Investigating the Effect of Compensation on Individual Performance: A Study on the Mediating Role of Internal Motivation and the Moderating Role of Self-efficacy and Reward Expectancy

Compensation is the most important part of the employment relationship and is, of course, one of the heaviest costs of any organization. Human resource managers as well as management theorists have always sought to answer the question of how compensation for services affects people's performance. This research has been conducted to explain the relationship between service compensation and individual performance in response to this fundamental question.
This research was carried out using hierarchical regression method - based on real salary information. A questionnaire was used to collect data from 1950 employees of Mellat Bank throughout the country.
The results of this study indicate that the effects of pay for performance on employee performance are higher than fixed payments. In addition, self-success and the expectation of receiving rewards in the relationship between performance-based pay and individual performance play a moderating role. Also, based on the results of hierarchical regression, the mediating role of internal motivation in the relationship between payment and individual performance was not confirmed.
The relationship between payment and performance is positive and significant, and the effect of pay for performance on individual performance is more than base-pay. Self-efficacy also has a moderating role in the relationship between performance pay and individual performance. This is a major consequence of the pay structure of the banking industry in Iran (and of course most of the Iranian organizations).