at optimizing cost of
compensation by establishing some kind of linkage with performance and compensation. It is not
necessary that higher level of wages and salaries will bring higher performance automatically but
depends on the kind of linkage that is established between performance and wages and salaries.
Compensation management tries to attempt at this.
Consistency in Compensation: Compensation management tries to achieve consistency-both
internal and external-in compensating employees. Internal consistency involves payment on the
basis of criticality of jobs and employees' performance on jobs. Thus, higher compensation is
attached to higher-level jobs. Similarly, higher compensation is attached to higher performers in
the same job. External consistency involves similar compensation for a job in all organizations.
Though there are many factors involved in the determination of wage and salary structure for a
job in an organization which may result into some kind of disparity in the compensation of a
particular job as compared to other organizations, compensation management tries to reduce this
disparity. Furthermore on the objectives of compensation management, according to Obikoya
(2002) as cited in Kelechi (2013) reward or compensation administration is a key element in any
discussion of the concept of human resources management. Effective compensation
administration is a critical factor in achieving productive work and services. In addition, the
compensation objectives of an employer are to:
Ensure that rewards are given for service rendered by employees.

Help to keep employees contented, minimize employee’s complaints and grievances that
might result into industrial actions strikes, etc.

Reassure employees that pay policies and pay levels are fair and will be applied across
the board uniformly and consistently with no regard for favoritism thereby minimizing
interpersonal and intergroup frictions.

Induce the employees towards higher performance height.
11

Serve as a weapon in the application of principle of rewards and sanctions to employees
who identify with organization on one hand and those who defy organization rules, and

Ensure that the organization gets maximum result from its limited means through good
and adequate control of labor cost.
According to Obikoya (2002) as cited in Kelechi (2013) based on the above reasons, employers
or organizational managers should devise effective compensation administration that could
satisfy the expectations and aspirations of the employees and sustain them in order to satisfy
organization’s productivity and profitability motives.
2.1.3 EFFECTS OF COMPENSATION MANAGEMENT
According to Kelechi (2013) employees today are not willing to work only for the cash alone,
they expect 'extra'. This extra is known as employee benefits. Also known as fringe benefits,
Employee benefits financial as well as are non-financial form of compensation offered in
addition to cash salary to enrich workers’ lives. Although expensive, there are many intrinsic
benefits to providing your employees with a comprehensive benefit plan. For most, it is the
ability to find and keep highly qualified staff that is the key driver. With the sector being highly
competitive and the number of new employees entering the workforce dwindling, employers are
challenged to become even more creative and responsive in the design, timing and generosity of
their benefit plans. The more progressive the organization, the more flexible the structure is in
response to today’s challenges: i.e. like having four different generations of employees working
side by side. Employers who continue to provide the more traditional and limited program, may
find it more difficult to find and keep different types of employees. So you would have to
carefully design your benefit package. Your package may include a cell phone to each worker,
taking them to a training workshop or seminar, giving them a day or two off every month and so
on. While deciding on the benefits package, do consider the associated costs. The advantages can
be seen below.
2.1.3.1 ADVANTAGES OF COMPENSATION MANAGEMENT PACKAGES
A well designed compensation and benefits plan helps to attract motivate and retain talent in an
organization. A well designed compensation & benefits plan will benefit a firm or
business/employee in the following ways:
12
Advantages to the Organization:
1. Performance Enhancement: Employees would be happy with their jobs and would love to
work for such an organization if they get fair compensations in exchange of their services.
2. Motivation: We all have different kinds of needs. Some of us want money so employees work
for the company which gives them higher pay. Some value achievement more than money, they
would associate themselves with firms which offer greater chances of promotion, learning and
development. A compensation plan that hits workers’ needs is more likely to motivate them to
act in the desired way.
3. Low Absenteeism: When worker’s compensations are adequately managed, employees will
have the zeal and enthusiasm to be regular at work instead of wasting time at home. Although
some tend to stay idle at work place also, but when they are treated well they will offer value for
it.
4. Low Turnover: Employees will not be willing to work for any other organization as long as
they are treated well and get their compensations at the right time and measure. So there will be a
low rate of employee turnover.
5. Higher output: By providing incentives to his employees, the employer is able to induce them
to work better. This leads to higher output.
6. Greater profits: Needless to say, higher output results in greater profits for the business. This
happens in two ways. First, the cost per unit becomes less and second, the enterprise is able to
keep the selling price low and this result in greater sales.
7. No problem of idle time: In an organization where no proper incentives are available for the
workers, the tendency will be to while away the time. When suitable incentives are available, the
workers become time conscious. They begin to see every minute in terms of money.
8. Supervision does not pose any problem: When suitable incentives are available, the workers
become duty conscious. The need for close supervision, thus, does not arise.
13
9. Possible to identify inefficient and dull workers: If, in spite of the incentive schemes, some
workers are able to earn only their normal wage, it should mean that they are basically dull. The
employer, therefore, has to decide whether to retain them or subject them to rigorous training.
10. Rate of labor turnover is bound to be low: If adequate incentives are available to the
workers, they may not have a feeling of dissatisfaction. Such workers are sure to have greater
work commitment and therefore may not leave the organization. The rate of labor turnover, as a
result, is bound to be low.
11. Reduction in complaints and grievances: As the organization makes available suitable
incentives to the workers, they may not have anything to complain about. This leads to reduction
in complaints and grievances.
12. By providing increased access and flexibility in employee benefits, employers can not only
recruit but retain qualified employees.
13. Providing benefits to employees is seen as managing high-risk coverage at low costs and
easing the company's financial burden.
14. Employee benefits have been proven to improve productivity because employees are more
effective with they are assured of security for themselves and their families.
Advantage to the Employees:
1. Peace of Mind: When incentives and benefits are offered workers in the right measure, it
relieves them from certain fears. The workers as a result now work with relaxed mind.
2. Increases self-confidence: Every human being wants his/her efforts to get acknowledgment.
Employees gain more and more confidence in them and in their abilities if they receive just
compensations. As a result, their performance level shoots up.
3. Efficient workers are able to earn more: Such of those workers who are highly efficient are
able to earn more by way of performance bonus, higher commission and so on.
4.
Employees with personal life and disability insurance can enjoy additional protection
including income replacement in the event of serious illness or disability.
14
5.
Employees can feel a sense of pride in their employer if they are satisfied with the coverage
they receive. Simply put, the elements of a total compensations program constitute all the things
a business uses to attract employees, including salary, bonuses, incentive pay, benefits and
employee growth opportunities such as professional development and additional training. This
system provides a number of advantages to companies, particularly small businesses in which
business owners and managers must foster positive personal relationships with employees. The
system works in a cyclical manner consisting of four total parts:

Employee Retention

Employee Performance

Controllable Expenses

Program Administration
2.2 TYPES OF COMPENSATION
According to Dessler (2012) compensation in typically classified into financial (direct and
indirect components) and non-financial (the job position and work environment) and hence
employers must be reasonably competitive with these types of compensation in order to hire,
keep, and reward performance of individuals in the organization.

Direct Financial Compensation consisting of pay received in the form of equitable wages
and salaries, market adjustments, cost of living increases, merit increases, performance
bonuses or fair commissions provided as regular and consistent intervals.

Indirect Financial Compensation including all financial rewards that are not included in
direct compensation and can be understood to form part of the social contract between the
employer and employee such as life insurance, supplementary health coverage, social
security benefits, paid absences (like vacations, sick leaves, educational loan), retirement
plans, education, and employee services.

Non-Financial compensation is referring to topics such as career development like
interesting duties and responsibilities, challenges, authority and autonomy and
advancement opportunities, opportunities for recognition feeling of achievement, as well
as work environment and conditions such as fair and consistent practices and policies,
competent supervision fun and effective co-workers, comfortable and safe working
15
environment, flexible scheduling or alternative working arrangements and modified
retirement.
2.3 FACTORS AFFECTING COMPENSATION SYSTEM
As noted by Dagne (2018) compensation can strongly be affected by several internal and
external factors and according to Durai (2010) from the perspective of the employer, the factors
that determine how much compensation is to be paid out to the employee are the following:
2.3.1 INTERNAL FACTORS
Ability to Pay: it depends upon the employer's ability to pay wages to the workers. This depends
upon the profitability of the firm. If the firm is marginal and can't afford to pay higher than the
competitors, then the employees will go to other firms; while if the company is successful then
they can easily pay their employees as they wish.
Organizational Provisions: Organizational provision states that the level of compensation largely
depends upon organizational operating policies and procedures. It is because the policies serve as
a guideline for formulating and implementing compensation plans and programs. Moreover,
organizational regulations, plans, objectives, etc. also affect the level of pay.
Organizational Positions: The position of the organization is determined by its productivity, for
example, if the productivity of the worker is high, it assesses itself as a higher position. As a
result, the compensation system is determined at a higher level. In contrast, lower productivity
tends to result low wages/salary rates. In addition, the position of the company in the business
cycle often determines how much the company is willing to offer to the employee. At a start-up
company would pay more because of the need to get the best possible talent into the company.
Further, many startups give their employees Employee Stock Option Plans wherein the
employees can redeem their stocks after the lock-in period.
Productivity of Workers: Another factor of compensation management is the productivity of
workers. This is the new concept of linking pay with employee performance. Highly productive
workers are got high compensation as compared to less productive workers.
16
Job Analysis and Evaluation Report:
Job analysis is a method through which necessary
information about the contents and the contexts of the job is made available to determine the
value of each job. The job evaluation is a process of determining the value/worth of a job so that
a payment system can be specified. Job analysis and job evaluation determine the relative worth
a job which ultimately assist for compensation management. Hence, it is regarded as an
important factor of compensation management.
Top Management Philosophy: Wage rates to be paid to the employees are also affected by the
top management's philosophy, values and attitudes. As wage and salary payments constitute a
major portion of costs and /or apportionment of profits to the employees, top management may
like to keep it to the minimum. On the other hand, top management may like to pay higher pay to
attract top talent.
Urgency of the Firm: Urgency in filling up the position plays an important role in determining
how much the employer is willing to pay the employee. In many cases, if the time to get
employee on board is less, staffing managers along with the line manager in charge of hiring the
employee might decide to pay more, as they want the employee to come on board as quickly as
possible.
2.3.2 EXTERNAL FACTORS
Macroeconomic Situation:
The overall macroeconomic situation where in the state of the
economy of the country in which the firm is situated plays a major role in determining the
compensation to be paid. This is a direct result of the linkage between firm performance and the
performance of the economy.
Demand and Supply of Labor: it is one of the important factors affecting wages. If the demand
of labor is more they will be paid high wages otherwise vice versa. If the supply of the
employees is more they will be paid less and vice versa. As it is stated by Judge & Bretz (1992)
the labor market conditions or supply and demand forces operate at the national, regional and
local levels, and determine organizational wage structure and level. If the demand for certain
skills is high and supply is low, the result is a rise in the price to be paid to these skills. The other
alternative is to pay higher wages if the labor supply is scarce; and lower wages when it is
excessive. Similarly, if there is a great demand for labor expertise, wages rise; but if the demand
17
for manpower skill is minimal, the wages will be relatively low. The supply and demand
compensation criterion is very closely related to the prevailing pay, comparable wage and
ongoing wage concepts since; in essence, all of these remuneration standards are determined by
immediate market forces and factor.
Cost of Living: Another important factor affecting the wage is the cost of living adjustments of
wages. This tends to vary money wage depending upon the variations in the cost of living index
following rise or fall in the general price level and consumer price index. It is an essential
ingredient of long-term labor contract unless provision is made to reopen the wage clause
periodically.
Labor Union: labor union also helps in paying better wages to the workers. Higher wages have
to be paid by the firm to its workers under the pressure of the trade unions.
Government Regulations: In order to protect the working class from wage exploitation by strong
employers, the government enacts various laws and judicial decisions. Such laws and regulations
affect compensation management. Because, they emphasize on minimum wage rate, overtime
rate, working hours, equal pay for equal work, payment of bonus, etc. So an organization has to
design its pay system as per the government rules and regulations.
Inflation: Compensation is concerned with an overall return that an employee obtains from the
organization for rendering contributions towards organization objectives. Therefore, the payment
should be adequate to maintain the cost of living of the employees. Hence, the employer should
manage compensation by viewing the cost of living of each individual and should adjust with the
increase in the cost of living.
2.4 ECONOMIC AND BEHAVIORAL ISSUES IN COMPENSATION
As noted by Meena (2010) many behavioral scientists, notably industrial psychologists and
Sociologist have presented their views on the research studies and programs conducted by them.
Briefly such theories are:
The Employee's Acceptance of a Compensation Level:
This type of thinking takes into
consideration the factors which may induce an employee to stay on with a company. The size
18
and prestige of the company, the power of the union, the wages and benefits that the employee
receives in proportion to the contribution made by him all have their impact.
The Internal Compensation Structure:
Social norms, traditions, customs prevalent in the
organization and psychological pressures on the management, the prestige attached to certain
jobs in terms of social status, the need to maintain internal consistency in compensation at higher
level, the ratio of the maximum and minimum wage differentials, the norms of span of control,
and demand for specialized labor all affect the internal wage structure of an organization.
2.4.1 ECONOMIC AND BEHAVIORAL ISSUE IN COMPENSATION MANAGEMENT
Muhamad, Idrus, Djumahir and Rahayu (2014) identified that the nature of human resource
market is one of the most important issues affecting compensation plan of any organization.
From the below description they concluded that economic and behavioral issues have their own
importance and have great impact on compensation management so such issues like demand and
supply, productivity, prevailing market rate and cost of living should be given considerable
importance while doing compensation management.

Demand and Supply: The nature of demand and supply are of various types and operate
at regional, national and global level and determine wages and salary structure. In the
case of Human Resource the level of demand and supply of a productize decided-If the
demand of a certain category of product exceeds their supply their price is tend to be
higher in respect of their productivity-which may reduce productivity of human resource
in another market or remain constant. The employer's demand for labor is dependent on a
number of factors such as demand for his/her product, availability of other factor of
determination, the level of technological progress, etc.

Productivity: Productivity of human resource is another market related force which
affects compensation management. If productivity of personnel is high the wages and
salary rate will also be high and if the productivity of personnel is low the wages and
salary payable to him/her will also be low. E.g. many foreigners have opted to open their
Business in India though there are many issues behind it. One of those factors/issues is
low employee cost but this low employee cost is offset by lower productivity in India.
There is low productivity in India as compared to other industrial advanced countries.
19
Prevailing market rate of wages and salary of different classes of personnel this is also
known as comparable rates.

Prevailing Market Rate of Wages and Salary of Different Classes of Personnel:
Prevailing market rate helps an organization in deciding compensation plan in several
ways like in order to attract and retain the personnel with certain specific skill, it is
essential to pay comparable rates. If an organization wants to acquire personnel with the
similar skills as his competitor's have therefore they have to pay competitive rates. In
determining the rate of prevailing market in formulating compensation plan an
organization can act as a leader or it may act as a follower.

Cost of Living: While nature of resource market affect different class of personnel.
Different cost of living affects all personal at one place. Similarly cost of living varies at
different levels i.e. from country to country and different place within same country e.g.
urban and rural areas varies from a place over a period of time because of inflating rate of
money. So cost of living may also be taken as the base for adjusting compensation plan
e.g. wages and salary in industrial advanced countries are much higher than the
economically less developed countries.
2.5 WAGE AND SALARY AND MOTIVATORS
Meena (2010) indicates that money often is looked upon as means of fulfilling the most basic
needs of man. Food, clothing, shelter, transportation, insurance, pension plans, education and
other physical maintenance and security factors are made available through the purchasing power
provided by monetary income- wages and salaries. Merit increases, bonuses based on
performance, and other forms of monetary recognition for achievements are genuine motivators.
However, basic pay cost of living increases, and other wage increases unrelated to an individual's
own productivity typically may fall into maintenance category.
2.6 FRAMEWORK OF COMPENSATION POLICIES
Bruno and Margit (2002) noted that compensation policies at the company level are subject to
the overall legislative and other mandatory principles established by the Government. A variety
of considerations both objective and subjective weight the determination of compensation
policies at the company level. There is a need for a balance between organization design and
20
company policies. Companies also need to consider the policies of other companies. In actual
practice compensation policies and structures are determined in the following way:
Unilaterally by employer in situations where employer could exploit the prevailing labor
market situation;

Jointly by management and workers union though collective bargaining;

Through consultations among the three partners in government, management and labor
representatives under the minimum wages legislations;

Wage boards and pay commissions;

Courts through adjudication.
Compensation policy helps in defining employment relationships, contractual obligations and the
implied psychological contract between the employer and the employee (Zacher, 2015). The
policy promotes employer employee relationship by having committed employees who have
trust with the organization, are willing to go an extra mile in their duties and have readiness to
assist other employees. Policy on compensation incorporates the following key components;
level of rewards, equity in pay, remuneration, contingent pay, competitiveness and transparency
in rewards management (Armstrong et al, 2007). Benefits refer to non-cash allowances which are
part of total reward. Benefits policy addresses issues of, pension schemes; personal security
through illness, health or accident insurance covers; safety in work environment, financial
assistance for loans in house purchase schemes or purchase of organizational products; work life
balance, holidays, career breaks, counseling; and employee development (Adler et. al, 2015).
Compensation policy portrays the positioning of the employee in the organization’s mind (Rajiv
et.al, 2000). A compensation policy is composed of reward structure together with the values and
philosophies which serve to determine the policy (Armstrong 2007). Elements of compensation
policy therefore reflect the wholesomeness of the policy when viewed from the perspectives of:
grade and pay structure; total reward; philosophies and values upon which the compensation
policy is grounded. (Onwuka and Faith, 2018)
2.7 CHALLENGES OF COMPENSATION
As noted by Dagne (2018) in his research, people who administer wage and salary face
challenges which often necessitate adjustments to a remuneration plan. The more important of
21
the challenges are skill-based pay, salary reviews, comparable worth, employee participation,
below market or above market rates, and marketing versus non-marketing rewards.
Fig. 2.1 Challenges of Compensation
Source: K. Aswathappa, HRM (text and cases), New Delhi, Tata McGraw Hill, 7th edition, 2014
Skilled Based Bay: In the traditional job-based pay, employees are paid on the bases of job they
do. In the skill-based system, workers are paid on the basis of number of jobs they are capable of
doing, or on the depth of their knowledge. The purpose of this system is to motivate employees
to acquire additional skills so that they become more useful to the organization.
Salary Reviews: Pay, once determined, should not remain constant. It must be reviewed and
changed often, but how often becomes a relevant questions. Pay reviews may be made on
predetermined dates, anniversary dates or there could be flexible reviews. In the fixed-date
reviews, wages and salaries of all employees are reviewed and raised on a specified date each
year. In the anniversary-date review, salaries may be reviewed at twelve-month intervals from
the date of the employees' anniversary date of hire. Using variable timing ensures flexibility.
Comparable Worth: One of the popular principles in employee remuneration is equal pay for
equal work. In fact, this principle has been the inspiration behind the enactment of the Equal
Remuneration Act. Under the Act, male and female nurses are to be paid the same if their merit
and seniority match, but a female nurse and a male electrician could be paid different rates.
22
Below Market versus Above Market Remuneration: Remuneration involving decision relating to
below market or above market pay structure has two implications. First, a firm's ability to attract
talent from other depends on employee's pay relative to alternative employment opportunities.
Second, the choice has an important cost component. Decision to above going rate obviously
adds to the cost. However in general, above market pay policies are more prevalent among larger
companies in less competitive industries, such as utilities and among companies that have been
performing well and have the ability to pay more.
Employee Participation: When employees are involved in designing a remuneration plan, they
exhibit little resistance in accepting it. Such a plan is much more likely to be a successful
motivator than the one imposed by the management.
2.8 RECOMMENDATIONS OF ICAO, IFATCA AND ILO
According to ICAO Annex 1 (2018) Standards and Recommended Practices for the licensing of
flight crew members (pilots, flight engineers and flight navigators), air traffic controllers,
aeronautical station operators, maintenance technicians and flight dispatchers, are provided by
Annex 1 to the Convention on International Civil Aviation. The human being is the vital link in
the chain of aircraft operations but is also by nature the most flexible and variable. Proper
training is necessary so as to minimize human error and provide able, skilful, proficient and
competent personnel. Annex 1 and ICAO training manuals describe the skills necessary to build
proficiency at various jobs, thereby contributing to occupational competency. The medical
standards of the Annex, in requiring periodic health examinations, serve as an early warning for
possible incapacitating medical conditions and contribute to the general health of flight crews
and controllers. ICAO's objective is to improve safety in aviation by making States more aware
of, and responsive to, the importance of human factors in civil aviation operations. The licensing
examination serves as a regular test of physical fitness and performance ensuring independent
control. As such, training and licensing together are critical for the achievement of overall
competency.
According to IFATCA technical and professional manual (2018) remuneration for the profession
of air traffic controller is justified commensurate with the requirements and responsibilities of
the profession, not limited by the practices of other organizations. Equal remuneration for equal
23
work is justified with relation to duties and responsibilities. Remuneration for air traffic
controllers should recognize the uniqueness of the Air Traffic Control profession and the
associated responsibilities. Remuneration of air traffic controllers should reflect their
"employment status" in accordance with ILO Publication International Standard Classification of
Occupations ISCO-08 (2012), in which air traffic controllers have been put in a category that
includes Aircraft pilots, ships' officers and other related "associate professionals". Remuneration
should be commensurate with acquired levels of skill and experience. The remuneration of
controllers should therefore reflect their skills and also have relation to the acquired amount/type
of ratings. When a controller is assigned additional tasks, such as instruction or systemdevelopment, this should also be reflected by a higher remuneration level. Furthermore IFATCA
technical and professional manual (2018) recommends that ATCs should get flight
familiarization as part of training in order to provide quality air traffic service.
2.9 EMPIRICAL LITERATURE
Putting in mind the above theoretical discussions of compensation management practices and
challenges, in this section an attempt is made to explore different empirical studies, conducted by
different researchers, which describes about different organizations of compensation
management practices and challenges.
Dagne (2018) in his assessment of compensation management practices and challenges in case of
networks of networks HIV positives in Ethiopia (NEP+) revealed that among the main factors of
compensation the current salary of the employees were found dissatisfied and unfair. Most of the
respondents agreed that the practice of compensation isn't equitable compared to other
employees performing similar jobs in other organizations. This implies that the payment might
not be adequate to maintain the cost of living of the employees. Due to this reason the
organization is experiencing high turnover. He also recommended revising the compensations
package policy so that dissatisfied employees would be able to express their genuine feelings
thereby minimizing the employees looking for other jobs. Furthermore, he recommended
improving the perception of compensation systems in the institution to be adequate.
Another research done by Amha (2019) on assessment of compensation management practices
and challenges in Ethiopian Construction Works Corporation concluded that employees are not
24
motivated and satisfied with the compensation system and practices of the corporation which
shows the organization has a poor and incompetent compensation system. He recommended
revising its compensation system and considering cost of living and current economic hardship
to determine compensation policy and raise employee's salary. As well as aside from monthly
salary variety of compensation packages motivates employees and enables them to have a good
attitude on the corporation compensation practice.
Bethelhem (2015) in her compensation and benefits practices of Abay Bank Share Company and
its implication for employee performance concluded that most of the employees of Abay bank
are satisfied with the current compensation scheme, and she recommended that the bank
management should able to keep up with the external environment, she also recommended the
organizations to revise the current performance based salary manual. By doing so the bank able
to retain its existing employees and in turn the bank employees will perform their best.
Influence of compensation practices on employee performance of tea companies in Rwanda
mountain tea studied by Huguette, Patrick (2017) concluded that there is a significant
relationship between compensation practices and employees’ performance which implies that
employee's performance depend on financial compensation, health care benefit and non-financial
compensation; and they recommended to make sure that there is friendly and positive
relationship between employers and employees in the organization. Management creates good
and friendly working conditions that will support employee’s performance; also recommended
the organization to ensure the provision of good welfare packages that will encourage and
promote employees performance. It is the desire of every organization to constantly increase
productivity, thereby necessitating the need to motivate employees through comprehensive
compensation policies and friendly working conditions. They also showed that employees are
integral part of the human resources management, and therefore must be properly compensated
in order to effectively perform beyond expectation.
25
CHAPTER THREE
METHODOLOGY
3.1 RESEARCH METHODOLOGY AND DESIGN
This chapter presents a detail discussion about the type of research design employed in the study.
Moreover, topics related to the sample size, sampling techniques, method of data collection and
procedures, data analysis and interpretation tools and validity, ethicality and reliability of the
study are included.
3.1.1 RESEARCH DESIGN
This research investigates the compensation management practice and challenges of ECAA for
the case of air traffic controllers so that both qualitative and quantitative data were used because
the generations of data are expressed in numbers in addition to the motives of directors and
employee behavior. Descriptive research method was used to make the quantitative data
meaningful. The qualitative data related to the ATC satisfaction with the current compensation
packages and their perception with the internal and external competitiveness assess the effect of
demand and supply on compensation. Besides, the qualitative part was used to generate data how
compensation affects a person economically, socially, and psychologically, because a person's
earnings serve as an indicator of power and prestige. Different scholars stated qualitative
approach as a systematic subjective approach used to describe life experiences, uniqueness of
individual and situations to give them meaning. On the other hand quantitative approach was
used to generate data on the idea of the majority which might be difficult to generate using
qualitative approach. Then, this helped to generalize the findings.
3.1.2 TARGET POPULATION
The participants should have an exposure to such issue in the case organization. Accordingly, the
study identified all ATCs who have pertinent knowledge, experience, and ability to provide
response for the research questions. The human resource management office of ECAA shows
that the total populations of air traffic controllers are 150; out of this number around 60 of them
are working in out station in the regional airports control tower and around 90 air traffic
26
controllers are working in Addis Ababa Bole International Airport control tower. Hence these are
the target population that helped to generalize the findings.
3.1.3 SAMPLING TECHNIQUE AND SIZE
The sampling technique the study used to address the employee (ATCs) was stratified sampling
technique because every member has equal chance to be included or excluded. Due to the
professional hierarchy stratified random sampling was used in order to entertain professionals at
each hierarchy. The study takes different factors like the nature of research, time and money into
consideration in order to choose the right sample and used a solvin formula to determine the
sample size. The sample size depends on the precision the study desire in estimating the
population parameter at a particular confidence level. For this study the researcher selected 73
respondents from the total number of 90 employees (ATCs) who have a direct link to the
compensation and benefit package and the rest 60 are located in domestic airports and the study
did not include them because of the reasons stated in the scope and limitation of the study and a
5% of error margin was applied.
n=
N
=
1+(Ne²)
90
=
1+(90*0.0025)
(where n is the sample size, N is the total
population, e is the error margin)
90 = 73
1.225
Table 3.1 Sample size distribution
Hierarchy of ATC
Total population
Sample size
Percentage from
distribution
sample size
Chief Air Traffic Controller (CATCO)
09
07
9.6%
Senior Air Traffic Controller (SATCO)
10
08
10.9%
Area Air Traffic Controller (AREA)
11
09
12.3%
Approach Air Traffic Controller (APP)
22
18
24.7%
Aerodrome Air Traffic Controller (AD)
26
21
28.8%
27
Assistant Air Traffic Controller
12
10
13.7%
Total
90
73
100%
Source: HR field survey data of December 2019
3.1.4 TYPES OF DATA AND SOURCE
The types of data the study used to conduct this research were both primary and secondary. The
secondary data was collected from manuals, procedures, and recommendations which are
depicted in International Civil Aviation Organization (ICAO) annexes. Some documents which
have done by ECAA also used as a secondary source in addition to human resource policy
documents available in the organization which was reviewed and referred to generate data
concerning its background and policies of compensation. The primary data was collected through
structured questionnaires that were distributed to ATCs and the data gathered were analyzed
quantitatively and also semi- structured in depth interviews were carried out to get data from
management members as well as EATCA executive committee and the collected data were
analyzed qualitatively.
3.1.5 METHODS OF DATA COLLECTION
For primary data the research used closed-ended questionnaires and semi-structured interview
data gathering methods were applied for this research. Closed ended questions were rated with
Likert Scale method. Likert Scale is a psychometric response scale primarily used in
questionnaires to obtain participant's preferences or degree of agreements with a statement or set
of statements. Respondents were asked to indicate their level of agreement with a given
statement by way of an ordinal scale, a 5 point scale ranging from “strongly disagree” on one end
to “strongly agree” to the other end was used for this research. Open and closed ended 73
structured questionnaire papers were distributed to the selected employees and in-depth
interviews were conducted with the selected managements and EATCA executives committee.
3.1.6 DATA COLLECTION PROCEDURE
Before interviewing and distributing the questionnaire the researcher informed respondents about
the objective of the study and asked their willingness to be interviewed and fill the
questionnaires. The checklist consists of questions that help to respond the research questions.
28
3.1.7 METHODS OF DATA ANALYSIS
After collecting the relevant data the information gathered was systematically analyzed and
interpreted in both qualitatively and quantitatively. Descriptive analysis was used to convert
numbers into meaningful form. The data gathered from employees through questionnaire was
checked, refined, organized, tabulated and putted in frequency and percentage using SPSS
software. Likewise qualitative data was segmented, categorized, summarized, and reconstructed
in a way that provides important concepts. So that the qualitative data obtained through in-depth
interviews were discussed in combination with the data obtained through questionnaire and the
information obtained from different sources. Because this type of approach helped the researcher
to present major findings and whether the findings are properly addressed the research questions.
Furthermore, cross-checking of qualitative data with quantitative data helps to minimize
biasness.
3.1.8 VALIDITY AND RELIABILITY OF THE STUDY
In order to ensure the quality of the research design, content and construct validity of the study
was checked. The content validity was verified by the advisor of this research, who looked into
the appropriateness of questions and the scales of measurement. Peer discussions were also
another way of checking the appropriateness of questions. Furthermore, one of the most
commonly used indicator of internal consistency is Cronbach's alpha and ideally it shall be above
70%. Thus to test the reliability of the questionnaire for this study, the researcher first selected 10
respondents in order to evaluate the consistency of compensation management practice to all the
items delineated in a measuring instrument for pilot testing prior to the actual data collection and
yield consistent result as calculated using SPSS software and as indicated in below table 3.2, the
Cronbach alpha values were acceptable or greater than 70%.
Table 3.2 Pilot sample reliability test result
Description No of tested respondents
Cases
Tested respondents in % Cronbach's alpha
Valid
10
100.0
Excluded
0
0.0
Total
10
100.0
Source: Survey data, 2020
29
0.735
3.1.9 ETHICAL CONSIDERATIONS
Ethicality is very important issue in conducting the research. According to Creswell (2009) as
cited in Dagne (2018) research is collecting data from people, about people to the people.
Therefore, the researcher had explained about the study objectives to the respondents and they
were also fully aware of every data obtained from them have been kept confidential and were
used for this research purpose only. Ethicality has been properly maintained in the course of the
research process. Unnecessary change and adjustments have not been practiced by the
researcher. In addition, all reference materials were acknowledged with proper citation and
confidentiality of data was maintained throughout the process. Therefore, all sources were
acknowledged.
30
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSIONS
This chapter of the thesis is dedicated to the data presentation, analysis and discussions of the
quantitative as well as the qualitative data obtained using the questionnaire and interview
administered among the selected respondents, who are located at Addis Ababa Bole International
Airport Control Tower and selected management members and EATCA executive committee.
The researcher distributed 73 questionnaires and was able to collect 73 questionnaires back. That
means the response rate for this research was 100%. And the researcher able to had an interview
with two management members including HR director and EATCA executive committee (with
the president and technical and professional officer) as proposed and the response rate was
100%.
4.1 DESCRIPTIVE ANALYSIS
4.1.1 DEMOGRAPHIC PROFILE OF THE RESPONDENTS
This section summarizes the demographic profile of the sample, which includes sex, marital
status, age group of the respondents, educational background, service years in ECAA, the
respondents' range of salary in ETB. The purpose of the demographic analysis in this research is
to describe the characteristics of the sample such as the proportion of males and females in the
sample, range of age, educational level, work experience, and their salary range so that the
analysis could be more meaningful for readers.
Table 4.1 Demographic profile of respondents
Sex
Frequency
Percent
Male
64
87.7
Female
9
12.3
Total
73
100
Marital Status
Frequency
Percent
Single
31
42.5
Married
41
56.2
31
Divorce
1
1.4
Widowed
0
0
Total
73
100
Age group (in years)
Frequency
Percent
18-30
20
27.4
31-40
45
61.6
41-50
4
5.5
51-60
4
5.5
Total
73
100
Educational background
Frequency
Percent
th
12 Complete
2
2.7
Diploma
4
5.5
Advance diploma
3
4.1
1st Degree
56
76.7
2nd Degree
8
11
PhD
0
0
Total
73
100
Service years
Frequency
Percent
≤ 5 years
18
24.7
6-10 years
20
27.4
11-20 years
27
37
≥ 21 years
8
11
Total
73
100
Salary range
Frequency
Percent
Below 7,000
11
15.1
7,000-10,000
7
9.6
10,001-13,000
24
32.9
13,001-16,000
27
37
˃ 16,000
4
5.5
Total
73
100
Source: Survey questionnaire, 2020
32
From the above table 4.1 the study finding showed that the majorities 87.7% of the respondents
were male while 12.3% of the respondents were female and this shows that the organization has
less number of female employees in the organization. When looking at the marital status, the
finding recorded that the greater number 56.2% of the respondents were married whereas 42.5%
were single and 1.4% was divorced. Regarding the age group of the respondents 61.6% of the
respondents were between 31-40 years old whereas 27.4% were between 18-30 years and the rest
age groups (41-50 and 51-60) had recorded the least equal percent 5.5%. Thus the finding
showed that the majorities (around 89%) of the respondents are young which indicates that most
of the ATCs are found at the productive age. Regarding educational background of the
respondents the majority 76.6% of the respondents were first degree holder while 11% were
second degree holder, whereas 4.1% and 5.5% of them were advance diploma and diploma
holders respectively and the rest 2.7% of them were 12th complete. Again the finding showed
that the majorities 87.6% of the respondents were 1st and 2nd degree holders which suggest that
most of the ATCs have the skills, knowledge and attitude that the field needs which the sector
require at this moment. When come to work experience 37% of the respondents have experience
of 11-20 years, 27.4% of the respondents have experience of 6-10 years, 24.7% of the
respondents have experience of less than 5 years and the rest 11% of the respondents have
experience of greater than 21 years; thus 75.4% of the respondents recorded work experience of
greater than 5 years which implies the majority of the ATCs have work experience of greater
than 5 years. Regarding range of the salary, the majorities 37% of the respondents salary fall in
the range of ETB 13,001-16,000 per month, and 32.9% the respondents are earning in the range
of 10,001-13,000, 9.6% of the respondents are earning in the range of 7,000-10,000 whereas the
rest 15.1% and 5.5% of the respondents are earning in the range of below 7,000 and above
16,000 per month which indicates that the majorities 69.9% of the respondents are earning in the
range of 10,001-16,000 and the finding suggests that the majority of the respondents are earning
above 10,000 ETB per month.
4.1.2 HOW DOES ECAA PRACTICE COMPENSATION MANAGEMENT
This section present and discusses the response of respondents to identify the practices of the
compensation management of ECAA for air traffic controllers. The purpose of this analysis
answers whether the organization is practicing the compensation management satisfactorily,
33
sufficiently, reasonably and in a balanced way or not in order to motivate employees to perform
their job effectively and efficiently. Besides also answers that whether the organization is paying
the salary and benefits well as compared to other similar organization and fit for the employees'
job or not so that the analysis could be more meaningful for the readers.
Table 4.2 Current compensation management practice
Strongly
No
1
2
3
4
5
6
7
Statements
The compensation
packages are managed well
The salary and benefits are
paid well comparing to
similar organizations
Agree
Neutral
Disagree
agree
Strongly
disagree
Mean
Frequency
Frequency
Frequency
Frequency
Frequency
/percent
/percent
/percent
/percent
/percent
_
2/2.7%
11/15.1%
30/41.1%
28/38.4%
1.82
1/1.4%
_
4/5.5%
24/32.9%
44/60.3%
1.49
_
1/1.4%
3/4.1%
21/28.8%
48/65.8%
1.41
_
3/4.1%
12/16.4%
22/30.1%
35/47.9%
1.76
_
_
6/8.2%
20/27.4%
47/64.4%
1.44
_
12/16.4%
14/19.2%
23 /31.5%
24/32.9%
2.19
_
_
5/ 6.8%
26/35.6%
42/57.5%
1.49
The salary and benefits are
fit for my job in the
organization
I received other benefits
apart from the salary that is
paid
The compensation
packages are sufficient to
motivate employees to
perform effectively based
on a laydown procedure
The basic salary and
benefits are balanced for
employees at the same
level in the organization
The compensation
packages are competitive,
reasonable and reviewed in
a fair manner
Grand mean score
Source: Survey questionnaire, 2020
34
1.66
Fig 4.1 Mean of each current compensation management practices
The compensation packages are
managed well
2.5
The salary and benefits are paid well
comparing to similar organizations
2
The salary and benefits are fit for my
job in the organization
1.5
I received other benefits apart from
the salary that is paid
1
The compensation packages are
sufficient to motivate employees to
perform effectively based on a
laydown procedure
The basic salary and benefits are
balanced for employees at the same
level in the organization
0.5
The compensation packages are
competitive, reasonable and reviewed
in a fair manner
0
Mean
Source: Survey questionnaire, 2020
From the above table 4.2 the study found that a total of 79.5% (38.4% strongly disagree and
41.1% disagree) of the respondents believed that the compensation packages are not managed
well. Majorities (60.3% strongly disagree and 32.9% disagree) of the respondents concluded that
the salary and benefits are not paid well comparing to other similar organizations. As proposed
interview were conducted and the interviewees also concluded that it is incomparable with the
external market which needs more task to do. The HR director said that ATCs are always
challenging the management to get better payment as to the sector and the job requirement.
35
94.6% (65.8% strongly disagree and 28.8% disagree) of the respondents believed that the salary
and benefits do not fit for their job in the organization. According to HR director due to ATCs
grievance in 2018 there was a strike, which brought negativity towards them because of the way
they precede with their request, due to unsatisfactory and incomparable compensation
management practices. The ATS director and EATCA executive committees also confirmed it.
Majorities (47.9% strongly disagree and 30.1% disagree) of the respondents described that they
do not received any other benefits other than salary. 91.8% of the respondents believed that the
compensation is not sufficient to motivate them to perform effectively based on a laydown
procedure. 64.4% of the respondents concluded that the basic salary and benefits are not
balanced for employees at the same level in the organization. Moreover 93.1% of the
respondents believed that the compensation packages are not competitive, reasonable and
reviewed in a fair manner. HR director replied that the practices of the compensation
management is not fair, sufficient and competent and as a result it brings grievance and loss of
employees, the ATS director and EATCA executive committee also confirmed it. According to
Armstrong (2005) pay should motivate effective and productive work and maintain competitive
rates; should be equitable, balanced, fair, consistent, reasonable and acceptable to the employee.
Bethelhem (2015) in her study compensation and benefit practices and its implication on
employee performance showed that a good compensation practices helps to retain existing
employee and as a result employees perform at their best for the attainment of the organizational
objectives. Mabaso and Dlamini (2017) showed that compensation package is one of the most
important factors that influence people to take up employment and stay with organizations.
Additionally in order to attract and retain talent, it should be prepared to pay salaries that are
equivalent or better than others in the labor market. Similarly it should be on a par with industry
norms.
With regard to explain the current compensation practices relative to:

Basic salary the HR director said that it is not sufficient and even it doesn't cover their
cost of living as the department is core to the organization specially after five years as
compared to other federal organizations and as to the work complexity, accountability
and as they are more responsible than the management and as the job requires quick
36
decision making which has impact on their health condition. The ATS director and
EATCA executive committee also confirmed the above fact;

Compliance of salary with government regulation both the ATS and HR director said that
as the organization is established under civil service commission and it follows
government regulations, however both said that high government bodies don't have
enough knowledge of the sector so that they face difficulties in convincing them to get
better compensation practices as the sector requires whereas the EATCA executive
committees don't believe that the organization is following government regulations;

Ability to pay all the interviewees believed that the organization has the ability to pay
them as it collects its own revenue in millions of foreign currency due to the air
navigation services provided on 24/7 base, but the organization is not paying because of
its establishment proclamation law;

Fair compensation all the interviewees confirmed that the organization doesn't have fair
compensation;

Job requirement again the interviewees revealed that the organization is not paying as to
the international standard and recommended practices by ICAO and ILO;

Demand and supply of labor the interviewees said that as the job is unique the demand is
high and it is difficult to get readymade ATCs from the market as it requires its own
training which requires high cost in terms of money and time to the organization. So that
the supply is negligent as a result it shall provide better compensation packages in order
to retain its employee.
Finally, from the above data the finding showed that almost all the respondents are not satisfied
and the interviewees also confirmed that the organization compensation practice is not even to
the sector practices. The organization is practicing compensation management unsatisfactorily,
insufficiently, uncompetitive, unreasonably, in unbalanced way and even the salary and benefits
are not fit to their job. Strongly convinced that there are no effective current compensation
management practices in the organization and there was strike in 2018 due to the grievance arise
from the above fact. The grand mean score 1.66 also indicates that the compensation
management practices of ECAA is not good enough; to go with the anticipated growth in the
37
aviation sector the organization shall consider satisfactory compensation management practices
to motivate, retain and attract talented employees.
4.1.3 WHAT ARE THE MAJOR CHALLENGES OF COMPENSATION MANAGEMENT IN
ECAA
This section present and discusses the response of respondents to evaluate the major challenges
of the compensation management that the organization is facing. The purpose of this analysis is
to answer whether employees receive notice and information on any change that may affect their
compensation packages, ensures equal compensation for the same kind of work among
colleagues within the same and another department having the same qualification or not and
ranks the most challenging issues on compensation. Also answer to what extent employees are
communicated, informed and involved during formulation, discussions and implementation of
policies concerning compensation. Besides also answers whether employees know what is going
on as far as compensation is concerned, the compensation packages are well defined and
explained to employees or not.
Table 4.3 Challenges of compensation management
Strongly
No
1
2
3
Statements
Employees receive notice
and information on any
changes that will affect their
compensation packages
Compensation is managed
to ensure that all employees
receive equal compensation
for the same kind of work
My colleague in another
department with the same
qualification receives more
compensation than I do
Agree
Neutral
Disagree
agree
Strongly
disagree
Mean
Frequency
Frequency
Frequency
Frequency
Frequency
/percent
/percent
/percent
/percent
/percent
_
5/6.8%
22/30.1%
31/42.5%
14/19.2%
2.25
1/1.4%
11/15.1%
14/19.2%
30/41.1%
15/20.5%
2.34
9/12.3%
11/15.1%
24/32.9%
17/23.3%
9/12.3%
2.91
38
4
5
6
7
Communication of issues
concerning compensation is
generally good in the
organization
Employees are well
informed and involved in
the formulation, discussion
and implementation of
policies concerning
compensation
Employees do not know
what is going on as far as
compensation is concerned
in this organization
1/1.4%
5/6.8%
11/15.1%
27/37%
28/38.4%
1.94
_
6/8.2%
10/13.7%
25/34.2%
32/43.8%
1.86
20/27.4%
21/28.8%
11/15.1%
13/17.8%
8/11%
3.44
_
5/6.8%
5/6.8%
35/47.9%
28/38.4%
1.82
The compensation packages
are well defined and
explained to employees
Grand mean score
Source: Survey questionnaire, 2020
From the above data placed in the table 4.3 the study revealed that 61.7% respondents believed
that they do not receive any adequate notice and information on any changes that will affect their
compensation packages. Majorities (20.5% strongly disagree and 41.1% disagree) of the
respondents concluded that compensation is not managed well in order to ensure equal
compensation for the same kind of work. 35.6% of the respondents believed that their colleague
in another department do not receive more compensation while 32.9% of the respondents are
neutral that means they don't have information regarding compensation of their colleague in
another department and the rest 27.4% of the respondents believed that their colleague in another
department receive more compensation than they do. 75.4% of the respondents revealed that they
are not addressed well with regard to the communication of issues concerning compensation in
the organization. 78% of the respondents revealed that they are not informed and involved in the
formulation, discussion and implementation of policies concerning compensation. Moreover
56.2% of the respondents concluded that they do not know what is going on as far as
compensation is concerned. 86.3% of the respondents believed that the compensation packages
are not well defined and explained to them.
39
2.64
Fig 4.2 Mean of each challenges of compensation management
Employees receive notice and
information on any changes that will
affect their compensation packages
3.5
3
Compensation is managed to ensure
that all employees receive equal
compensation for the same kind of
work
2.5
My colleague in another department
with the same qualification receives
more compensation than I do
2
Communication of issues concerning
compensation is generally good in the
organization
1.5
Employees are well informed and
involved in the formulation, discussion
and implementation of policies
concerning compensation
1
Employees do not know what is going
on as far as compensation is
concerned in this organization
0.5
The compensation packages are well
defined and explained to employees
0
Mean
Source: Survey questionnaire, 2020
As proposed interview were conducted with management members and EATCA executive
committee on the major challenges of compensation management at the organization. According
to the HR director the major challenges are issues discussed starting from its establishment
proclamation low, civil aviation proclamation number 616/2008, to the management
commitment. On the other hand the ATS director considered the loss of financial freedom as the
main challenge, EATCA executive committee also believed that the departments within the
40
organization as a challenge as the service provider and the regulatory body are organized
together by the government. With regard to the question internal and external factors that may
affect the compensation system the interviewees said that the organization internal factor starts
with its establishment proclamation as it doesn't give financial freedom to the management even
if it collects its revenue the government didn't give the organization financial and administrative
authority. According to the HR director the other internal factor is that the management itself
didn't promote the organization to the government strategically with respect to the collection of
foreign currency, politics, security, and tourism according to its importance to the sector and the
country as a whole as the grievance of ATCs and other events could be taken as a good
opportunity to do so. The ATS director on the other hand considered the ATCs attitude against
the management attitude as internal factor; the EATCA executive committee also said that. And
when the big problem comes to the external factor is that the organization is under civil service
commission as it doesn't know anything about the importance of the organization to the sector
and country as well according to the HR director. EATCA executive committee and HR director
said that the other external factor is the politics within the sector and the biasness of the top
government officials on the national carrier as the organization and the airline do not have even
equal place on the mind of the government, when it supposed to be give priority as other
countries do; because of lack of awareness as the organization didn't promote itself well. All the
interviewees confirmed that during prestrike the management tried to involve the employees on
the revision but it was not fortunate. EATCA executive committees confirmed that the
organization allowed participation of employees through the association during salary revision
process in 2009 G.C. based on ATCs request and special consideration from the government.
Ponduri and Soudikar (2016) showed and recommended in their study employees should
participate actively in designing and redesigning of compensation and benefit policy decision
process, so that the sense of responsibility entrusted into employees will enhance. According to
them it is proved and suggested that employee participation in decision making process gives
good results. Modern organizations makes the employees as a part of their decision making
process to attain the goals and objectives. Employees need more information about pay and
benefit practices, it is essential to educate and communicate employee about compensation and
benefits time to time.
41
From the above the researcher found that the organization is doing with unsatisfactory and
incomparable compensation packages due to its establishment proclamation law and become a
major challenge. The organization by itself is not promoting in order to get attention from the
concerning body. The researcher also found that the major challenges that the organization
facing is due to limited power on financial and administrative issues and the management
commitment to proceed till the end in order to have compensation policy manual by promoting
the duty of the organization. The interviewees also recommended accordingly as proposed in the
statement of the problem by the researcher as one of a possible solution. The attitude of ATCs,
the politics within the sector, government biasness and civil service commission knowledge gap
on the organization are another challenges which needs much attention and commitment of all
stake holders (Government, management and EATCA) as a result, there is low productivity and
employee turnover. The grand mean score 2.64 also indicates that employees are not
participating in the formulation, discussion and implementation process satisfactorily. Besides
the packages is not well explained and defined to the employees.
Fig 4.3 Most challenging issues on compensation
45
40
35
30
25
20
15
10
5
0
1st most challenging
2nd most challenging
3rd most challenging
4th most challenging
Your payment Your payment You are not
is insufficient
does not
paid on time
to support you match your
and your
qualification
family
You are not You are paid There is no
equally paid low comparing challenge
with your
with other
regarding
colleague at
similar
compensation
the same
organization
position
5th most challenging
6th most challenging
Source: Survey questionnaire, 2020
From the above fig 4.1 42.5% of the respondents ranked "your payment is insufficient to support
you and your family" as the first most challenging issue. 41.1% of the respondents ranked that
the first most challenging issue for them is that "your payment does not match their
42
qualification". 32.9% and 30.1% of the respondents ranked that the second and third most
challenging issue is that "you are paid low comparing with other similar organization". 39.7% of
the respondents ranked that their forth most challenging issue is "you are not equally paid with
your colleague at the same position". The respondents ranked "you are not paid on time" and
"there is no challenge regarding compensation" as fifth and sixth most challenging issue
respectively with equal percentage 42.5%. From the above analysis the researcher found out that
the very most challenging issues for most of the employee is that their payment is not enough to
support themselves and their family. Because the organization payment is not competent to the
current rising cost of living and their payment also does not much with their qualification as
well. And a total of 63% of respondents believed that they are paid low as compared to other
similar organizations whereas 42.5% of the respondents revealed that they are paid their salary
on time.
4.1.4 HOW OFTEN IS THE ECAA COMPENSATION PACKAGE BEING REVIEWD
This section present and discusses on the response of the respondents and the purpose is to
explore in what period the organization reviews its compensation system.
Table 4.4 Review period of compensation package
Strongly
No
1
Statements
ECAA
reviews
Agree
Neutral
Disagree
agree
Strongly
disagree
Mean
Frequency
Frequency
Frequency
Frequency
Frequency
/percent
/percent
/percent
/percent
/percent
1/1.4%
4/5.5%
10/13.7%
16/21.9%
41/56.2%
1.72
_
2/2.7%
12/16.4%
23/31.5%
34/46.6%
1.75
1/1.4%
3/4.1%
5/6.8%
25/34.2%
39/53.4%
1.66
the
compensation package
annually
2
ECAA
reviews
the
compensation package
every five years
3
ECAA reviews the
compensation package
in a reasonable period
43
4
ECAA
never
reviewed
ever
its
19/26%
12/16.4%
16/21.9%
13/17.8%
10/13.7%
3.24
compensation
packages
Grand mean score
2.1
Source: Survey questionnaire, 2020
Fig 4.4 Mean of each review period of compensation package
3.5
ECAA reviews the compensation
package annually
3
2.5
ECAA reviews the compensation
package every five years
2
ECAA reviews the compensation
package in a reasonable period
1.5
1
ECAA never ever reviewed its
compensation packages
0.5
0
Mean
Source: Survey questionnaire, 2020
From the above table 4.4 majorities 78.1% of the respondents concluded that the organization is
not reviewing its compensation package annually and also again 78.1% of the respondents
believed that even the organization does not review its compensation package every five years.
While 87.6% revealed that the organization is not reviewing its compensation package in a
reasonable period as well. 42.4% of the respondents concluded that the organization never ever
reviewed its compensation package whereas 31.5% revealed that the organization review its
compensation package. As proposed interview were conducted and the HR director revealed that
the organization doesn't have compensation package review manual as the responsibility is under
civil service commission as indicated in civil aviation proclamation number 616/2008. The ATS
director and EATCA executive committee also added that it is believed to be reviewed as soon as
possible. With special consideration from the government, the EATCA executive committee
44
confirmed that the organization reviewed its base pay in 2010 G.C. based on ATCs request.
Ponduri and Soudikar (2016) showed and recommended in their study compensation is not a
onetime issue. It should be evaluated periodically by considering the current GDP, economic
conditions, population size and others. If any organizations want to sustain in the modern
competition by attract, motivate and retain competent employees their current compensation and
benefit packages should be restructured and improved again. The focus of restructuring
compensation and benefit policy should include the base pay. Mabaso and Dlamini (2017)
showed that proper sector research should be conducted regularly to determine what others are
offering and adjust salaries accordingly.
From the above the researcher found that as respondents revealed through questionnaire, the
interviewees also confirmed that the organization is not reviewing its compensation package
regularly as the mandate is given to the civil service commission to do so by the government.
However the researcher found from the questionnaire that the organization reviews its
compensation package in the past years as interviewee also confirmed but not in a reasonable
period furthermore the revision was not in the past five years. The grand mean score 2.1 show
that the organization is not reviewing its compensation packages regularly or periodically.
4.1.5 HOW DO THE EMPLOYEES OF ECAA PERCEIVE THE COMPENSATION SYSTEM
This section present and discusses on the response of the respondents on employees perception
on the compensation of ECAA. The purpose of this analysis is to analyze whether the employees
perceive the compensation system adequately or not.
Table 4.5 Employee perception on financial compensation
No
Statements
.
1
2
Strongly
Agree
Neutral
Disagree
agree
You are satisfied with
your salary
You are paid based on
your actual performance
Strongly
disagree
Mean
Frequency
Frequency
Frequency
Frequency
Frequency
/percent
/percent
/percent
/percent
/percent
1/1.4%
2/2.7%
1/1.4%
17/23.3%
51/69.9%
1.40
_
2/2.7%
4/5.5%
24/32.9%
42/57.5%
1.53
45
Your yearly salary
increment is attractive
You received payments
other than base pay
You received your
payment on time
3
4
5
_
_
2/2.7%
19/26%
51/69.9%
1.35
_
13/17.8%
7/9.6%
22/30.1%
28/38.4%
2.07
22/30.1%
31/42.5%
10/13.7%
7/9.6%
2/2.7%
3.89
Grand mean score
2.048
Source: Survey questionnaire, 2020
Fig 4.5 Mean of each employee perception on financial compensation
4
3.5
You are satisfied with your salary
3
You are paid based on your actual
performance
2.5
Your yearly salary increment is
attractive
2
You received payments other than
base pay
1.5
You received your payment on
time
1
0.5
0
Mean
Source: Survey questionnaire, 2020
From the above table 4.5 the researcher found that the majorities 93.2% of the respondents
revealed that they are not satisfied with their current salary and also 90.4% of the respondents
said that they are not paid based on their actual performance. Moreover 95.9% of the respondents
believed that even the yearly increment of salary is not attractive. Furthermore 68.5% of the
respondents said that they didn't receive payments other than base pay whereas 17.8% of the
respondents revealed that they received payments other than base pay. 72.6% of the respondents
46
concluded that the organization is paying their payment on time. According to Malcom (2009) as
cited by Amha (2019) organizations shall implement some combination of salary and benefits
and performance pay to get the best out of their employees. Nishii, Lepak and Schneider (2011)
showed in their research that when employees perceive that HR practices reflect a commitment
to quality and are based on seeing employees as assets they have higher commitment and
satisfaction. If employees viewed a practice as a sign that the company values quality service or
products, and will empower employees to produce them, employees were more satisfied. When
employees perceive that HR practices are based on controlling costs, they have more negative
attitudes. When employees believed that HR practices reflected the company’s view that
employees were a cost to be contained, employee satisfaction and commitment dropped. Even
within a firm, the same HR practice may be viewed differently by different employees. But the
effect is the same; if employees feel they are being valued, they respond more positively.
From the above analysis the researcher found that there is too much dissatisfaction with their
salary even they are not paid based on their actual performance in addition to the
unattractiveness of the yearly salary increment. Moreover majority of the respondents perceived
that they didn't receive other payments except their base pay but other respondents perceived that
they receive other payments. While as majority of the respondents said the organization is paying
their base pay on time. Grand mean score 2.048 also indicates that the perception of employees
towards the compensation packages is not adequate.
With regard to non-financial compensation almost all of the respondents revealed that they are
receiving like medical and transport service but it is not satisfactory. Because, as the respondents
revealed, they are receiving the medical and transport service partially, 12 soft tissues on yearly
base, a jacket every three years and rain coat is provided rarely. Again as the respondents said in
the past few years ago there was cockpit ride (flight familiarization) for every ATC but for the
past more than five years they didn't get it. All the interviewees also confirmed that both
financial and non financial compensation packages are unfair, insufficient and incompetent.
From the above the researcher found that the organization is providing some non-financial
compensation but it needs improvement and flight familiarization shall be started soon because it
helps them to provide quality air traffic service to the operation according to IFATCA (2018)
technical and professional manual.
47
Table 4.6 Grand mean score
Statements
Current
Challenges of Review period of Employee
compensation
compensation
compensation
perception on
management
management
management
financial
practices
Samples
Grand mean score
compensation
73
73
73
73
1.66
2.64
2.1
2.048
Source: Survey questionnaire, 2020
Fig 4.6 Grand mean score
3
2.5
Current compensation
management practices
2
Challenges of compensation
management
1.5
Review period of compensation
management
1
Employee perception on financial
compensation
0.5
0
Grand mean score
Source: Survey questionnaire, 2020
As it is shown in the table 4.6 and fig 4.6 above the grand mean score of the respondents on each
of the research question which were designed to answer the practices and challenges of
compensation management in ATC in ECAA is below 3. In general this implies the
compensation packages of the ECAA are not fair, sufficient, competent and adequate.
48
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
This chapter is aimed to deal with summary of the findings, conclusion which is drawn from the
findings and possible recommendations to be forwarded.
5.1 SUMMARY OF FINDINGS
Based on the collected data analysis, interpretation, discussions and related literature the
following major findings are drawn.
On the demographic part the study found majority of ATCs are male with very less number of
females only 9 in number out of 73 respondents. More than 56% of the respondents are married
and more than 61% of them are also in the age group 31-40. More than 76% of the respondents
are 1st degree holders and 11% of them are 2nd degree holders. Moreover 52.1% of the
respondents have less than 10 years of services. Most of the respondents are earning below
16,000 and only 4 respondents are earning above 16,000 ETB per month.
ECAA compensation management practices are below the level of ATCs satisfaction; it is not
managed well, the salary and benefits are not able to cover their physiological needs with the
payment they are receiving from the organization. ECAA pays below the existing labor market
comparing to similar organizations and even not fit to the job requirement. It is not sufficient to
motivate ATCs to perform effectively and efficiently and it is not balanced among employees at
the same level within the organization. The packages are not competitive, reasonable and are not
reviewed in a regular and periodic manner. The organization does not review its salary structure
or compensation policy according to the rising cost of living which means it does not reasonably
pay employees considering inflation. ATCs are receiving some benefits like bonus at the end of
the budget year apart from the salary they get paid however it is not satisfactory and fair.
ECAA doesn't have compensation policy manual however follows government regulation
concerning compensation through civil service commission as a result ATCs are not
appropriately compensated in a fair manner from the revenue the organization generates. ATCs
are not compensated based on demand and supply relationship.
49
On the major challenges of compensation management most ATCs feel that they do not receive
notice and information on any changes of their compensation packages besides it is not managed
perfectly to ensure equal compensation for the same kind of work. Communication of issues
concerning compensation is found as poor. Some of ATCs do not know whether the organization
pays or not well differently; some feel the organization is not paying differently and most of
them believe that the organization is paying well differently for employees in another department
with the same qualification, experience and educational status. ATCs are not well informed and
involved in formulation, discussion and implementation of policies as these are the mandates of
civil service commission; besides they are uncertain on what is going on in the organization. The
study revealed that the packages are not well defined and explained to ATCs. On the contrary to
the above fact, the study found that employees had enough participation in 2009 G.C. salary
revision study due to special consideration from the government. The study found that the
challenge "your payment is insufficient to support you and your family" ranked as 1st most
challenging issue, "your payment doesn't match your qualification" ranked as 2nd most and "you
are paid low comparing with other similar organization" ranked as 3rd most challenging issue,
"you are not equally paid with your colleague at the same position" ranked as 4 th most
challenging issue.
The study revealed that ECAA is not reviewing its compensation packages regularly in line with
cost of living considering inflation, although review of base pay in 2010 G.C. ECAA is paying
on time. However ATCs perceived that they are not satisfied with the salary they are earning,
they are not paid based on their actual performance, the yearly salary increment is unattractive,
and the payments they receive other than base pay is not satisfactory. The study also found that
ATCs are getting some non financial compensation however they perceived these non financial
compensations are not provided satisfactorily.
And finally the HR director recommended that the organization shall be autonomous on financial
and administrative issues as a possible solution in order to be comparable with the external
market. EATCA executive committee added that the service provider shall be separated from the
regulatory body in order to be financially autonomous and also they said that the association by
itself shall influence the government by doing different researches as a possible solution. ECAA
is providing air traffic service with annual budget allocation from the government even it is
50
collecting its revenue as a navigation fee. The ATS director also said that the government shall
give a financial freedom as like Revenue and Customs Authority as a possible solution.
5.2 CONCLUSION
The study concludes that it is vital for aviation sector to invest on effective compensation
management structures and policies that will promote employee performance. In line with the
major findings the following conclusions are presented.
The study concluded that educational status of the ATCs in line with the age group is good
enough to get the required training in the organization before starting the job at each hierarchy. It
is concluded that ATCs are not earning as to the sector as their basic salary indicates. Female
controllers are less in number so that they should get affirmative action in order to accommodate
them in the anticipated growth in aviation. Most of ATCs service years are below 10 years
implies that there is turnover of employees.
The compensation management practices of ECAA for ATCs are not satisfactory, comparable
and attractive. It is not sufficient and needs much attentions and task to do in order to motivate
and retain them. There weren't efficient and effective compensation management practices in
terms of compensation package such as pay, reward, and incentive. The organization needs
competitive compensation management practices to motivate the employee to perform their job
more effectively in the organization.
The study also concludes that there were challenges of compensation management that the
organization is facing like in giving notice and information on any change that may affect
employee compensation packages, in the formulation, discussion and implementation of policies,
and procedures such as communication of issues concerning compensation and in its flow and
process as the need to be more strengthen in order to attract and retain employees. The study
concluded that there was employee participation in 2009 G.C. during the process of salary
revision. The study again concludes that ATCs are getting more stressful to overcome the
challenges they are facing which is against ILO (1996) recommendations as the job by itself is
considered as one of the most stressful in the world in its working paper occupational stress and
stress prevention in air traffic control. And according to Hashmi et al (2015) stress can occur due
to workplace environments, and organizational climate. Long term stress may lead to physical,
51
psychological disorders, and negative health effects that include cardiovascular disease,
gastrointestinal disease and health service utilization. Stress prevention should be at
organizational and individual level.
Besides the above it is concluded that the organization was not reviewing its compensation
packages periodically. It is concluded that ATCs are always challenging the organization to
review its compensation packages.
It is concluded that the organization is paying payment on time even if ATCs perceived that they
are not happy with the ECAA compensation packages.
5.3 RECOMMENDATIONS
Based on the findings and conclusions the researcher recommends, considering the importance
of strategies proposed towards compensation management practices at the organization, as the
following:
 As most of ATCs are getting insufficient payment from the organization to cover their
basic needs and support their families so that ECAA should:
1. Revise its compensation packages and consider factors like cost of living and current
economic inflation to determine compensation packages;
2. Promote compensation strategies which are unique to ensure that enables to have
improvement of performance and competitive advantage over its competitors and
reducing employee turnover that will benefit employee and employer together;
3. Have reward strategies to align with the employee performance in order to provide the
necessary incentives to motivate employees to deliver the goals of the organization;
4. Design and implement the compensation packages in line with recommendations of
ICAO on annex 1 (personnel licensing and rating). According to the annex, air travel
cannot do without pilots and other air and ground personnel, their competence, skills and
training will remain the essential guarantee for efficient and safe operations. Adequate
personnel training and licensing also instill confidence between States, leading to
international recognition and acceptance of personnel qualifications and licenses and
greater trust in aviation on the part of the traveler. Standards and Recommended Practices
for the licensing of air traffic controllers are provided by Annex 1 to the Convention on
52
International Civil Aviation. Today's aircraft operations are so diverse and complex that
protection must be provided against the possibility of total system breakdown due to
either human error or failure of a system component;
5. Revise its compensation packages in accordance with ILO (2012) international standard
classification of occupations as air traffic controllers are classified with pilots. Because a
good compensation packages motivate employees and enables to have a good attitude on
the organization compensation management practices.
 The organization should promote its importance to the top government body or decision
makers in line with expanding tourism, maximizing service export and politics to the
country and should have a commitment in order to consider either separating the service
provider from the regulatory body or try to have a unique financial management authority
by convincing the decision makers. EATCA should also make joint venture with the
management in order to convince the government by providing documented professional
studies instead of going head to head. As a result it will enable to overcome the internal
and external major challenges that the organization is facing to design and implement
satisfactory compensation packages. Organization should allow employees to participate
actively in designing and redesigning of compensation and benefit policy decision
process, so that the sense of responsibility entrusted into employees will enhance.
 The organization should consider reviewing the compensation packages periodically in
order to be fair, sufficient and competent. ATCs are expected to be at least level 3
medically fit every time as ICAO requirements so that having stress free professionals are
mandatory for safe and efficient operation. Due to the fact that reviewing mixture of
compensation packages will help to have motivated employees and mitigate stress on
ATCs, in other word they will be healthy and serve the organization and country for long
period of time.
 The organization should use both financial and non-financial compensations in addition
to providing other incentives that will help motivate employees. ATCs perception
towards the current compensation is not adequate so that the organization should improve
the perception of them against the compensation systems in the organization; should
consider providing full transport service all time, family base full medical coverage,
house allowance etc. Besides the organization should start its flight familiarization as
53
recommended by IFATCA (2018) technical and professional manual as part of training.
Because compensations that are perceived inadequately can create a lack of energy and
passion.
 Finally according to IFATCA and ILO, because of the uniqueness of the air traffic
control profession, it does not readily lend itself to comparisons with other professions.
However, to ensure that the ATCs’ remuneration is commensurate with their
responsibilities, it should be noted that one of the professions in which the responsibilities
assumed closely resemble that of the ATC is that of the professional pilot. In fact the
controller’s remuneration has to be compared and linked to that of airline captain. In
Ethiopia ATCs are compared to other public servants for remuneration purposes due to
their employment status which has led to considerable dissatisfaction among ATCs. As a
result the decision makers and the organization should be consulted on the proposed
remunerations resulting from these comparisons; and the organization should act
according to the recommendations in order to attract and retain qualified personnel,
enhance performance, have low absenteeism and turnover, have higher outputs and
profits, have reduction in complaints and grievance etc. The study also recommended to
further comprehensive study in separating the service provider from the regulatory body.
54
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57
Appendix I
Ethiopian Civil Service University
Department of Public and Social Security Management
Masters of Public Management
MPM Program
Dear Respondents
Greetings!
The purpose of this questionnaire is designed to collect necessary data for a study entitled
“Compensation Management Practices and Challenges in ATCs in ECAA”. The questionnaire
contains five parts; part I is about the demographic information and part II-V is about your
opinion survey on compensation management. The information gathered will be used only for
the academic purpose and it remains confidential. Therefore, your genuine, honest, and prompt
response is a valuable input for the quality and successful completion of the study. No need to
right your name in any place of this questionnaire. If you have any enquiry please feel free to
contact the researcher at the following address.
Email: golf_siera@yahoo.com, Mobile No: +251911157349
I thank you in advance for your effort and precious time to fill the questionnaire.
Getahun Seifeselassie
MPM Candidate
Part I. Demographic Information of Respondents
Instruction: Please put the indicated sign (√) parallel to your choice
1. Sex
Male................
2. Marital status
Single.............
Female................
Married...........
58
Divorce........... Widowed...........
3. Age group
18-30.................
4. Educational background
31-40............
12th complete..........
41-50................ 51-60.................
Diploma........... Advance Diploma......
First Degree........... Second Degree........... PhD.............
5. Service years in ECAA
≤ 5 Years................
6-10 Years.....................
11-20 Years.............
≥ 21 Years...................
6. Range of your salary fall in ETB Below 7,000.........
10,001-13,000.........
7,000-10,000...............
13,001-16,000.......
˃16,000.......
Please indicate the extent of your agreement or disagreement with each statement by putting a
mark (√) in the column of your choice that is numbered from 1-5 for all items in the
questionnaire. Please use the following rating scale for all items
5
4
3
2
1
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
Part II. How does ECAA practice compensation management?
2.1 Current Compensation Management Practices
No.
Statements
5
1
The compensation packages are managed well
2
3
The salary and benefits are paid well comparing to similar
organizations
The salary and benefits are fit for my job in the organization
4
I received other benefits apart from the salary that is paid
5
The compensation packages are sufficient to motivate
employees to perform effectively based on a laydown
procedure.
The basic salary and benefits are balanced for employees at the
same level in the organization
The compensation packages are competitive, reasonable and
reviewed in a fair manner
6
7
59
4
3
2
1
Part III. What are the major challenges of compensation management?
3.1 Challenges of Compensation Management
No.
Statements
1
Employees (ATCs) receive notice and information on any
changes that will affect their compensation packages
Compensation is managed to ensure that all ATCs receive equal
compensation for the same kind of work
My colleague in another department with the same qualification
receives more compensation than I do
Communication of issues concerning compensation is generally
good in the organization
Employee (ATCs) are well informed and involved in the
formulation, discussion and implementation of policies
concerning compensation
Employees (ATCs) do not know what is going on as far as
compensation is concerned in this organization
The compensation packages are well defined and explained to
employees (ATCs)
2
3
4
5
6
7
5
4
3
2
1
3.2 Please rank in order of importance each of the following challenges of compensation
management by allocating rank 1 for the most.......... to 6 for the least challenging one.
----A. Your payment is insufficient to support you and your family
----B. Your payment does not match your qualification
----C. You are not paid on time
----D. You are not equally paid with your colleague at the same position
----E. You are paid low comparing with other similar organization
----F. There is no challenge regarding compensation
Part IV. How often is the compensation package being reviewed?
No.
Statements
5
1
ECAA reviews the compensation package annually
2
ECAA reviews the compensation package every five years
3
ECAA reviews the compensation package in a reasonable
period
60
4
3
2
1
4
ECAA never ever reviewed its compensation packages
Part V. How do the ATCs perceive the compensation of ECAA?
5.1 Employees Perception on Financial Compensation
No.
Statements
5
1
You are satisfied with your salary
2
You are paid based on your actual performance
3
Your yearly salary increment is attractive
4
You received payments other than base pay
5
You received your payment on time
4
3
2
1
5.2 Write below your perception on non-financial compensation and list some of them that
ECAA provided you.
61
Appendix II
Ethiopian Civil Service University
Department of Public and Social Security Management
Masters of Public Management
MPM Program
The following interview questions are designed to collect information towards the compensation
management practice and challenges of ECAA for ATCs.
List of interview questions:
1. Please explain the current compensation practice relative to with the following points;

Basic Salary

Pay versus Cost of Living Index

Compliance of salary with Government Regulation

Ability to Pay

Fair Compensation

Job Requirements

Demand and Supply of Labor
2. What is the reaction of ATCs on compensation management practices in ECAA?
3. How does the compensation package being compared and analyzed with external market?
4. What are the internal and external factors that may affect the compensation system of
ECAA?
5. Do you think the current compensations are faire, sufficient and competent to employees?
If not why?
6. How often ECAA reviews its compensation policy manual, do ATCs participate during
the revision and what are the factors to do so?
7. What are the major challenges that ECAA is facing with respect to compensation?
8. What are the possible solutions that should be taken to retain talented and qualified ATCs
for the achievement of organization's goals?
62
Appendix III
EATCA Letter
63