IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/1619.html
   My bibliography  Save this paper

Performance Related Pay Coverage in the UK

Author

Listed:
  • Cowling, Marc

Abstract

A simple model of the firms’ decision to pay workers performance related pay (PRP) is tested using company level data for 1,001 UK private sector businesses. From the basic sample statistics we observe that, on average, 26.5% of workers are covered by PRP systems. Yet this hides the fact that only 50.5% of businesses have any workers at all covered by PRP. Our empirical analysis offers support for the key hypotheses drawn from Lazear type PRP models, which emphasise the relations between firm size and implementation costs, and ease of measurement, as medium and large firms are more likely to have PRP systems. However, these results are over-turned when we consider the extent of workers covered by firm level PRP systems if they are in place. Here we observe that more workers are covered by PRP in micro and small firms.

Suggested Citation

  • Cowling, Marc, 2007. "Performance Related Pay Coverage in the UK," MPRA Paper 1619, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:1619
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/1619/1/MPRA_paper_1619.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Meyer, Margaret & Milgrom, Paul & Roberts, John, 1992. "Organizational Prospects, Influence Costs, and Ownership Changes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 9-35, Spring.
    2. Robert Drago & John S. Heywood, 1994. "The Choice of Payment Schemes: Australian Establishment Data," Labor and Demography 9402001, EconWPA, revised 04 Feb 1994.
    3. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
    4. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    5. Wadhwani, Sushil & Wall, Martin, 1990. "The Effects of Profit-Sharing on Employment, Wages, Stock Returns and Productivity: Evidence from UK Micro-data," Economic Journal, Royal Economic Society, vol. 100(399), pages 1-17, March.
    6. Booth, Alison L & Frank, Jeff, 1997. "Performance-Related Pay," CEPR Discussion Papers 1593, C.E.P.R. Discussion Papers.
    7. Marc Cowling, 2002. "The extent and determination of performance related pay systems in Scandinavian countries," Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 305-316.
    8. Marc Cowling, 2000. "Performance related pay in Belgium and The Netherlands," Applied Economics Letters, Taylor & Francis Journals, vol. 7(10), pages 653-657.
    9. John S. Heywood & W. S. Siebert & Xiangdong Wei, 1997. "Payment by Results Systems: British Evidence," British Journal of Industrial Relations, London School of Economics, vol. 35(1), pages 1-22, March.
    10. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    11. Garen, John E, 1994. "Executive Compensation and Principal-Agent Theory," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1175-1199, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    performance related pay systems; firm size; quality of work;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:1619. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.