Ch4 - 71-342: Compensation Management Chapter 4 Components...

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71-342: Compensation Management 1 Chapter 4 Components of Compensation Strategy
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71-342: Compensation Management Types of Pay Base pay Performance pay Indirect pay 2
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71-342: Compensation Management Base Pay A portion of an individual’s compensation that is based on a unit of time worked. Fixed component which is guaranteed by the employer. Accounts for 75-80% of total compensation Proportion of base pay to total compensation is significantly less for higher level jobs 3
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71-342: Compensation Management Why use base pay? Easy to communicate Fixed and certain Output-based pay may not always be practical 4
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71-342: Compensation Management Disadvantages of base pay No link to performance May create entitlement mentality Does not motivate task behaviour 5
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71-342: Compensation Management Performance pay Any type of financial reward that is given only after achievement of certain objectives.
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This note was uploaded on 11/28/2011 for the course FINANCE 101 taught by Professor Chan during the Spring '11 term at Aarhus Universitet.

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Ch4 - 71-342: Compensation Management Chapter 4 Components...

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