The Role of Employee Compensation on Organizational Productivity among Small Business in Banadir Region, Mogadishu, Somalia

This study investigates the role of employee compensation, specifically incentives and overtime payments, in organizational productivity among small businesses in Mogadishu, Somalia. It aims to assess how these compensation strategies influence employee motivation and productivity, offering insights for small business owners to enhance their performance. A descriptive research design was used, with data collected from 200 employees in small businesses via simple random sampling. Descriptive statistics, Multiple Regression and Structural Equation Modeling (SEM) path analyses were conducted using SPSS Version 20 to analyze the relationship between incentives, overtime payments, and productivity. The findings show that 75% of respondents believe that incentives enhance productivity (mean = 4.01, p < 0.05), while 76% agree that overtime payments play a vital role (mean = 4.0, p < 0.05). The regression analysis confirmed that both incentives (β = 0.208, p < 0.05) and overtime payments (β = 0.478, p < 0.05) significantly predicted productivity. This study concludes that fair and performance-driven compensation systems, including incentives and overtime pay, are crucial for motivating employees and enhancing productivity in small businesses. By proving the link between fair compensation and productivity, this study provides small business owners with tangible recommendations to increase efficiency and retain talent, even in difficult economic times. Small businesses recommend transparent performance-based compensation systems, regularly review pay structures, and incorporate non-monetary rewards to address diverse employee preferences. This study provides practical insights, its small sample size and reliance on self-reported data are its limitations. Future research should explore additional compensation components and use larger and more diverse samples. This study provides insights by examining how incentives for workers and overtime payments influence productivity in Mogadishu's small enterprises. This study adds value by focusing on small businesses in Mogadishu and offering new insights into compensation strategies in resource-constrained environments.