Mainstream economic theory has been considered too abstract to be of much practical use in the hiring, organizing and motivating of employees, leaving the field of personnel to industrial psychologists and sociologists. This text shows that economic analysis can be extended to an important, but traditionally neglected, class of practical problems. It shows that by adding more detail and structure to their theory, economists can make specific predictions and prescriptions for personnel issues that arise in business on a daily basis. The author focuses on compensation and its relation to worker motivation, selection and teamwork. He also discusses job design, job evaluation, institutional arrangements and directions for future research.