Merit-based Rewards, Job Satisfaction and Voluntary Turnover: Moderating Effects of Employee Demographic Characteristics

This paper draws on the reflection theory of compensation (Thierry, H. (1998). 'Compensating work'. in P. J. D. Drenth, H. Thierry and C. J. de Wolff (eds), Handbook of Work and Organizational Psychology, 2nd edn, pp. 291-315, Psychology Press: Hove; Thierry, H. F. (2001). 'Job evaluation systems and pay grade structures: do they match', International Journal of Human Resource Management, 8, pp. 1313-1324) to examine the influence of individual merit-based rewards on voluntary turnover via job satisfaction. It also tests the moderating effects of employees' gender, age and education level between merit-based rewards and job satisfaction. Data were collected from 636 employees in Japan at three points in time over a 12-month period. The findings show that merit-based rewards have a direct, positive effect on job satisfaction and an indirect effect on voluntary turnover. The effect of merit-based rewards on job satisfaction was moderated by gender and education, providing evidence that merit-based rewards are more important for male and highly educated employees. Practical and theoretical implications are discussed.