In this economy, the idea of compensation can be harsh when it turns on the underlying philosophy of "Just be glad you have a pay check."
A step above that sledge-hammer concept, best used by bullies, is the quid-pro-quo, labor for money, approach, which has the advantage of at least being honest, although it is rather a blunt instrument in human resources.
Andy Rosen, who heads ORC Worldwide's compensation consulting practice, thinks the best approaches tie compensation to career development. "Compensation management is a talent management tool," he said. "It's not just a quid pro quo." (ORC is a big human resources consulting company -- headquarters in NYC, although Andy works at a suburban Philadelphia office.)
Over lunch (he had the Mediterranean wrap), he explained the idea: Companies sort jobs into "job families" and then carefully consider what it takes to rise from a step one grade to a step two and so forth within each family. What are the analytic skills required? What responsibilities are undertaken? By carefully delineating these requirements including soft skills, the employee can talk with supervisors about getting the skills and assignments to move up -- both in responsibility and in pay.