n extensive review of the literature indicates that important work-
related variables leading to job satisfaction include challenging work,
interesting job assignments, equitable rewards, competent supervi-
sion, and rewarding careers.
It is doubtful, however, whether many
employees would continue working were it not for the money they
earn. Employees desire compensation systems that they perceive as being
fair and commensurate with their skills and expectations. Pay, therefore, is a
major consideration in HRM because it provides employees with a tangible
reward for their services, as well as a source of recognition and livelihood.
Employee compensation includes all forms of pay and rewards received by
employees for the performance of their jobs.
passes employee wages and salaries, incentives, bonuses, and commissions.
comprises the many benefits supplied by employers,
includes employee recognition programs,
rewarding jobs, organizational support, work environment, and flexible work
hours to accommodate personal needs.
Both managers and scholars agree that the way compensation is allocated among
employees sends a message about what management believes is important and the
types of activities it encourages.
Furthermore, for an employer, the payroll constitutes
a sizable operating cost. In manufacturing firms compensation is seldom as low as 20
percent of total expenditures, and in service enterprises it often exceeds 80 percent. A
strategic compensation program, therefore, is essential so that pay can serve to moti-
vate employee production sufficiently to keep labor costs at an acceptable level. This
chapter will be concerned with the management of a compensation program, job
evaluation systems, and pay structures for determining compensation payments.
Included will be a discussion of federal regulations that affect wage and salary rates.
Chapter 10 will review financial incentive plans for employees. Employee benefits that
are part of the total compensation package are then discussed in Chapter 11.