Effects of performance-based financial incentives on work performance: A study of technical-level employees in the private sector in Sri Lanka

Vathsala Wickramasinghe () and S. Dabere
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Vathsala Wickramasinghe: University of Moratuwa
S. Dabere: University of Moratuwa

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Abstract: The objective of the study is to investigate the effect of performance-based financial incentives on work performance. The study hypothesized that the design features of performance-based financial incentive schemes themselves may influence individuals' work performance. For the study, survey methodology was used and 93 technical-level employees who were subjected to a performance-based incentive scheme for at least two years in their firms responded. Regression analysis was used for data analysis. It was found that the design features of performance-based financial incentives schemes explain 51 per cent of the variance in work performance. Six of the incentive scheme factors, including the goals of incentive scheme, employee participation in setting goals, incentive scheme type, and payout frequency have significant positive impact on work performance. Overall, the findings suggest that well-designed and carefully implemented incentive schemes have significant positive impact on work performance.

Keywords: compensation management; employee efficiency; behavioral economics; goal setting theory; organizational performance; performance appraisal; reward systems; productivity improvement; extrinsic motivation; employee motivation; incentive compensation; pay-for-performance; technical-level employees; work performance; employee performance; financial rewards; performance-based financial incentives (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://hal.science/hal-05594548v1
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Published in Performance Improvement Quarterly, 2012, 25 (3), pp.37 - 51. ⟨10.1002/piq.21121⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05594548

DOI: 10.1002/piq.21121

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