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Timothy P. Munyon, Jacquelyn D. Jacobs, Andrew M. Carnes and Sergio López Bohle

Compensation is arguably one of the most important human resource practices in organizations. However, it can also be one of the most contentious, potentially eliciting political behavior and maneuvering as employees jockey to gain desired pay and rewards. In this chapter, we consider the variable compensation–organizational politics relationship, reviewing the literature to date regarding this relationship and summarizing key findings. We then evaluate the pay system and managerial characteristics that create a context for political behavior and perceptions of organizational politics. Specifically, we assess how pay dispersion, reward size and intensity, managerial discretion, ambiguity and line of sight, and transparency can create a context conducive to political behavior and perceptions of politics. Moving to the group and team level, we then consider how blended rewards and reward allocation methods influence employee political reactions and perceptions. Finally, we conclude with a discussion of this chapter and future research directions.