COMPENSATION
Third Canadian Edition
Milkovich, Newman, Cole
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Compensation
Compensation refers to all forms of
financial returns and tangible
services and benefits employees
receive as part of an employment
relationship.
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Contrasting Perspectives of
Compensation
Society’s
Views
Stockholders’
Views
Global
Views
Employees’
Views
Managers’
Views
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Total Returns for Work
Total Returns
Total Compensation
Relational Returns
Benefits
Learning
Opportunities
Recognition
Cash Compensation
& Status
Allowances
Life,
Long-term Health, and
Employment Challenging
Incentives Disability
Security
Work
Base
Merit/Cost
Insurance Work/Life
of Living
Short-term
Programs
Incentives
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Relational Returns from Work
Recognition
& Status
Employment
Security
Employee
Engagement
Learning
Opportunities
Challenging
Work
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THE PAY MODEL
STRATEGIC
POLICIES
ALIGNMENT
TECHNIQUES
INTERNAL
STRUCTURE
STRATEGIC
OBJECTIVES
EFFICIENCY
 Performance
Quality
COMPETITIVENESS
PAY
STRUCTURE
INCENTIVE
CONTRIBUTORS
 Customers &
Stockholders
 Costs
PROGRAMS
FAIRNESS
MANAGEMENT
EVALUATION
COMPLIANCE
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Compensation Objectives
Efficiency
Fairness
Compliance
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Pay System Objectives at
Medtronic and Whole Foods
Medtronic
 Support Medtronic mission





and increased complexity of
business
Minimize increases in fixed
costs
Attract and engage top talent
Emphasize personal, team
and Medtronic performance
Recognize personal and
family total well-being
Ensure fair treatment
Whole Foods
 We are committed to increasing long



term shareholder value
Profits are earned every day through
voluntary exchange with our
customers
Profits are essential to create capital
for growth, prosperity, opportunity, job
satisfaction and job security
Support team member happiness and
excellence
We share together in our collective
fate
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Pay System Policies
 Internal alignment
comparisons between jobs or skill levels inside a
single organization
 External competitiveness
 comparisons of compensation with competitors
external to the organization
 Employee contributions
 relative emphasis placed on employee
performance
 Management
 policies related to managing the pay system

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Conclusion
 the model presented in this chapter provides a structure
for understanding compensation systems
 the three main components of the model include:
 the objectives of the pay system
 the policy decisions that provide the system’s
foundation
 the techniques that link policies and objectives
 two key questions should constantly be asked:
 first, why do it this way? ->there is rarely one correct
way to design a system or pay an individual
 second, so what? ->what does this technique do for
us? ->how does it help achieve organizational goals?
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