Chapter 1: The Pay Model

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Management and Organizational Studies
Management and Organizational Studies 3342A/B
Linda Eligh

Chapter 1 The Pay Model Compensationrefers to all forms of financial returns tangible services and benefits that employees receive as part of an employment relationshipContrasting Perspectives of Compensationy Culture and background eg China and India boomingy Government CPP employment insurance etcy Society o Some people view pay as a measure of justiceo The gender pay gap in Canada still persists despite the narrowing in this gap through the years and despite pay equity legislation always to the detriment of womeno Voters may see compensation pensions and health care for public employees as the cause of increased taxesy Stockholders o Executive pay is of special interest o In Canada pay for executives is supposed to be tied to the financial performance of the companyo Stockholders may suffer if excessive executive pay tarnishes corporate reputation and sends negative signals to stock marketsy Managers o Directly influences their success in two ways o It is a major expense Competitive pressures force managers to consider the affordability of their compensation decisionso A manager uses it to influence employee behaviours and to improve organization performance The way people are paid affects the quality of their work their attitude toward customers their willingness to be flexible or learn new skills or suggest innovationsy Employees o The major source of their financial securityo Pay plays a vital role in a persons economic and social wellbeing o May view compensation as an entitlement for being an employee of the company or as a reward for a job well doney Global Views y GlobalizationFORMS OF PAYTotal Returns for Worky Total compensation o Cash compensationBase y Wage pay calculated at an hourly rate y Salary pay calculated at an annual or monthly rateMeritcost of living y Merit increase increment to base pay in recognition of part work behaviour y Costofliving adjustment percentage increment to base pay provided to all employees regardless of performance
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