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Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees


  • Pouliakas, Konstantinos
  • Theodossiou, Ioannis


The increasing use of incentive pay schemes in recent years has raised concerns about their potential detrimental effect on intrinsic job satisfaction (JS), job security and employee morale. This study explores the impact of pay incentives on the overall job satisfaction of workers in the UK and their satisfaction with various facets of jobs. Using data from eight waves (1998-2005) of the British Household Panel Survey (BHPS) and a uniquely-designed well-being dataset (EPICURUS), a significant positive impact on job satisfaction is only found for those receiving fixed-period bonuses. These conclusions are robust to unobserved heterogeneity, and are shown to depend on a number of job-quality characteristics that have not been controlled for in previous studies.

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  • Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees," MPRA Paper 14244, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14244

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    References listed on IDEAS

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    Cited by:

    1. Pouliakas, Konstantinos, 2008. "Pay enough, don’t pay too much or don’t pay at all? An empirical study of the non-monotonic impact of incentives on job satisfaction," MPRA Paper 10031, University Library of Munich, Germany.
    2. Keith A. Bender & Alex Bryson, 2013. "Performance Pay: Trends and Consequences Introduction," National Institute Economic Review, National Institute of Economic and Social Research, vol. 226(1), pages 1-3, November.
    3. Jones, Derek C. & Kalmi, Panu & Kato, Takao & Mäkinen, Mikko, 2017. "Worker separation under performance pay : Empirical evidence from Finland," Research Discussion Papers 33/2017, Bank of Finland.
    4. Cornelissen, Thomas & Heywood, John S. & Jirjahn, Uwe, 2011. "Performance pay, risk attitudes and job satisfaction," Labour Economics, Elsevier, vol. 18(2), pages 229-239, April.
    5. Benjamin Artz, 2010. "Fringe benefits and job satisfaction," International Journal of Manpower, Emerald Group Publishing, vol. 31(6), pages 626-644, September.
    6. 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.
    7. Yannis Georgellis & Vurain Tabvuma, 2010. "Does Public Service Motivation Adapt?," Kyklos, Wiley Blackwell, vol. 63(2), pages 176-191, May.
    8. Pouliakas, Konstantinos & Theodoropoulos, Nikolaos, 2009. "Performance Pay as an Incentive for Lower Absence Rates in Britain," MPRA Paper 18238, University Library of Munich, Germany.

    More about this item


    performance-related-pay; job satisfaction; job security; intrinsic satisfaction; sorting;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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