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Alternative Pay Practices and Employee Turnover:

An Organization Economics Perspective

University of Kansas

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.

Group & Organization Management, Vol. 25, No. 4, 419-439 (2000)
DOI: 10.1177/1059601100254006


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