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Compensation Fundamentals: Common Pay Structures

Author: Joseph J. Martocchio, Professor Emeritus, University of Illinois at Urbana-Champaign


Employee compensation encompasses the rewards employees receive for performing their jobs, to adjust for cost-of-living increases, for their seniority, job performance over time, or acquiring new competencies, skills or knowledge sets.

HR professionals collaborate with high-level managers to determine the optimal compensation plans that will facilitate recruitment, employee job performance and retention - all within budgetary limits. Then, HR relies on its expertise to create and oversee the implementation of compensation programs.

This guide discusses common pay structures in an employee compensation system. It should be reviewed together with the other parts of the Compensation Fundamentals series: