To summarize the major points covered in this chapter:
Compensation is the HRM function that deals with every type of reward that individuals receive in exchange for performing organizational tasks—wages, salaries, bonuses, commissions, benefits, and nonfinancial rewards like praise.
The objective of the compensation function is to create a system of rewards that is equitable to the employer and employee alike.
Compensation should be adequate, equitable, cost-effective, secure, incentive-providing, and acceptable to the employee.
Motivation theories like the "economic man" theory, Maslow's hierarchy of needs, equity theory, exchange theory, and behavior modification suggest a relationship between pay and motivation.
Pay satisfaction refers to an employee's liking for or dislike of the employer's compensation package, including pay and benefits. Much research has been conducted about the relationship, but it has not been clarified.
There is early evidence linking pay and productivity from the time of the Code of Hammurabi in the 18th century B.C. However, high performance requires more than understanding the relationship among pay, motivation, satisfaction, and productivity.
The pay-structure decision involves comparing jobs within the organization to determine their relative worth.
Determining the worth of a job is difficult because it involves measurement and subjective decisions. Using systematic job evaluation procedures is one way to determine net worth.
The four most widely used methods of job evaluation are job ranking, classification, the point system, and factor comparison.
The wave curve (or line) illustrates the average target wage for each pay class.
Most managers group similar jobs into pay classes or rate ranges.
Broadbanding is a new system for condensing rate ranges into broader classifications. It allows an employer to create a more flexible compensation program based on individual contributions.
