A study of Compensation Incentive from the Perspective of Mental Accounting

Abstract

This paper explores the issue of compensation incentive from the perspective of mental accounting, builds a model of compensation incentive from the perspective of mental accounting, and proposes corresponding management suggestions on this basis. The paper fi rstly discusses the relationship between employee pay and non-pay, analyzes employee mental accounting and its important role in the organization, then proposes a model to explore the issue of employee compensation incentive from the perspective of mental accounting, and fi nally proposes a compensation incentive strategy based on the perspective of mental accounting. In our study of the relationship between employee pay and non-pay, we fi rst explored employees’ perceptions of compensation. The study found that employees preferred pay increases to non-pay increases and that diff erent types of employeeshad diff erent preferences for the timing of pay increases. We then analyzed employees’ mental accounting and found that at the individual level, there were diff erent levels of preference for the timing of pay increases. At the organizational level, we found that diff erent types and sizes of organizations have diff erent levels of preference for the timing of compensation rises.