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Chapter
1
The Pay
Model
Chapter Topics
Compensation: Definition, Please?
Forms of Pay
The Employment Relationship
Combines Transactional and
Relational Returns
A Pay Model
Book Plan
Caveat Emptor - Be an Informed
Consumer
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1-5
Contrasting Perspectives of
Compensation
Society’ Stockholders’
s Views Views
Managers’
Employees’
Views
Views
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Exhibit 1.1: Hourly 1-7
Compensation
Costs for Production Workers
What Is Compensation?
Compensation refers to
all forms of financial
returns and tangible
services and benefits
employees receive as
part of an employment
relationship.
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1-10
Forms of Pay
Direct Pay Forms Indirect Pay Forms
Long-Term Incentives
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1-12
Challenging Learning
Work Opportunities
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1-13
What Is an Implicit
Employment Contract?
An unwritten
understanding between
employers and employees
over their reciprocal
obligations and returns;
employees contribute
toward achieving the goals
of the employer in
exchange for returns given
by the employer and valued
by the employee.
Analyzing Employment
Relationships
HIGH PAY – LOW COMMITMENT HIGH PAY – HIGH COMMITMENT
High
(Stockbrokers) (Microsoft)
Low High
RELATIONAL
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1-15
Compensation Objectives
Efficiency
Fairness
Compliance
External competitiveness
Pay surveys
Employee contributions
Incentiveplans
Performance-based pay increases
Be An Informed Consumer
Does the research measure anything
useful?
Does the study separate correlation
from causation?
Are there alternative explanations?