This study concerned annual salary system at business companies in Korea. In Korea there have been some studies introducing process and contents of foreign annual salary systems or investigating attitude of Korean employees to annual salary system. These studies, however, failed to investigate the factors affecting effectiveness of annual salary system and to improve annual salary system effectiveness. This study aimed to fill this gap.
This study categorizes the factors affecting effectiveness of annual salary system into two parts; the factors related to contents of annual salary system and the factors related to process of the system.
This study was empirically tested with the data collected from Korean employees. The main findings are as follows.
(1) Employees' annual salary system reaction is regarded as important to increase annual salary system effectiveness.
(2) Annual salary system satisfaction correlates with the appropriateness for raise and reduction of the annual salary, the appropriateness for the jobs to which the annual salary system is applied, the appropriateness of the period that performance is evaluated, the appropriateness of the method by which annual salary is calculated, and the appropriateness of the evaluation criteria.
(3) Annual salary system satisfaction correlates with appraisal satisfaction, rater's knowledge about ratees, the possibility that annual salary is modified, and the employee's knowledge of annual salary system itself.
In addition, it presented the useful information for those who intend to build an annual salary system.
Finally, some academic and managerial implications of findings and several directions for future research were discussed.
