Group Effects on a Merit Pay System

Abstract

A relationship between pay increases and performance ratings may reflect differences between individuals, between groups, or both. An empirical study of a firm’s compensation program, demonstrating what proportion of pay raise is attributable to individual performances and to group influences, is presented. The results show how concealed effects of groups pose difficult problems in examining pay‐for‐performance relationships in compensation systems. Policy implications for incentive programs, pay secrecy, differencies in pay for performance within and between work units, substitutability of pay components, and problems in associating individual performance with pay raises are discussed.

Citation

King, A.S. (1986), "Group Effects on a Merit Pay System", American Journal of Business, Vol. 1 No. 2, pp. 35-40. https://doi.org/10.1108/19355181198600012