TY  - RPRT
        AU  - Engellandt, Axel
AU  - Riphahn, Regina T.
        TI  - Incentive Effects of Bonus Payments: Evidence from an International Company
        PY  - 2004/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1229
        UR  - https://www.iza.org/publications/dp1229
        AB  - This study uses panel data describing about 6,500 employees in a large international
company to study the incentive effects of performance related pay. The company uses two
performance related remuneration mechanisms. One is an individual "surprise" bonus
payment. The other is a more structured system, where part of the salary is determined by
individual performance evaluations. We hypothesize that effort is higher in departments
where (i) performance evaluation results are more spread out, (ii) person-specific
performance evaluations are more flexible over time, (iii) surprise bonuses are used more
frequently. These hypotheses are tested using days of absence and overtime work as effort
indicators. The tests yield that hypotheses (ii) and (iii) are supported, and that (i) cannot be
tested reliably due to possible simultaneity bias in our data. We investigate and confirm the
robustness of these findings. They suggest that surprise bonus payments and flexibility in the
evaluation of individual performances over time provide effective incentives for employee
effort.
        KW  - bonus
KW  - mobility
KW  - social status
KW  - worker effort
KW  - overtime
KW  - pay for performance
KW  - merit pay
KW  - absenteeism
        ER  -