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Factors that Affect a Firm's Pay Policy

Define pay policy. Which competitive pay policy would you recommend to an employer? Why? Does it depend on circumstances faced by the employer? If so, which ones?

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Solution Preview

Pay policy refers to a company's decision to pay above, below, or at market rate for its jobs. The pay policy helps recruit, retain, and motivate employees. In addition, the pay policy of a firm provides the basis for sound financial and employee planning. The pay policy sets out the framework for making decisions on employees' pay(1). The pay policy has the purpose of recruiting a standard of employees, supporting their recruitment/retention/reward system, and ensuring objectivity in compensation decisions. ...

Solution Summary

The answer to this problem explains the factors that affect a firm's pay policy. The references related to the answer are also included.