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The Effect of Variable Pay Schemes on Workplace Absenteeism

In: Research in Labor Economics

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  • Konstantinos Pouliakas
  • Nikolaos Theodoropoulos

Abstract

The effect of variable pay schemes on workplace absenteeism is estimated using two cross-sections of private sector British establishments. Establishments that explicitly link pay with individual performance are found to have significantly lower absence rates. The effect is stronger for establishments that offer variable pay schemes to a greater share of their non-managerial workforce. Matched employer–employee data suggest that the effect is robust to a number of sensitivity tests. Establishments that tie a greater proportion of employees’ earnings to variable pay schemes experience lower absence rates. Quintile regressions suggest that the effect is greater among establishments with a higher than average (‘sustainable’) absence rate. Finally, panel data suggest that a feedback mechanism is present; high absenteeism in the past is correlated with a greater future incidence of individual variable pay schemes, which, in turn, is correlated with lower current absence rates.

Suggested Citation

  • Konstantinos Pouliakas & Nikolaos Theodoropoulos, 2012. "The Effect of Variable Pay Schemes on Workplace Absenteeism," Research in Labor Economics, in: Research in Labor Economics, pages 109-157, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rleczz:s0147-9121(2012)0000036008
    DOI: 10.1108/S0147-9121(2012)0000036008
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    3. Böckerman, Petri & Bryson, Alex & Ilmakunnas, Pekka, 2012. "Does high involvement management improve worker wellbeing?," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 660-680.
    4. Maczulskij, Terhi & Haapanen, Mika & Kauhanen, Antti & Riukula, Krista, 2021. "Dark Half: Decentralized Bargaining and Well-being at Work," ETLA Working Papers 89, The Research Institute of the Finnish Economy.
    5. 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.
    6. 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.
    7. Olfa Aissa, 2016. "A Meta-Analysis of the Financial Participation Impact on Firm Performance," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(8), pages 186-186, July.

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    More about this item

    Keywords

    Performance-related pay; Absenteeism; Incentives;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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