Chapter 9, Case Study 2 An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay 1. Why is it important for pay to be externally fair? The reason for paying externally fair wages is that it makes a company to be competitive place, where employees want to work. It is because having good employees will make higher production rates and higher customer satisfaction. In order to be attractive to employees, a company can ask themselves are we paying externally fair. Moreover, a company should care the condition of labor market and cost of living to decide whether their pay rate is externally fair or not. 2. Why is it important for pay to be internally fair? Since a business is working toward a profit, a company should know their limited budget. Specially, labor cost is the biggest expense for a company. So, the pay rate should be internally fair. Also, the company should evaluate each employees’ worth in order for employees to feel it is fair enough. For example, when a employee find out that his co worker who has lower
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