Pay enough, don’t pay too much or don’t pay at all? The impact of bonus intensity on job satisfaction

Pouliakas, Konstantinos (2008): Pay enough, don’t pay too much or don’t pay at all? The impact of bonus intensity on job satisfaction.

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”.

• Item Type: MPRA Paper
• Language: English
• Keywords: Incentives, intensity, bonus, performance pay, job satisfaction
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J28 - Safety ; Job Satisfaction ; Related Public Policy; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M54 - Labor Management; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages ; Payment Methods

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