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Pay Enough, Don't Pay Too Much or Don't Pay at All? The Impact of Bonus Intensity on Job Satisfaction

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  • Pouliakas, Konstantinos

    ()
    (European Centre for the Development of Vocational Training (Cedefop))

Abstract

Using ten waves (1998-2007) of the British Household Panel Survey (BHPS), this paper investigates the ceteris paribus association between the intensity of incentive pay, the dynamic change in bonus status and the utility derived from work. After controlling for individual heterogeneity biases, it is shown that job utility rises only in response to 'generous' bonus payments, primarily in skilled, non-unionized, private sector jobs. Revoking a bonus from one year to the next is found to have a detrimental impact on employee utility, while job satisfaction tends to diminish over time as employees potentially adapt to bonuses. The findings are therefore consistent with previous experimental evidence, suggesting that employers wishing to motivate their staff should indeed "pay enough or don't pay at all".

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4713.

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Length: 30 pages
Date of creation: Jan 2010
Date of revision:
Publication status: published in: Kyklos, 2010, 63(4), 597-626
Handle: RePEc:iza:izadps:dp4713

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Keywords: job satisfaction; performance pay; bonus; intensity; incentives;

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References

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Citations

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Cited by:
  1. Colin Green & John Heywood, 2012. "Don't Forget the Gravy! Are Bonuses and Time Rates Complements?," Working Papers 13424023, Lancaster University Management School, Economics Department.
  2. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2012. "Rewarding carrots and crippling sticks: Eliciting employee preferences for the optimal incentive design," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1247-1265.
  3. Pouliakas, Konstantinos & Theodoropoulos, Nikolaos, 2011. "The Effect of Variable Pay Schemes on Workplace Absenteeism," IZA Discussion Papers 5941, Institute for the Study of Labor (IZA).

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