Are Firms Paying More For Performance?

Alex Bryson, John Forth and Lucy Stokes

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Despite its potential to raise productivity, performance-related-pay (PRP) is not widespread in market-oriented economies. Furthermore, despite secular changes conducive to its take-up, there is mixed evidence as to whether it has become more prominent over time. Ours is the first paper to present firm-level data for the Britain on both the incidence and size of bonus payments in the 2000s. We decompose the share of the total wage bill accounted for by bonuses into the shares of employment in the PRP and non-PRP sectors, the ratio of base pay between the two sectors, and the gearing of bonus payments to base pay within the PRP sector. We show that there was some growth in the share of total pay accounted for by bonuses in Britain in the mid-2000s. However this rise - and subsequent fluctuations since the onset of recession in 2008 - can be almost entirely explained by changes in the gearing of bonus to base pay within the PRP sector. There has been no substantial change in the percentage of employment accounted for by PRP firms; if anything it has fallen over the past decade. Furthermore, the movements in the gearing of bonuses to base pay in the economy at large are heavily influenced by changes in the Finance industry: a sector which accounts for a large proportion of all bonus payments in the British economy.

Keywords: Performance pay; bonuses; recession; business cycle; finance (search for similar items in EconPapers)
JEL-codes: J33 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-bec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Are firms paying more for performance? (2016)
Working Paper: Are firms paying more for performance? (2014)
Working Paper: Are firms paying more for performance? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1272

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