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Performance Pay and Applicant Screening

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  • Uwe Jirjahn
  • Jens Mohrenweiser

Abstract

Using German establishment data, we show that the relationship between performance pay and intensity of applicant screening depends on the nature of production. In establishments with increased multitasking, performance pay is associated with a greater intensity of applicant screening. In establishments without increased multitasking, it is associated with a reduced intensity. The findings fit the hypothesis that performance pay induces a positive self-sorting of employees if jobs are less multifaceted. In this case, employers using performance pay need no intense applicant screening to ensure a high quality of matches between workers and jobs. However, if jobs are more multifaceted, performance pay can entail problems of adverse self-sorting. In order to mitigate or overcome these problems, employers tying pay to performance screen applicants more intensely.

Suggested Citation

  • Uwe Jirjahn & Jens Mohrenweiser, 2015. "Performance Pay and Applicant Screening," Research Papers in Economics 2015-11, University of Trier, Department of Economics.
  • Handle: RePEc:trr:wpaper:201511
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    More about this item

    Keywords

    Performance pay; multitasking; self-sorting; applicant screening; non-managerial employees; managerial employees;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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