The levels of base pay and incentive pay used by small firms to compensate professional employees with general and specific human capital

Women on the Front Line: The Growth of SMEs During Crises

“…However, whereas there is some evidence of how entrepreneurs, owners, CEOs, and top management teams (TMTs) act in SMEs facing external threats, e.g., [23,[36][37][38], studies on the role played by the employees working at their operational levels in critical times are much scarcer. This is problematic because employees are one of the most valuable resources of SMEs [39], and, usually, their largest fixed cost [40,41]. In addition, their contribution to the performance of SMEs tends to be outsized when compared to employees' influence on the outcomes of larger businesses [42].…”

Pay incentives, human capital and firm innovation in smaller firms

“…Moreover, it has also been demonstrated that inducements such as compensation condition an SME’s capacity to attract and retain high calibre human capital (Cardon and Stevens, 2004; Wang et al, 2018). In smaller organisational contexts, effective pay incentives may encourage employees with high human capital to remain with the firm, even though their knowledge, skills and abilities would make them attractive to larger firms (Chowdhury and Schulz, 2020).…”

“…In SMEs, employees are asked to perform multiple roles and tasks simultaneously and to act as generalists rather than specialists (Messersmith and Guthrie, 2010). This, combined with the limited resources available to small firms that frequently generate job overload for employees (Chowdhury and Schulz, 2020), makes employees with low human capital less likely to positively perceive an incentive pay system based on their individual or collective performance, which in turn increases their aversion to innovation. In contrast, employees with high knowledge, skills and abilities may feel more confident in their performance and are more likely to react positively to incentive schemes.…”

The Breadth and Depth of Small Business Human Resource Practices: Do High Performers Differ From Low Performers?

“…Beyond the effects of a single HR practice, research found that combined HR practices interact with employee job satisfaction to impact employee productivity and SME financial performance (Lai et al, 2017). Moreover, implementation of training and development, recruitment efforts, performance appraisals, and competitive compensation impacts sales growth in SMEs (Carlson et al, 2006;Chowdhury & Schulz, 2020). Related, many SMEs use incentive compensation to attract talent and maintain motivation and morale (Carlson et al, 2006;Chowdhury & Schulz, 2020).…”

“…Moreover, implementation of training and development, recruitment efforts, performance appraisals, and competitive compensation impacts sales growth in SMEs (Carlson et al, 2006;Chowdhury & Schulz, 2020). Related, many SMEs use incentive compensation to attract talent and maintain motivation and morale (Carlson et al, 2006;Chowdhury & Schulz, 2020). Nevertheless, there is still a lot we do not know about how HR practices broadly impact small business performance.…”