Final answer:
Employers attract and keep employees by offering a mixture of direct and indirect remuneration, including health insurance, retirement plans, and wages. Efficiency wage theory highlights that paying employees more can lead to increased productivity and loyalty. Total compensation combines base pay with benefits and statutory contributions.
Step-by-step explanation:
Employers use a variety of direct and indirect remuneration approaches to attract, recognize, and retain employees. This includes employee insurance, particularly health benefits, retirement plans, employer contributions to Social Security, and other benefits such as Medicare and unemployment and worker's compensation insurance. The concept of total compensation per hour includes all these benefits along with the base wages or salaries.
Efficiency wage theory suggests that employers may pay more than market conditions alone would dictate, as better-paid workers are often more productive and motivated, reducing turnover and training costs for the company. Factors such as experience, education, skill, talent, and labor union membership can also influence compensation. Legally required payments and optional benefits like supplemental pay, health benefits, retirement, and savings plans, which can be either defined benefit or defined contribution plans, form part of the total compensation package.