Compensation Practices and Employees’ Performance in the Insurance Companies in Nairobi City County, Kenya
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Date
2025-11
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Kenyatta University
Abstract
The insurance companies in Kenya have been posting poor employee performance results
in the recent past. These instances could be seen from the increase in fraud cases
involving employees in the insurance companies in Kenya. Employees’ performance is
fundamental for any organization, thus ought to be monitored. This in the premise that
optimal employees’ performance has a ripple effect on organizational performance. One
way of boosting employees’ performance is through compensating them well. This study
therefore sought to research on the effect of compensation practices on employees’
performance in the insurance companies in Nairobi City County, Kenya. Precisely, the
study investigated the effect of salaries and wages, Professional allowances, Individual
incentives and, Fringe benefits on employees’ performance in the insurance companies in
Nairobi. The equity theory, the expectance theory, the agency theory and the balanced
scorecard theory were reviewed so as to support this proposal. The study used the
descriptive research design. The target population was drawn from a pool of insurance
companies operating in Nairobi. The stratified random sampling method was employed in
picking the sample size of 162 units from the target population of 270 units. The
employees in the human resources, finance and sales departments of the insurance
companies in Nairobi constituted the earmarked respondents to this study. This current
study employed primary quantitative data which was collected via questionnaires.
Several diagnostic tests such as the test for normality, linearity, autocorrelation and
multicollinearity were carried out in this study. F-test in ANOVA as well as the
coefficient of determination was conducted before ultimately running the regression
model. The p-value statistics from the regression model was used in answering the
research questions. Ultimately, conclusion and recommendation were given. The study
used tables, graphs, charts and plots in presenting the overall trend of the data. The study
revealed that salaries and wages, professional allowances, individual incentives and
fringe benefits had a positive significant effect on employees’ performance. The study
concludes that offering competitive salaries helps attract top talent in a highly
competitive industry. Professional allowances alleviate the financial burden of job-related
expenses, leading to higher job satisfaction. Personalized incentives resonate more with
employees, as they reflect individual preferences and values leading to higher levels of
motivation and engagement, as employees feel their unique contributions are recognized
and valued. The study recommends that the companies should conduct regular market
surveys to ensure that salary offerings are competitive with industry standards. The
companies should implement a structured bonus system tied to individual and team
performance metrics. The companies should develop programs that reward employees for
achieving specific performance metrics, such as sales targets or customer satisfaction
scores. The companies should offer a strong health plans that cover a wide range of
medical services, including mental health support.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment for the Award of the Degree of Master of Business Administration (Human Resource Management) of Kenyatta University. November, 2025
Supervisor
David Kiiru