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The IUP Journal of Organizational Behavior :
Linking Compensation and Turnover: Retrospection and Future Directions
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The purpose of this paper is to examine the extant literature on compensation and turnover. This paper briefly traces the history of compensation-retention research over the last four decades and discusses how there has been a shift in the focus and importance given to compensation as a means to influence retention. There has been a shift in the role played by compensation, but the very objective of compensation remains the same and will continue to be so. Through this review, a few research gaps have been identified which can advance our understanding of the effects of compensation on turnover. Thus the paper strives to pave the direction for future research in the area so as to gain a holistic view of the relationship between compensation and turnover.

 
 
 

A proactive and committed organization clearly recognizes that the primary and most valuable source of competitive advantage is its people. They are the only differentiator that helps the organization to survive, sustain and attain competitive advantage. Hence, it could be well understood that the people are its biggest expense, or its biggest investment. Pay has always been a priority to both the parties of employment relationship, i.e., employers and employees, as it is rightly pointed out by Simon (1951) and Milkovich, and Newman (1996) that the beginning of any employment relationship between employer and employee is the pay and thus is a distinctive characteristic of any employment relationship.

Compensation is a connecting factor that brings the employee and organizational goals together. It takes care of the most critical issue that every organization is facing today and that is talent retention. It is a bridge between macro issue of talent retention in organization and micro behavior of its member in the organization. Compensation as an effective tool for talent retention strategy is well established when a survey conducted by Hay Group UK (2010) established that almost 70% of respondent organizations were concerned about the retention of high performers and 63% of organizations use pay increases as a means for rewarding their high performers. According to one survey by Aon Hewitt (2013), pay is regarded as one of the top levers of talent engagement and retention. In other words, the bottom line is that people work to earn a living, so compensation is a key factor in an effective talent retention.

 
 
 

Organizational Behavior Journal,Objective of the Study,Historical Development of Turnover Research,Employee Participation in Compensation Management (EPCM ).