The role of individual variable pay in a collectivistic culture society: an evaluation

With increasing worldwide use of individual variable pay (IVP) and thereby some theoretical suggestions to drop it in collectivistic societies it is worth examining the role of variable pay in such cultural surroundings. This paper aims at answering the following research questions: what kind of IVP systems are offered in collectivistic societies, is the implementation of IVP systems related to some specific company characteristic and what results can companies achieve by using IVP systems. A primary research of compensation practices was conducted among 58 Croatian medium and large companies. The research carried out shows that in Croatia, which is a highly collectivistic society, companies offer IVP such as pay for performance, sales commissions and occasional bonuses to its employees. Non-parametric testing has shown that the use of individual-based pay for performance is dependent upon the size and ownership structure of the company. However, contrary to some previous findings and expectations, our analysis reveals only minor differences in organisational outcomes between companies that apply or do not apply individual incentives. Research results support the thesis of global convergence of compensation practices and show that collectivistic heritage does not inhibit the implementation of IVP.