1. Department of Economics, Helsinki School of Economics, and HECER, P.O. Box 1210, FIN-00101, Helsinki, Finland 2. The Research Institute of the Finnish Economy, L?nnrotinkatu 4B, FIN-00120, Helsinki, Finland
Abstract:
We analyze how features of performance-related pay (PRP) schemes affect their perceived motivational effects using a Finnish
survey for upper white-collar employees from 1999. The results show that the following features are important for a successful
PRP scheme: (i) the employees have to feel they are able to affect the outcomes; (ii) the organizational level of the performance
measurement should be close to the employee: individual and team level performance measurement increase the probability that
the scheme is perceived to be motivating; (iii) employees should be familiar with the performance measures; (iv) the level
of payments should be high enough and rewards frequent enough. Levels below the median do not generate positive effects; (v)
employees should participate in the design of the PRP scheme.