Performance Pay in the Hybrid Work Economy

Jean-Victor Alipour ()

No 12680, CESifo Working Paper Series from CESifo

Abstract: The large-scale rise of working from home (WFH) has granted workers unprecedented autonomy over how they allocate their time and effort, while weakening employers' monitoring ability. We ask whether firms use performance-based compensation to align workers' incentives when adopting WFH. To isolate the causal impact of WFH, we use individual-level panel data and exploit workers' exposure to the WFH shock in 2020 through their 2019 job's WFH feasibility. Results show that WFH significantly raises the incidence of performance pay and its share in annual earnings between 2019 and 2023, consistent with principal-agent theory. The shift is concentrated among men and workers without collectively bargained wages. WFH simultaneously reduces uncompensated overtime, particularly in the groups with stronger shifts to performance pay. The pattern is expected when implicit incentives (overtime as a worker-quality signal) are replaced by explicit performance-based contracts (bonus for output). We find evidence for selection on gains, where those more easily induced to WFH are also more likely to adopt performance pay.

Keywords: work from home; performance pay; principal-agent; monitoring; signaling (search for similar items in EconPapers)
JEL-codes: D82 D86 J22 J33 J81 M52 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ifo.de/DocDL/cesifo1_wp12680.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12680

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().