The Effect of Total Rewards on Employee Engagement: the Moderating Role of Perceived Reward Fairness (Empirical Evidence from private Banks in Ethiopia)

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Addis Ababa University


With the reported downward spiral of engagement levels worldwide, and many Research indicating that employees are no longer satisfied with traditional reward systems, organizations are becoming aware that in order to deal with this, attract best talent and keep them engaged, they need to shift their attention to total reward strategies. The main purpose of this study was to explore the relationship between total rewards and work engagement in Ethiopian context and to determine which reward categories significantly predict employee engagement. The study further endeavored to determine whether perceived reward fairness had a moderating effect on the relationship between total rewards and employee engagement. A quantitative, cross-sectional research design was adopted. By dividing the total population in to strata and then by using a non-probability convenience and purposive sampling strategy, 315 questionnaires were collected and analyzed from two randomly selected private banks in Addis Ababa. The 17-item UWES, WorldatWork total reward model and 18 item questioner to test perception of fairness developed by Moorman (1990) were chosen as measuring instruments. Evidence from the study suggested that three total reward dimensions explained 37.5% of the variance in employee engagement. From the study it was found that Intrinsic rewards had the biggest significant effect on employee engagement. Similarly, Work life balance also had a significant effect on employee engagement .unlike the two Extrinsic rewards was found to negatively affect employee engagement. In addition, results from the study inferred that perceived fairness moderated the relationship between total rewards and employee engagement. Evidences from the study suggested that Total Rewards and perception of fairness are important engagement factors for employees in the workplace. unlike the other two subscales, Extrinsic rewards had negatively affected employee engagement implying that more research is needed and Organizations seeking to implement total reward strategies should pay attention to which reward categories have a positive impact on employee engagement.


A Thesis submitted to the school of graduate studies of Addis Ababa University in partial fulfillment of the requirements for the Master of Business Administration (MBA)


Employee Engagement, Intrinsic Rewards, Perception of Fairness private banks, Work Life Balance