Chapter 14: Attracting and Retaining Qualified Employees
STRUCTURING CRUISE LINE COMPENSATION
1. Salaries will probably go down. The fringe benefit is a form of compensation. If you add
2. + Selects for people who like to cruise. It may be useful to have this sort of employee on
PAYING FOR FRINGE BENEFITS AT LINCOLN ELECTRIC
Discussion Question Answer:
In a competitive labor market, the employer must provide workers their reservation utilities or
they will go to work for other firms. Thus, it is unlikely that the workers at Lincoln Electric are
STRUCTURING COMPENSATION PLANS
Discussion Question Answers:
1. The pay plans may differ for several reasons. First, Parkleigh may not pay a commission
because they want their people performing several different tasks, only one of which is selling
products to customers. They may, for example, want salespeople spending more time on
customer service and handling customer returns. Kaufmann’s salespeople, because their pay is
tied to sales, have lower relative incentives (at least in the short run) to ensure that customers are
same type of products as their customers. Note also that the employee discount is probably a
tax-advantaged form of compensation. (The employee pays $70 for something they would
otherwise pay $100 for, thus increasing their effective after-tax compensation by $30. To give the
2. This answer obviously depends on the quality of employee at each store, and we do not know
anything about that. Assuming employee quality is the same across stores, we would predict
Kaufmann’s hourly wage to be higher. The employee discount offered by Parkleigh is a form of