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How does variable pay relate to pay satisfaction among Canadian workers?

Author

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  • Julie Cloutier
  • Denis Morin
  • Stéphane Renaud

Abstract

Purpose - This study aims to determine the effect of individual and group variable pay plans on pay satisfaction among Canadian workers from six occupational groups. Design/methodology/approach - Theoretical foundations rest on the discrepancy model of pay satisfaction and equity theory. Canadian national data from theWorkplace and Employee Survey(WES) were used to test the hypotheses. Findings - The results show that individual and group variable pay plans act differently on workers’ pay satisfaction. For individual pay plans, being eligible for a variable pay plan, and thereby having one's performance rewarded, has no effect on pay satisfaction. Workers on variable pay plans are more satisfied with their pay only when they receive performance‐dependent payouts. In short, they want to be rewarded not only for performance but also for effort. For group pay plans, not receiving payouts has no negative effect on pay satisfaction. In contrast, receiving payouts creates pay dissatisfaction. Individual and group plans have a distinct effect on pay satisfaction by occupational group. Practical implications - Managers can make informed decisions regarding the adoption of variable pay plans and their implementation. Originality/value - This study sheds light on the link between variable pay and pay satisfaction. It improves our understanding of the mechanism by which variable pay affects pay satisfaction: the effort – performance – pay link (i.e. risk and perceived fairness of the allocation).

Suggested Citation

  • Julie Cloutier & Denis Morin & Stéphane Renaud, 2013. "How does variable pay relate to pay satisfaction among Canadian workers?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 34(5), pages 465-485, August.
    • Handle: RePEc:eme:ijmpps:v:34:y:2013:i:5:p:465-485
    DOI: 10.1108/IJM-05-2013-0119
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    Citations

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    Cited by:

    1. Ilija Coric & Katija Vojvodic, 2018. "Variable Pay 2.0: Transforming The Post-Transitional Context In Warehouse Logistics," Business Logistics in Modern Management, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 18, pages 109-123.
    2. Ilija Coric & Katija Vojvodic, 2015. "Variable Pay: A Case Study In Warehouse Logistics," Business Logistics in Modern Management, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 15, pages 189-200.

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