The aim of this study is to attain a deeper understanding of the relationship between reward systems and employee retention at Municipality X in KwaZulu-Natal, South Africa. The municipality regularly loses employees to other organisations, and this trend compromises productivity, negatively impacting service delivery and increases the costs of replacing valuable employees. This study identifies the challenges with the implementation of the municipality’s reward systems, determines the effectiveness of these systems in enhancing employee retention and provide recommendations to address these.

The study uses a mixed methods approach and from a population of approximately 2700 employees of the Municipality, a sample of 105 employees was selected from each department. The findings revealed that although Municipality X has both intrinsic and extrinsic reward systems in place, they are not implemented effectively. This impacts negatively on its employee retention efforts. The challenges revealed are that reward systems are not designed with employees, there is no consultation with employees, there is insufficient education on reward systems and how they operate. The study recommends that the Human Resource Department of Municipality X strengthen their reward systems and actively involve employees in the design of these. This will increase the probability of retaining skilled employees in the organisation.