The Influence and Impact of Long-Term and Short-Term Contracts On Employee Behavior - A Study of Nigeria'S Banking Industry
The Influence and Impact of Long-Term and Short-Term Contracts On Employee Behavior - A Study of Nigeria'S Banking Industry
The Influence and Impact of Long-Term and Short-Term Contracts On Employee Behavior - A Study of Nigeria'S Banking Industry
Anyim Godfrey
Niagara University, Ontario, Canada
godfreya2002us@yahoo.com
Abstract
The human resources strategies and employment arrangements adopted by banks within the
Nigerian Banking sector have undergone several changes over the years. These changes have
potential negative impacts on employee behavior over time. Research about employment
contract of banking employees in developing countries like Nigeria is not readily available. The
main goal of this research was to evaluate the existing relationship between short-term and
long-term contracts and employee behavior. Data were analyzed from 600 (n) banking staff
within Nigeria’s 77,600 (N) bank employees. Correlation analysis was performed to determine
the existing relationship between short-term and long-term contracts and the behavior of the
employee with reference to their level of job satisfaction. The study established a negative
correlation between type of contract and employee behavior. There were significant differences
between the type of contract and the employee behavior. Findings revealed that employees
working under long-term contracts experience higher levels of job satisfaction and therefore
exhibit more positive behavior than employees on short-term contracts.
INTRODUCTION
This topic investigates the influence and the impact of short-term and long-term contract
employment in an organization. The study focused on Nigeria's banking sector which has
significant number of employees on short-term contract employment. As indicated by Okoye
and Aderibigbe (2014), the past four decades have been characterized by a global upsurge in
the number of organizations that employ workers in short-term basis. This has been ascribed to
economic instability and uncertainty (Jackson, Schuler and Jiang, 2014). Further, the situation
can be attributed to the increasing global competition and the need to minimize the cost of doing
business.
In this report, the nature of the contract of employment is used to develop a framework for
understanding employee behavior. Employee job satisfaction is defined as “persistent feelings
towards discriminable aspects of the job situation that are thought to be associated with
perceived differences between what is expected and what is experienced in relation to the
alternatives available in given situation” (Smith, Kendall and Hulin 1969, cited in Ntisa, Dhurup,
and Joubert, 2016) . Therefore, job satisfaction mirrors an employee’s behavior in relation to
their assessment of their experience and level of their satisfaction or dissatisfaction with the
nature of the contracts of employment. To determine the influence and impact of the contract
type on the behaviors of staff with regard to job satisfaction, would require a combination of
complex factors. Wilkin (2013) asserts that the predictors of job satisfaction are compensation,
job security, working conditions, possibility of growth, and promotion and workload. These
variables may be favorable to the employee depending on the nature of the contract. If the
impact is favorable, the level of job satisfaction is expected to be positive while unfavorable
impacts are expected to produce a negative correlation. This argument is supported by
Maslow’s hierarchy of need that indicates that an employee whose needs are met is likely to
experience job satisfaction (Niemela and Kim, 2014).
Problem Statement
Many short-term contract employees lack legislative protection and are not covered in award
schemes while those who are covered may also be evaded during such awards. Short-term
employees are known to earn lower wages than their long-term colleagues (Callea, Urbini,
Ingusci and Chirumbolo, 2016). A general perception among labour relation professionals that
fixed-term/temporary/ short-term contracts are different from the conventional permanent/full-
time/long-term contract with regard to the status and future of job availability (Kiem et al., 2014).
Hence, short-term contracts are often associated with job dissatisfaction. Nonetheless, it is
difficult to locate a quantitative research study that documents the difference in employee
behavior according to contract type (Wooden and Warren, 2003). The associated low level of
job satisfaction with contract type influences the level employee behavior by impacting the
possibility of job security and employee prospects (Kiem et al., 2014). Organizations that equate
growth to economic boom may have to see short-term contracts as a disappointing event. Non-
standard employment contracts are associated with low job satisfaction and therefore negative
employee behavior and organization outcomes (Landsbergis et al., 2014). Evidently,
understanding the influence and impact of the type of contract should be important to
policymakers, social analysts, and business owners. Consequently, the main goal of the report
is exploring how the type of employment contract relates to employee behavior.
Research Questions
1) What influences the choice of employment contract type?
2) How does contract type impact employee behavior?
3) How is the Nigerian banking sector coping with challenges of contract employment?
4) What is trending in human resource management with regard to contract type?
Statements of Hypotheses
Hypothesis 1 (H1): Long-term contracts will significantly impact employee behavior
Hypothesis 2 (H2): Short-term contracts will significantly impact employee behavior
Hypothesis 3 (H3): Job satisfaction will significantly impact employee behavior
LITERATURE REVIEW
This section reviews works done by other researchers in fields related to our topic of study. This
section covers long-term contract employment versus employee behavior, short term contract
employment versus employee behavior, human resource policies, and factors influencing the
choice of contract type.
wage, paid leave, insurance, education and training, and protection from unfair dismissal
(Tinuke, 2012). These benefits are favorable among employees and are known to influence job
satisfaction and hence positive behavior outcomes (Landsbergis et al., 2014). Early Research
indicates higher employee satisfaction among long-term employees than short-term employees
(Ajani & Adisa, 2013).
coordinated to achieve the goal of the organization. HR policies in Nigeria have not been
revised since the enactment of the Labour Act Chapter 198 (Republic of Nigeria, 1990).
Government policies have also stagnated and this may have encouraged the rough landscape
of foreign investment in Nigeria (UNCTAD, 2018).
THEORETICAL FRAMEWORK
Social Exchange Theory
According to Wandera (2011) there is no known theoretical framework for analyzing the
influence and impact of short-term contracts of employment. However, psychological theories
developed for long-term contracts could act as a stepping stone. The theories are subdivided
into two categories: social comparison theories and work stress models. The theory of social
comparison suggests that individuals are driven to evaluate their opinions and capabilities using
outside images (Festinger, 1954 cited in Wandera, 2011). The images can be human or
physical reality observed in others as being realistic and achievable, and subsequently
compared to self, images and other people.
Festiger’s theory hypothesized that humans often feel the urge to probe their opinion
and capabilities against those of others for self-appraisal. He also suggested that self-
evaluation against other people’s specifics declines as opinion or capability becomes more
differentiated. Further, there is an urge to ascend to greater capability, but there are certain
constraints that hinder the possibility of change especially in capability. Like individuals generate
more accurate evaluations of opinions and capabilities.
The assumption on work stress is that it attempts to clarify the results of short-term
contract by underlining certain qualities that make short-term staff more inclined to endure work
related strain (Landsbergis et al., 2014). There are three significant factors. First, short term
employees are secondary to the business promotion or advanced training. This argument is
progressed by theories such as the Flexible Firm concept by Atkinson (Tan, Denton, Rae, &
Chung, 2013) and the Dual Labor Market model. Subsequently, the adverse terms of
employment for short-term employees working conditions can cause a reduction in their level of
productivity (Wilkin, 2013).
As a result, short term contract employees can choose to work away from the workplace
or within the workplace environment (Landsbergis et al., 2014). Furthermore, since short term
contract employees are new individuals from the association, they need to acclimatize
strategies and parts of the association, turning into another potential source of stress (Miller &
Rice, 2013). The absence of support provided by colleagues and the management at the
workplace can likewise influence the onset of stress and adverse health. The third factor is
associated with the lack of control that short term workers may encounter in regard to the
requirements of the business (or bosses).
RESEARCH METHODOLOGY
Research Design
Quantitative research and cross-sectional survey design were used. This choice was informed
by the need to utilize nonparametric statistical approaches to test for variations within the
population. Quantitative research applies statistical analysis to quantify data (Malhotra, 2010).
Cross-tabulation was use and employees were required to have been in their current position
for more than four years.
FINDINGS
Respondents Demographics
The sample population was fairly distributed in terms of gender (males 49% and females 51%).
Most respondents were between the ages of 30-39 years (36%) followed closely by 40-49 years
(34%). Most of the respondents were in low level management (33.4%), and those who worked
in middle management positions (33.4%). In terms of education levels many of the bankers still
have a degree (37.2%) followed by those with diploma (33.4%). Those with a master’s degree
are relatively fewer (6.7%). Nonetheless, a large population of the bankers was employed on
long-term basis (51.6%) and a fairly big population was also working under short-term contract
(48.4%).
Correlations
Correlation was performed to determine how the type of contract relates to the level of
employee satisfaction. The output of the test is presented in Table 1.
Table 1: Correlations
Constructs Contract type Job satisfaction
Contract type 1.000 -0.284**
Job satisfaction -0.284** 1.000
Mean 1.67 3.90
SD 0.766 0.70
Cronbach alpha - 0.887
Generally, there is a negative correlation (-0.284) between the employee’s type of contract and
level of job satisfaction.
Table 2: Kruskal-Wallis test ranking for contract type and job satisfaction
Contract type and job satisfaction N Mean Rank
Long-term contract and job satisfaction 245.0 296.6
Fixed contract and job satisfaction 144.0 196.8
Temporary contract and job satisfaction 105.0 179.1
The analysis results of Kruskal-Wallis analysis indicate a significant difference between contract
type of the banker and their level of job satisfaction. In table 2, mean rank of long-term contract
(296.6) seems to have a higher level of employee satisfaction as opposed to short term
contracts (196.8 and 179.1). Bankers employed on short-term contracts experience lower levels
of satisfaction. The results are rational because bankers with short-term contracts are not
entitled to various benefits that accompany their positions of work; for instance, group life
insurance, and pension fund, among others (Jawando & Adenugba, 2014). The employers
seem to place insignificant interest on human needs of short-term employees and seem to be
treating them only as labor, a factor of production. Therefore, the sense of mutual commitment
and partnership between the short--term contract employee and the employer is lacking
(Srivastava, 2013). Such employees are bound to experience lower levels of job satisfaction
due to lack of deserving consideration from the employer such as equity and fairness (Callea,
Urbini, Ingusci, & Chirumbolo, 2016). On the contrary, the favorable working conditions of long-
term contact employees can lead to increased levels employee satisfaction because employers
will often consider long-term employees for promotions, wage increments, training and
promotion (Pavlopoulos, 2013).
DISCUSSION OF FINDINGS
The research found that short-term employment resulted in low job satisfaction and to a great
extent negative staff behavior such as unscheduled turnover and low productivity. These
findings are in line with Wandera (2011) findings indicating that firms that extensively use short-
term contracts also experience higher rates of unscheduled staff turnover. Moreover, short-term
employees also experience low morale which influences the development of negative attitudes
about their job security and how to best perform their duties. Landsbergis et al. (2014) also
found that short-term contract affect morale in organizations because short-term and permanent
employees may be working together but getting different treatments in terms of compensation
and entitlements.
Short-term contract employees exhibited lower consistent commitment to the
organization than long-term employees. This finding agrees to reports by Cabrales et al. (2014)
that short-term contracts increase feelings of divided loyalty which reduces employee
productivity at the workplace. A lot of time and resources are also used to replace and train
employees because of the high turnover rate associated with short-term contracts.
The study also found that the banking industry employs temporary workers because they
need to reduce the cost of doing business as a result of the challenging economic environment
in the country. As employers turn to short-term contracts millions of youth joining the job market
work under poor conditions and this has the potential to hinder social progress that should come
with employment. Short-term employment in Nigeria’s banking sector grew by over 100 percent
in the last one year and it is projected that the banking industry will have 50% short-term
employees and 50% long-term employees by the end of 2019 (Idowu, 2018). This statistics
reflect the increasing trend of organizations preferring temporary employees over permanent
workers.
CONCLUSION
This research study focused on the evaluation of the influence and impact of contract type on
behavior of bank employees in Nigeria. The assessment considered how bank employees cope
with the associated differences in treatment at the workplace, the development opportunities
and economic benefits presented by the different contract arrangements. Findings show that
long-term contracts are associated with significant positive impact on behaviors of bank
employees. In contrast, short-term contract has a significant negative impact on employee
behaviours. The difference in impact is rationally attributed to the entitlements received by long-
term employees which are more than those of short-term contract workers despite them
handing similar duties.
The likely negative outcomes influenced by unequal treatment due to type of
employment contract results from lower job satisfaction levels. Certainly, these findings provide
insight into some of the most important considerations of equity that would complement the
arguments about efficiency and flexible labor markets advocated for by those in favor of short-
term contracts as a means for reducing cost and increasing profits. Salient changes to the 1990
Labor Act in matters relating to contract employment could change the current state of affairs by
introducing further protections to non-standard contracts.
LIMITATIONS
This study focused on the Nigerian banking sector which is unique to Nigeria’s economy.
Moreover, only three of the twenty-one commercial banks granted the researcher the
permission to perform the research. Although the sample size of the study (n=600) was
relatively high, it may not represent all the bankers in Nigeria’s banking industry. There are
possibilities that the results might have been different if all the commercial banks had
participated. Therefore, the nature of the current study does not allow for the absolute
generalization of the findings within Nigeria’s banking industry.
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