Employee Compensation

World at Work, the American Compensation Association, uses the concept of total rewards to describe the broad view of how to attract, retain, and motivate a talented and productive workforce. Total rewards consist of three elements: compensation, benefits, and the work experience. These three elements may be analyzed separately, but they work together and to the extent that they work together and are consistent with each other, the organization will realize a synergistic impact. Compensation and benefits are discussed elsewhere in this encyclopedia, so [Page 159]this section focuses on the third element: the work experience.

The Corporate Leadership Council (CLC) has identified four concepts that describe the work experience and that contribute to employee retention. An organization that aspires to improve the work experience for its associates and thereby to retain them must consider these four variables: organizational commitment, job satisfaction, pay satisfaction, and external opportunities. Considering these variables within a large complex organization such as a hospital guides the development of multiple retention strategies for various units, job families, and pay grades within an organization.

The term organizational commitment refers to the relationship between the individual employee and the organization. Is the employer seen as a good organization in which to work? What does the employer do to promote a loyal workforce? Are the employees proud to be employees? Does the employer promote a balance between work and other life roles? Does the employer facilitate a satisfying relationship among coworkers? Do employees have a sense of job security? All these questions help assess the organizational commitment.

Job satisfaction has been extensively researched and frequently measured. However, it is important to note that there is no one-to-one inverse relationship between job satisfaction and intention to leave an employer. The strongest indicator of job satisfaction is an employee's relationship with his or her supervisor. The importance of the immediate supervisor is compounded by the fact that implementing employee retention programs depends on front-line supervisors. Job satisfaction includes the nature of the job itself, promotional opportunities, professional and personal development opportunities, coworker relationships, and work–life balance. Obviously, there is some overlap between job satisfaction and organizational commitment.

Pay satisfaction involves employees' perception of their pay relative to other comparable employees inside the organization (internal equity) and with competitors (market competitiveness). Pay satisfaction includes base pay, retirement, health benefits, and bonuses as a percentage of base pay. Data indicate that pay satisfaction is particularly important to high performers in industry.

External opportunities as perceived by employees are an increasingly influential variable on intention to leave. Increased awareness of options in the labor market leads to greater movement and growth in the percentage of the workforce that is effectively available to the market. Perception of external opportunities are now playing at least a role equal to job satisfaction in predicting turnover. The relationship between organizational commitment and external opportunities needs to be further explored to ascertain if the former acts as a counterweight to the latter. That is, an organization may find that increased emphasis on building organizational commitment may reduce the impact of the external market.

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