Using arguments drawn from the organization economics literature, associations between the use of alternative pay practices and firm turnover rates are hypothesized. Relationships between the use of skill-based and group-based compensation plans and firm turnover rates were examined in a sample of 153 New Zealand firms. Ordinary least squares regression results indicate that use of skill-based pay systems improves employee retention, whereas group incentive plans are associated with greater turnover. This latter association is magnified as organization size increases.
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