Background Digital signal processing algorithms tend to alter temporal cues in the speech signal and yet individuals with hearing impairment rely strongly on these cues for speech perception. Hence, there is a need to assess the effect of these algorithms on temporal cues and speech perception. The present study aimed to quantify, in a wide dynamic range compression hearing aid, the individual and combined effects of digital noise reduction and directionality algorithms on temporal cues, syllable recognition, and sentence recognition. Temporal cues were quantified by the envelope difference index (EDI). Material and methods The study included 20 individuals (in the age range of 21 to 44 years) with mild to moderate sensorineural hearing loss. Sentence recognition, syllable recognition, and EDI were obtained at different levels in four different aided conditions – digital noise reduction algorithm only, directionality only, both digital noise reduction and directionality on, and both algorithms off. Sentences were presented in noise at +5 dB signal-to-noise ratio from 180° azimuth. Results Compared to independent activation of the algorithms, the combined algorithms significantly improved speech recognition scores at all presentation levels. The temporal changes induced by the algorithms were only mild, even though EDI was the highest when all the algorithms and the directional microphone were activated. Conclusions The noise reduction algorithms and compression induce temporal changes; however speech recognition improved when the algorithms were activated, presumably due to countervailing psychophysical factors.