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Who pays for performance?

Author

Listed:
  • Erling Barth
  • Bernt Bratsberg
  • Torbjørn Hægeland
  • Oddbjørn Raaum

Abstract

Purpose - The purpose of this paper is to improve our understanding of why some firms tie compensation to worker performance as well as the variation in type of performance pay system across firms. Design/methodology/approach - The study first presents a theoretical framework that motivates n empirical study of performance‐related pay. The data are based on Norwegian establishment surveys from 1997 and 2003. The empirical analysis addresses determinants of adoption of performance pay systems. Findings - Performance‐related pay is more prevalent in firms where workers of the main occupation have a high degree of autonomy in how to organise their work. Performance pay is also more widespread in large firms, but is less common in highly unionised firms and in firms where wages are determined through centralised bargaining. Results show that performance pay is on the rise in Norway, even after accounting for changes in industry structure, bargaining regime, and union density. Finally, it is found that the incidence of performance‐related pay relates positively to product‐market competition and foreign ownership. Originality/value - The paper provides new empirical evidence on the use of performance‐related pay. The results support an interpretation of incentive pay as motivated by agency problems, and provide new evidence on the relationship between payment schemes and institutions such as unions and bargaining framework.

Suggested Citation

  • Erling Barth & Bernt Bratsberg & Torbjørn Hægeland & Oddbjørn Raaum, 2008. "Who pays for performance?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 29(1), pages 8-29, March.
    • Handle: RePEc:eme:ijmpps:v:29:y:2008:i:1:p:8-29
    DOI: 10.1108/01437720810861985
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    References listed on IDEAS

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    1. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 917-962.
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    More about this item

    Keywords

    Performance related pay; Compensation; Payments; Profits; Norway;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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