New Horizons in Management series
Edited by George Saridakis and Cary L. Cooper
Chapter 9: Compensation policy and employee turnover
For many years opinion about how far the decision to quit one job and start another is determined by relative pay rates has been heavily contested among managers, consultants, economists and management writers. This remains the case despite decades of research looking at the issue from different perspectives, using different methodologies and sample groups from all manner of professional groups based in many different countries. For some it is self-evident that the amount of money someone will receive for doing a job forms a major, if not the major, consideration in any decision they may make about where to work. It follows that employers are effectively obliged either to ‘meet the market’ or, if possible, ‘lead the market’ if they are successfully to retain effective performers and hence thrive in a competitive marketplace. Others take the view that pay levels are more commonly a second-order consideration; one of a wide range of factors that act as potential antecedents of voluntary employee turnover, but not especially prominent in most decisions to quit. This chapter first explores this debate, summarizing the key research findings that underpin the two viewpoints and suggesting some possible conclusions. The chapter then goes on to evaluate the potential effectiveness of some commonly used compensation tools and practices in terms of their capacity to deter voluntary turnover of a dysfunctional kind. These are salary progression systems, performance-related pay, deferred pay and benefit packages.
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