Chapter 9 - Direct Financial Compensation Essay

916 Words May 10th, 2015 4 Pages
Chapter 9 - Direct Financial Compensation
Compensation - The total of all rewards provided to employees in return for their services.
Compensation theory has never been able to provide a completely satisfactory answer to what an individuals service for performing a job is worth.
Direct financial compensation - Pay that a person receives in the form of wages, salary, commissions, and bonuses.
Indirect financial compensation - Also known as benefits, it is all financial rewards that are not included in direct financial compensation.
Non-financial compensation - Satisfaction that a person revives from the job itself or from the psychological and or physical environment in which the person works.
Equity theory - Motivation theory that people assess their performance and attitudes by comparing both their contribution to work and the benefits they derive from it to the contributions and benefits of comparison others whom they select - and who in reality may or may not be like them.
Financial equity - Perception of fair pay treatment for employees. (viewed as an asset and expense)
External equity - Equity that exits when a firm’s employees receive pay comparable to workers who perform similar jobs in other firms.
Internal equity - Equity that exists when employees receive pay according to their relative value of their jobs within the same organization. (Job evaluation is a primary means for determine internal equity)
Employee equity - Equity that exist when individuals performing…

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