CHAPTER 2

Compensation Basics

How people are paid affects their behaviors at work, which affects an organization’s success. For most employers, compensation is a major part of total cost, and often it is the single largest part of operating cost. These two factors together mean that well-designed compensation systems can help an organization achieve and sustain competitive advantage.

—Milkovich, Newman, and Gerhart

Executive pay is part of all compensation paid by corporations and many of the details are much the same. Consequently, this chapter includes compensation basics as well as the additional details associated with executives. Compensation represents wages or salaries paid to employees plus bonuses and other benefits. Cash compensation ...

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