Abstract
A compensation philosophy statement communicates a company’s guiding principles regarding pay. Employee satisfaction with pay depends, in part, on finding objective evidence that confirms company adherence to its philosophy. Unfortunately, most company environments are “noisy” and employees have limited situational awareness of ambiguous pay events (i.e., “cues”). In processing and interpreting these cues, employees are prone to error in classifying cues about company pay practices as indicative of nonconformance with the compensation philosophy. This article focuses on assessing the situational awareness of employees for pay practice adherence to compensation philosophy. The premise, conceptual framework and approach for testing the situational awareness of employees through survey instrumentation are presented. Also included is a discussion of implications for compensation administration.
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