This paper assesses the impact of employee total rewards on the success of Small and Medium Enterprises, answering the following research question; “What is the impact of employee total rewards in the success of SMEs in Mozambique?” The following hypotheses were tested in this study: H0 “Employee total rewards promote high employee performance leading to the success of SMEs” and H1 “Employee total rewards increase production costs leading to the failure of SMEs”. In developing economies many SMEs are facing financial challenges in starting, expanding and consolidating their businesses and employee total rewards are being overlooked as the backbone to the success of their businesses. In this context Mozambique is not an exception. Total rewards are all aspects of the employment offering which include remuneration packages such as fixed pay, incentive pay and benefits and intangible aspects of the psychological contract, such as: the working environment, career development and employment security. Remuneration packages are also known as extrinsic rewards, while psychological rewards are also known as intrinsic rewards. Thus extrinsic and intrinsic rewards amount to employee total rewards, which require the employer’s financial input for them to be in place. In general, there is an assumption that in the short run employee total rewards drain the financial coffers of the employer but in the long run, the return on investment is high. Through total rewards, employees are motivated to perform above expectations, thereby promoting high productivity in a firm. Therefore, this paper examines the relationship between employee total rewards and the success of SMEs in Mozambique.

Keywords : Small and Medium Enterprises, New Institutional Economics, Employee Total Rewards and Productivity.