Performance Pay in the Hybrid Work Economy

Jean-Victor Alipour ()

No 12680, CESifo Working Paper Series from CESifo

Abstract: The rise of working from home (WFH) has granted workers unprecedented autonomy while weakening employer monitoring. We test the principal-agent prediction that firms respond by introducing performance pay (PP). Exploiting workers' exposure to the 2020 WFH shock through the WFH feasibility of their 2019 jobs, we find that WFH adoption increases PP, particularly among men and workers outside collective bargaining. WFH reduces labor supply when bundled with PP, consistent with incentive substitution: explicit performance-based pay replaces the implicit incentive to signal effort through longer hours. We document selection on gains: WFH is more eagerly adopted when paired with PP.

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
New Economics Papers: this item is included in nep-hrm and nep-lma
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