Comparative Effects of Merit Pay and Piece-Rate Pay on Organizational Commitment in Manufacturing Firms

This study explores the comparative effects of merit pay and piece-rate pay on organizational commitment among employees in bottled water manufacturing firms in Ondo State, Nigeria. Guided by Meyer and Allen’s three-component model of commitment, the research investigated how performance-based pay systems influence affective, normative, and continuance commitment. A cross-sectional survey was conducted among 246 employees, and data were analyzed using Pearson correlation and multiple regression models. The results reveal that piece-rate pay significantly predicts continuance commitment, suggesting that employees compensated based on output are more likely to remain with their organizations due to economic dependence rather than emotional or moral attachment. Conversely, merit pay—although generally well perceived—was not a statistically significant predictor of any dimension of commitment, indicating possible weaknesses in appraisal fairness or implementation clarity. These findings are consistent with previous literature in low-autonomy and routine task environments, where financial incentives often influence retention but fail to build deeper organizational loyalty. This study extends the compensation literature in developing economy contexts by emphasizing the psychological and structural nuances that shape employee responses to different pay strategies. It also offers practical implications for HR managers seeking to design compensation policies that enhance not just retention, but engagement and commitment. Limitations and recommendations for future research are discussed.