The performance and productivity of each individual in an organization leads to the prosperity of the organization and a nation as a whole. Labour productivity is therefore very important since it indicates the extent to which an organizations labor force is efficiently creating output. The aim of this study was to establish the moderating influence of Employee Engagement on the Relationship between Labour productivity and Performance based Reward. The specific objective was to establish the moderating effect of Employee Engagement on the relationship between Performances based Reward and Labour productivity. An explanatory research design was adopted where a census method was used, involving all 205 HR managers in state Corporations in Kenya. The data was first explored for the underlying factor structure through factor analysis before descriptive and inferential statistical analyses. The study established that there is a significant moderation effect of Employee engagement on the relationship between performance Based rewards.The study recommends that organizations wishing to experience higher Labour productivity should seriously consider Employee Engagement strategies, as it will enhance their reward strategies. This study recommends further research to determine the moderating effect of Employee Engagement on the relationship between Labour productivity and Work life balance.