Compensation and Benefits

Learning goals

Upon completing this course, students are expected to understand the following concepts and their pratical applications:

  • What is compensation and benefits
  • How does C&B relate to strategic human resource management
  • Wage setting theory
  • Effect of C&B practices on organizational performance
  • Considerations in designing incentive compensation packages
  • Performance appraisal
  • International dimension of C&B.


MNG: Milkovich, Newman, GErhart (2014) Compensation, 11th edition. McGraw Hill.

LG: Lazear and Gibbs (2009) Personnel Economics in Practice, 2nd edition. John Willey & Sons.

Bandiera, O., Barankay, I., and Rasul, I. (2007) Incentives for managers and inequality among workers: Evidence from a firm-level experiment. Quarterly Journal of Economics, 122(2): 729-773.

Baron, J. M., Berger, M. C. and Black, D. A. (2006) Selective counteroffers. Journal of Labor Economics, 24(3): 385-409.

Fehr and Schmidt (2006) The economics of fairness, reciprocity and altruism–experimental evidence and new theories. In Kolm and Ythier (Eds) Handbook of the economics of giving, altruism and reciprocity, vol 1.

Hossain, T. and List, J. (2012) The behavioralist visits the factory: Increasing productivity using simple framing manipulations. Management Science, 58(12): 2151-2167.

Lazear, E. P. (2000) Performance pay and productivity. American Economic Review, 90(5): 1346-1361.

Shaw, J., Gupta, N. and Delery, J. (2002) Pay dispersion and workforce performance: Moderating effects of incentives and interdependence. Strategic Management Journal, 23: 491-512.

Zubanov, N. (2012) Risk aversion and effort in an incentive pay scheme with multiplicative noise: Theory and experimental evidence. ERIM working paper ERS-2012-005-STR. Available at

Course contents

This course aims to give broad introduction to the management of employee compensation and benefits (C&B). Starting with discussions about the importance of C&B to workers and firms, proceeding to theoretical foundations of wage setting and the effects of C&B practices on organizational performance. The role of C&B in strategic management of human resources will also be mentioned together with practical implications for the design of C&B schemes. Theoretical and empirical studies on C&B and firm performance will be presented as part of the course.



Professor Nick Zubanov

Type of Course:

Lecture and tutorials

Certification of credits:

Written exam of 90 minutes