Compensation incentivizes behavior by encouraging employees to push themselves to obtain a certain outcome or achieve a specific goal. Employee compensation is important in an organization because it can help the organization’s equity. For equity to be distributed fairly, employee perceive it as three types of equity internal, personally, and external. In this week’s learning materials we learned about how we often compare our inputs and outputs to our co workers and how this is one way negative inequities can occur. In week 8 lecture 1 it discusses the results of negative inequities such as “ask for a raise, start stealing, reduce inputs, leave the organization, and convince myself the ratios are equal.” (Slide 7) But there are also positive inequities to comparing our equity to our co workers, which are “Increase inputs, Convince myself the ratios are equal.” (Slide 7) These examples are based on the if we think our co workers inputs and outputs are lower than our own.
One example of compensation is pay and incentive pay can greatly effect behavior. According to the article the definition of “Incentive pay is performance-based compensation that rewards an employee for meeting set goals or objectives. This compensation can come in the form of money, stocks, additional paid leave, gifts, etc. Although incentives are often created for individual employees, you can also create incentive pay plans for teams or the entire company.” (Eddy. 2022, August 25) Some benefits of incentive pay on behavior are happier employees, better performance and retention, better organizational performance, and helped execute business strategy. These are some positives to this example of compensation but compensation can also have negative effects on employee behavior such as, uncertainty for employees, distrust, and conflict. Overall compensation can have both positive and negative effects, but it still effects behavior either way.
Incentive pay: Pros, cons & how to implement. Eddy. (2022, August 25). Retrieved November 18, 2022, from https://eddy.com/hr-encyclopedia/incentive-pay/
