Confronting objections to performance pay: A study of the impact of individual and gain-sharing incentives on the job satisfaction of British employees

Kostas Pouliakas, Ioannis Theodossiou

Research output: Working paperDiscussion paper

Abstract

The increasing interest in incentive pay schemes in recent years has raised concerns regarding their potential damaging effect on intrinsic job satisfaction, or the security of employment. This study explores the impact of both individual and gain-sharing incentives on the overall job satisfaction of workers in the UK, as well as their satisfaction with various facets of jobs, namely total pay, job security, and the actual work itself. Using data from six waves (1998-2003) of the British Household Panel Survey (BHPS), and after correcting for the sorting problem that arises, no significant difference in overall job utility is found between those receiving performance-related pay (PRP) and those on other methods of compensation. In addition, non-economic arguments that PRP crowds-out the intrinsic satisfaction of jobs are also not supported, as are popular concerns regarding the adverse impact of PRP schemes on job security. An important asymmetry in the manner in which individual and gain-sharing incentives affect the utility of employees is nonetheless unearthed, as the latter are consistently found to have a positive effect on employee well-being.
Original languageEnglish
PublisherCentre for European Labour Market Research
Number of pages46
Publication statusPublished - Feb 2007

Publication series

NameUniversity of Aberdeen Business School Working Paper Series
No.08
Volume2007
ISSN (Print)0143-4543

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    Pouliakas, K., & Theodossiou, I. (2007). Confronting objections to performance pay: A study of the impact of individual and gain-sharing incentives on the job satisfaction of British employees. (University of Aberdeen Business School Working Paper Series; Vol. 2007, No. 08). Centre for European Labour Market Research. http://hdl.handle.net/2164/117