Context: Although employee remuneration has been said to be pivotal in employee management, instituting suitable remuneration packages to retain functional human resources has remained an intriguing issue (Manila, 2011). This study examined the relationship between remuneration and retention of health workers in a rural district setting in Uganda. Ibanda district was selected to represent this setting. Objectives: The study sought to contribute to the improvement of health of the rural communities in Ibanda district by establishing the relationship between preferential remuneration and health workers’ retention in the rural areas, results of which would inform policy makers on how remuneration could be used to achieve retention of health professionals in the health sector. The specific objectives were: to examine the relationship between pay levels and health workers’ retention; to establish the relationship between performance related pay and health workers’ retention and to assess the relationship between monetary allowances and health workers’ retention. Methodology: This was a descriptive-cross sectional design that utilised mixed methods. Key informant interviews were conducted with district political and administrative leadership while a survey questionnaire was administered to health workers in nine public health centers in the district. Data were collected from 115 respondents, 103 of whom were health workers and 12 from the district political and administrative leadership. The collected data were analyzed using SPSS verson16.0. Study findings: The study showed that there is a significant relationship between remuneration and retention of health workers in rural health centers in Ibanda district. All remuneration factors such as pay level, allowances and merit pay showed a significant relationship with retention of health workers tested using Pearson product moment correlation at 0.01level of significance. Conclusions: The study concludes that increasing pay levels, merit pay and allowances that are comparable in the labor market have a critical role in health workers’ retention. Adequate pay makes the health workers more stable on job while inadequate pay keeps them on look-out for better jobs. Recommendations: The study recommends pay policy reforms and structures that can greatly minimize health workers’ turnover. This is achievable by conducting labor market pay surveys. The study further recommends redesigning of allowances to make them more inclusive of various cadres of health workers and timely promotion of the employees that are due since this increases their opportunities for promotion where they can earn increased salaries and stay longer in service.

Retention, Remuneration, Pay Level, Merit Pay, Allowances