Abstract

Employee compensation consists of salaries, reward systems, and benefits. Salary increases depend on the employee's job skills and the market value of those skills. Salary is forward-looking because a salary contract determines what will be earned in the future. The reward system is backward-looking because reward depends on past work. Benefits come in a package and are not as personal as the other two components of compensation. A case study examines how one company has tried to make its compensation system foster teamwork and become a non-issue. The system should be fair to all employees in the company (internally equitable) and appropriate for its industry (externally equitable). Key objectives for the company are to tie compensation to specific skills required for each job and to have ongoing employee evaluations that are not tied to annual salary decisions.