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At The Most Basic Level, Compensation Is A Hygiene Factor Required To Meet ...

At the most basic level, compensation is a hygiene factor required to meet fundamental needs such as food and shelter. On other levels, it serves to recognise status and ability, may form a reward for achievement and helps ensure the worker is not tempted to pursue alternative employment: employee turnover generates costs in recruiting and training as well as inefficiencies as new staff learn their roles.

Expectations regarding compensation vary between industries and roles: for example, piece rates are widely accepted in the garment industry, but not in the print industry (Torrington and Hall 1987: 554). While commission is expected by salespeople as recognition of their performance to the extent that it could be regarded as a hygiene factor rather than a motivator if commission is uncapped and a salesperson's earnings are particularly high, it may be resented (Eilon 1992: 177). However, in certain sectors, such as investment banking, large bonuses are an integral element of the organisational culture (ibid: 178).

Eilon also suggests that systems of reward such as plaques and ‘employee of the week' titles are viewed positively in the US but less so in the UK, suggesting that cultural factors influence the individual's perception of their compensation (1992; 169). This is demonstrated by the use of such devices in Asda, influenced by its US owner, Wal-Mart, and the cynicism of a British writer:
walls were plastered with motivational league tables on pastel-coloured paper with lots of stick-on stars. There were photos of colleagues who had excelled themselvesit was as if a very earnest primary-school headmistress cum Guide pack leader had launched one massive Pavlovian collective behaviour modification exercise (Blythman 2005: 119)

The issues of compensation and status are heightened by the wide use of surveys of pay rates and compensation packages: Sweeney and McFarlin suggest that comparisons made between one's own and others' compensation packages contributes to perception of status (2005: 129). Mobility between industries has increased in recent years, leading to comparisons with dissimilar sectors (ibid: 128).

Opportunities outside the organisation are an influence on packages because of the rate at which they are taken up. Firstly, an individual can be very demanding if moving to another company without concern for jeopardising an existing reputation there (Baron and Pfeffer 1994: 201). Secondly, employers are keen to encourage loyalty and may do this through the terms of a compensation package. ‘Golden handcuffs' are one example of this, where a bonus is payable on completion of certain length of service.


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