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Why Does Performance Pay De-Motivate: Financial Incentives versus Perfrormance Appraisal

  • Stephen French
  • Katsuyuki Kubo
  • David Marsden

The sheer scale and speed of the shift of payment system from time-based salaries to performance-related pay, PRP, in the British public services provides a unique opportunity to test the effects of incentive pay schemes. This study is based on the first large scale survey designed to measure the effects of performance related pay on employee motivation and work behaviour across the British public services. While there is evidence of a clear incentive effect for those gaining above average PRP, it is likely that it is offset by a more widespread demotivating effect arising from difficulties of measuring performance fairly. Organisational commitment appears to offset some of the negative effects of PRP.

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File URL: http://cep.lse.ac.uk/pubs/download/DP0476.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0476.

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Date of creation: Nov 2000
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Handle: RePEc:cep:cepdps:dp0476
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Simon Burgess & Helene Turon, 2000. "Unemployment dynamics, duration and equilibrium: evidence from Britain," LSE Research Online Documents on Economics 20162, London School of Economics and Political Science, LSE Library.
  2. Stephen Nickell & Luca Nunziata, 2000. "Employment patterns in OECD countries," LSE Research Online Documents on Economics 20198, London School of Economics and Political Science, LSE Library.
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