Wage and Salary Chapter 1

12487 Words Feb 25th, 2014 50 Pages
Milkovich−Newman: Compensation, Eighth Edition

Front Matter

1. The Pay Model

© The McGraw−Hill Companies, 2004

Chapter One
The Pay Model
Chapter Outline
Compensation: Definition, Please? Society Stockholders Managers Employees Global Views—Vive la différence Forms of Pay Cash Compensation: Base Cash Compensation: Merit Pay/ Cost-of-Living Adjustments Cash Compensation: Incentives Long-Term Incentives Benefits: Income Protection Benefits: Work/Life Focus Benefits: Allowances Total Earnings Opportunities: Present Value of a Stream of Earnings Relational Returns from Work The Employment Relationship Combines Transactional and Relational Returns Variations in Transactional and Relational Expectations A Pay Model Compensation
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The Pay Model

© The McGraw−Hill Companies, 2004

2 Chapter 1 The Pay Model

Think of all the other employees, in addition to the performers, required for putting on a performance of Cats. Electricians, trombonists, choreographers, dressers, janitors, nurses, vocal coaches, accountants, stagehands, payroll supervisors, ushers, lighting technicians, ticket sellers—the list goes on. Consider the array of wages paid to these employees. Why does the swing get paid more than other performers? Why does the performer get paid more (or less) than the trombonist? How are these decisions made, and who is involved in making them? Whether the pay is our own or someone else’s, compensation questions engage our attention. Does the compensation received by all the people connected with Cats matter? Most employers believe that how people are paid affects people’s behaviors at work, which affect an organization’s chances of success. Compensation systems can help an organization achieve and sustain competitive advantage.1

COMPENSATION: DEFINITION, PLEASE?
What image does the word “compensation” bring to mind? It does not mean the same thing to everyone. Yet how people view compensation affects how they behave at work. Thus, we begin by recognizing different perspectives.

Society
Some people see pay as a measure of justice. For example, a comparison of earnings of women with those of men highlights what many

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