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Performance Pay as an Incentive for Lower Absence Rates in Britain

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  • Pouliakas, Konstantinos
  • Theodoropoulos, Nikolaos

Abstract

Using two cross-sections of a representative dataset of British establishments, the effect of various forms of incentive pay (e.g. performance-related pay (PRP), profit-sharing, share ownership, cash bonuses) on the absence rates of firms is investigated. Incentives that are tightly linked to individual or group merit are found to be significantly related to lower absenteeism. Important disparities in the effect of PRP on absenteeism are detected, which depend on the extent of monitoring, private-public status, teamwork, and other organizational changes. The findings are robust to the potential endogenous relation between monitoring, PRP and absenteeism, and have important implications for the design of optimal compensation policies by firms.

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  • Pouliakas, Konstantinos & Theodoropoulos, Nikolaos, 2009. "Performance Pay as an Incentive for Lower Absence Rates in Britain," MPRA Paper 18238, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:18238
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    More about this item

    Keywords

    performance-related pay; incentives; absenteeism;
    All these keywords.

    JEL classification:

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

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