Bonuses and performance evaluations

Dirk Sliwka

IZA World of Labor, 2020, No 478, 478

Abstract: Economists have for a long time argued that performance-based bonuses raise performance. Indeed, many firms use bonuses tied to individual performance to motivate their employees. However, there has been heated debate among human resources professionals recently, and some firms have moved away from individual performance bonuses toward fixed wages only or collective performance incentive schemes such as profit-sharing or team incentives. The appropriate approach depends on each company's unique situation, and managers need to realize that individual bonus plans are not a panacea to motivate employees.

Keywords: bonus; compensation; variable pay; incentives; performance evaluation; evidence-based bonus design (search for similar items in EconPapers)
JEL-codes: J33 M5 M52 (search for similar items in EconPapers)
Date: 2020
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