2012) The Impact of Pay Satisfaction and Transformational Leadership on Employee Engagement

Abstract. Employee engagement is an issue of concern to all organizations and they adopt monetary as well as non monetary methods to achieve the same. This paper studies the impact of pay satisfaction and transformational leadership on employee engagement. Data was collected from 93 respondents across domains. Analysis of the findings showed that transformational leadership is a significant determinant of employee engagement. Transformational leadership was also found to be significantly related to pay satisfaction. Firms in today’s competitive times are facing talent shortages due to demographic changes in the workforce. Therefore, retaining employees is becoming a key focus area as employee turnover can affect an organization due to the high costs associated with attrition. Organizations are adopting two broad measures to attract and retain talent. Namely, focusing on transactional strategies and attempting to induce employees by material rewards. Also, competitively increasing salaries are evidence of the fact that companies are trying to outdo each other in enticing employees through hefty pay packages. Organizations are also focusing on transformational strategies, such as developing a positive culture through exemplary leadership. Companies following this strategy often invest large sums of money in leadershi