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Wage and Salary Chapter 1

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Milkovich−Newman: Compensation, Eighth Edition

Front Matter

1. The Pay Model

© The McGraw−Hill Companies, 2004

Chapter One
The Pay Model
Chapter Outline
Compensation: Definition, Please? Society Stockholders Managers Employees Global Views—Vive la différence Forms of Pay Cash Compensation: Base Cash Compensation: Merit Pay/ Cost-of-Living Adjustments Cash Compensation: Incentives Long-Term Incentives Benefits: Income Protection Benefits: Work/Life Focus Benefits: Allowances Total Earnings Opportunities: Present Value of a Stream of Earnings Relational Returns from Work The Employment Relationship Combines Transactional and Relational Returns Variations in Transactional and Relational Expectations A Pay Model Compensation Objectives Four Policies Pay Techniques Book Plan Caveat Emptor—Be an Informed Consumer 1. Does the Research Measure Anything Useful? 2. Does the Study Separate Correlation from Causation? 3. Are There Alternative Explanations? Your Turn: Glamorous Internships? or House Elves?

A friend of ours writes that she is in one of the touring companies of the musical Cats. In the company are two performers called “swings” who sit backstage during each performance. Each swing must learn five different lead roles in the show. During the performance, the swing sits next to a rack with five different costumes and makeup for each of the five roles. Our friend, who has a lead in the show, once hurt her shoulder during a dance number. She signaled to someone offstage, and by the time she finished her number, the swing was dressed, in makeup, and out on stage for the next scene. Our friend is paid $2,000 per week for playing one of the cats in the show. She is expected to do a certain number of performances and a certain number of rehearsals per week. She gets paid for the job she does. The swing gets paid $2,500 per week, whether she performs 20

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