The Impact of Incentive and Reward Systems on Employee Performance in the Saudi Primary, Secondary, and Tertiary Industrial Sectors: A Mediating Influence of Employee Job Satisfaction

Abstract

The three levels of the industrial sector in Saudi Arabia (primary, secondary, and tertiary sectors) are collectively regarded as a pillar of the economy, with great potential that offers attractive job prospects. Therefore, the success of Saudi private sector companies and foreign companies operating in the Kingdom is pivotal. The purpose of this research is to investigate the effect of incentives and rewards on the performance of employees in the Saudi industrial sectors, and the role of job satisfaction in this relationship. The research population consisted of employees working with the industrial sectors in Eastern Region in Saudi Arabia, and the sample comprised 216 full-time employees. Structural equation modeling (SEM) was used as a statistical method for testing the hypotheses. The results demonstrated that there is an insignificant direct effect between incentives and rewards, and employees’ performance. However, evidence shows a significant direct effect between incentives and rewards, and job satisfaction, as well as a significant direct effect between the mediating variable, job satisfaction, and performance. Furthermore, when job satisfaction acts as a mediator, the influence of incentives and rewards on employees’ performance is significant. The research findings have notable theoretical and practical implications for incentive and rewards systems. The present study seeks to further our understanding of the incentive and reward effect on employees’ performance by examining job satisfaction as a mediating variable to the relationship. Additionally, the study attempts to explain how the relationship between proposed variables works in Saudi cultural context, which differs than Western contexts where most of the previous studies have been conducted. Analyzing employee job satisfaction as a mediator facilitates a better understanding of how and why different forms of incentives and rewards enhance employees’ behavior at work.