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Compensation Philosophy Paper Name ________ Professor ______ Introduction Compensation is viewed differently, depending on the individual persons perspective (e.g. employee, manager, stockholders, etc.). An employee may view compensation as what is owed to him or her for work performed, while a manager may view pay as an expense. In order for an organization to have an effective compensation strategy, it must consider the various perspectives when creating the organizations compensation strategy. Milkovich, Newman, and Gerhart, authors of Compensation, define Compensation as, “All forms of financial returns and tangible services and benefits employees receive as part of an employment relationship,” (2011, p. 10). In other…show more content…
“As a result, Costco generated $21,805 in the U.S. operating profit per hourly employee, compared with $11,615 at Sam’s Club,” (Cascio, 2006). Fairness can have a direct relationship to internal alignment and external competiveness. Internal alignment refers to pay within an organization: * How pay is determined and pay differentials are determined for individuals performing the same job within the organization. And * How pay differentials are determined for individuals performing dissimilar jobs within the organization (i.e. an analyst as compared to a computer programmer). External competiveness refers to individual pay within an organization as compared to individuals pay, performing similar work at a competing organization. Just as what is considered compensation varies by an individual’s perspective, so does fairness in compensation. According to Milkovich: One group argues that if fair (i.e., sizable) differentials among jobs are not paid, individuals may harbor ill will toward the employer, resist change, change employment if possible, become depressed, and ‘lack that zest and enthusiasm which makes for high efficiency and personal satisfaction in work,’ (2011, p. 87). On the other side of that argument, Unions would argue that differentials in pay should be smaller, with individuals receiving equal pay for equal work. Individuals or groups that argue for

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