Evaluating Employee Compensation

Abstract

The continually rising costs of pay and benefits is always a matter of serious concern to organizations. However, these costs are not subjected to the probing cost-benefit analyses that are routinely used for operating costs. This article explores some of the reasons for manager's indifference to these enormous expenditures. Drawing upon a recent study of how employees view monetary and non-monetary rewards, the authors present an Action Program that managers can use to determine if their organization's compensation expenditures are generating the appropriate motivational responses. Illustrated by its use in a Canadian corporation, this diagnostic tool presents step-by-step procedures to evaluate the motivational effectiveness of each reward item of a compensation program consistent with the human resource objectives of the organization.