Payment by Results Systems: British Evidence

A model of the firm's decision to adopt a payment by results system is developed and tested with British establishment data. The model maintains that payment by results systems have larger set‐up costs but lower supervision costs than time rates, particularly for short‐tenure workers who are no...

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Bibliographic Details
Published in:British journal of industrial relations 1997-03, Vol.35 (1), p.1-22
Main Authors: Heywood, John S., Siebert, W. S., Wei, Xiangdong
Format: Article
Language:English
Subjects:
Labour relations
Pay for performance
Payments
Performance related pay
Productivity
Studies
United Kingdom
Wages
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Summary:A model of the firm's decision to adopt a payment by results system is developed and tested with British establishment data. The model maintains that payment by results systems have larger set‐up costs but lower supervision costs than time rates, particularly for short‐tenure workers who are not well motivated by deferred compensation. The evidence confirms the model's predictions by showing that payment by results systems substitute for supervision, and that larger establishments and those with shorter‐tenure workers are more likely to adopt payment by results. In addition, both the presence of a payment by results system and the new adoption of such a system are shown to exert a positive influence on measures of establishment performance.
ISSN:0007-1080
1467-8543
DOI:10.1111/1467-8543.00038