Marco Clemens (IAAEU and Trier University) and Jan Sauermann (IFAU) examine how the introduction of performance-based pay affects employee productivity in a large telecommunications company.
The study finds no significant effect on performance on average. However, high-skilled workers respond positively to performance-based pay, while low-skilled workers show no improvement in productivity and even reduce work speed. Additionally, employees reduce their overtime hours, possibly to avoid the negative effects of long working hours.
Marco Clemens and Jan Sauermann, Making the right call: The heterogeneous effects of individual performance pay on productivity, Labour Economics, 2025, 102694.
The study finds no significant effect on performance on average. However, high-skilled workers respond positively to performance-based pay, while low-skilled workers show no improvement in productivity and even reduce work speed. Additionally, employees reduce their overtime hours, possibly to avoid the negative effects of long working hours.
Marco Clemens and Jan Sauermann, Making the right call: The heterogeneous effects of individual performance pay on productivity, Labour Economics, 2025, 102694.