Some are punished and some are rewarded: A study of the impact of performance pay on job satisfaction

Research output: Working paperDiscussion paper

Abstract

Using an econometric procedure that corrects for both self-selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance-related pay (PRP) compared to those on alternative compensation plans. Using data from four waves of the British Household Panel Survey (BHPS), it is found that PRP exerts a positive effect on the mean job satisfaction of (very) high-paid workers only. A potential explanation for this pattern could be that for lower-paid employees PRP is perceived to be controlling, whereas higher-paid workers derive a utility benefit from what they regard as supportive reward schemes. Using PRP as an incentive device in the UK could therefore be counterproductive in the long run for certain low-paid occupations.
Original languageEnglish
PublisherCentre for European Labour Market Research
Number of pages42
Publication statusPublished - Jan 2007

Publication series

NameUniversity of Aberdeen Business School Working Paper Series
No.06
Volume2007
ISSN (Print)0143-4543

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McCausland, W. D., Pouliakas, K., & Theodossiou, I. (2007). Some are punished and some are rewarded: A study of the impact of performance pay on job satisfaction. (University of Aberdeen Business School Working Paper Series; Vol. 2007, No. 06). Centre for European Labour Market Research. http://hdl.handle.net/2164/108