Compensation Tools

Compensation tools can be grouped into two broad categories depending on the unit of analysis used to make pay decisions: job-based approaches and skill-based approaches.

Job-based approaches include the most traditional and widely used types of compensation programs.62 These plans assume that work gets done by people who are paid to perform well-defined jobs (for example, secretary, bookkeeper). Each job is designed to accomplish specific tasks (for example, coding, recordkeeping) and is normally performed by several people. Because all jobs are not equally important to the firm and the labor market puts a greater value on some jobs than on others, the compensation system’s primary objective is to allocate pay so that the ...

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