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date: 06 July 2022

Abstract and Keywords

This article reviews effects associated with two dimensions of pay structure. The first dimension, the extent to which a firm's pay structure is relatively hierarchical or flat (also referred to as ‘pay dispersion’), is specifically mentioned by Jim Sinegal, CEO of Costco. He states that a pay structure in which top executives make ‘100 or 200 or 300 times more than the average person working on the floor is wrong’ and intimates that Costco's egalitarian pay structure promotes organizational effectiveness. Another aspect of pay structure is the basis of pay. Along with research on pay dispersion effects, the article also reviews a limited number of studies examining the use of person-based, as opposed to job-based, pay systems. It begins with pay form, then review pay structure, followed by a discussion of pay level effects.

Keywords: remuneration, pay effects, pay structure, pay dispersion, organizational effectiveness, job-based pay system, person-based pay system

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