Using The Right Financial Reward System In Indonesian Public Sector

2154 words - 9 pages

Motivation in the workplace: using the right financial reward system in Indonesian public sector

INTRODUCTION
Indonesia is one the most populous nation in the world, which happen to sit in one the most dynamic region between Australia and Asian industrial countries like Japan, China and South Korea. With Asia and Australia nearby, Indonesia is trying to leverage its strategic position by building its economic capacity. As commonly seen in developing country, Indonesia’s public sector is seen as inadequately equipped to bolster development in Indonesia. As a way to increase its economic development, Indonesian government decided to initiate bureaucratic reform for its public employee. ...view middle of the document...

However, this essay is limited to financial incentive aspect of motivation especially the alternatives to seniority-based reward system such as performance-based reward system and how it could be implemented in Indonesian public sector to improve motivation in workplace.
LITERATURE REVIEW
Government of Indonesia uses membership-based and seniority-based rewards uniformly for all civil servants irrespective of their fields and even responsibilities. This means that a security guard at Ministry of Public Works who have been working for thirty years would earn more than a geologist at the Ministry of Mineral Resources with ten years of service. Of course, there are other factors that influence the salary, such as formal education and promotion to managerial position. But by far the biggest factor in determining how much an employee earn is the number of years they spent serving the government. Seniority-based reward system indeed have some advantages, its implementation is relatively easy and straightforward. Government only need small resource to count the number of years employees have in service. And in country like Indonesia, employee with loyalty and experience is seen as desirable. Therefore government of Indonesia decided to use seniority-based reward system in the first place.
While seniority-based rewards have the advantages of minimising stress of insecurity and may attract applicants, It does not directly motivate performance and may discourage poor performers from leaving (McShane, Olekalns & Travaglione 2013). Furthermore, this kind of financial reward practice is essentially a golden handcuff which could potentially weaken job performance because they generate continuance rather than affective commitment (McShane, Olekalns & Travaglione 2013). It is this kind of situation that exactly happened at Indonesian government. Government of Indonesian have no problem attracting applicants for public service position, because in a developing country like Indonesia, the prospect of having predictable income is very attractive. However, the Government of Indonesia fail to provide sufficient way to motivate its employee. As a result, employee has no incentive to improve performance and competence. One of the most alarming statistic is that 95% of Indonesian civil servants do not have appropriate competence (Pratama et al. 2015). Therefore Indonesian government need to devise a new financial reward system to motivate employee in order to improve performance and competence.
Other thing that make membership-based rewards unsuitable is that it is alienating high performing employees because this system reward employee not based on performance, therefore it could be perceived unfair by high performing employees. Equity theory principle infers that people should be paid in proportion to their contribution (McShane, Olekalns & Travaglione 2013). Treating employees fairly is good for employee motivation and there are two forms of...

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