Implication on Compensation Policies of Four Behavioral Wage Theories

Implication on compensation policies of four behavioral wage theories

1. Introduction

Compensation to employees covers remuneration, benefits given by employers like paid vacations, holidays, health insurance, or sometimes stock options, etc. Whether those compensations are available in a modern organization is included in compensation policies, as well as how those compensations will be offered among employees if available. Here this essay considers compensation policy making serves as a factor to influence workers' behaviors in working settings, working harder or not. As a behavior or action is the effect of motivation subject to influence of psychological and environmental factors (Iso-Ahola, 1980), the following parts will include them as defined in need-fulfillment theory, expectancy theory, reinforcement theory and justice theory, finally summarizing implication on compensation policy making.

2. Use of Need –fulfillment in working settings

Need is a type of psychological factors to drive people to make a certain action or choice. In working settings, people are driven to work with more or less commitment. According to hierarchy of needs developed by Abraham Maslow (Goossen, 2000), one will aim for the higher level of need after the lower one is satisfied. From lower to upper level, there are physiological need including food, clothing and so on; safety needs indicating need of stuff to feel safe, social needs referring to the need for feeling of being part of the group, egoistic or self esteem needs emphasizing need of respect by people, and finally the self-actualization need signifying focus on realization of one's own value. Deci and Ryan (2000) summarized those needs in a way that is a little different but relevant. Three needs were mentioned including autonomy, competence and relatedness. The need for autonomy refers to an urge to be causal agents and to experience volition which involves the physiology need and safety need indispensible for experiencing volition. The need for competence concerns the desire to be effective in dealing with the environment, covering self-esteem and self-actualization need. Meanwhile the need for relatedness or belongingness reflects the universal propensity to interact with other people, similar to social need.

Need satisfaction in a work setting was positively related to enjoyment of work and positive behavior at work (Andreassen et al., 2010). This means discovering what need is in favor of some workers is crucial. If one is with the social need or relatedness, what should be offered to them is something like an opportunity to be invited to important meetings or other similar opportunities. If facing the need of competence, those workers would be in favor of giving a desirable position or a post.

3. Use of Expectancy theory in working