The Effect of Variable Pay Schemes on Workplace Absenteeism

Konstantinos Pouliakas and Nikolaos Theodoropoulos

No 5941, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We estimate the effect of variable pay schemes on workplace absenteeism using two cross sections of British establishments. Private sector establishments that explicitly link pay with individual performance are found to have significantly lower absence rates. This effect is stronger for establishments that offer variable pay schemes to a greater share of their non-managerial workforce. Matched employer-employee data suggest that the effect is robust to a number of sensitivity tests. We also find that firms that tie a greater proportion of employees’ earnings to variable pay schemes are also found to experience lower absence rates. Further, quintile regression results suggest that variable pay schemes have a stronger effect on establishments with an absence rate that is higher than an average or “sustainable” level. Finally, panel data suggest that a feedback mechanism is present, whereby high absenteeism in the past is related to a greater future incidence of individual variable pay schemes, which, in turn, is correlated with lower absence rates.

Keywords: performance-related pay; incentives; Britain; absenteeism (search for similar items in EconPapers)
JEL-codes: C21 J22 J33 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2011-08
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-hrm, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Research in Labor Economics, 2012, 36, 109-157

Downloads: (external link)
https://docs.iza.org/dp5941.pdf (application/pdf)

Related works:
Chapter: The Effect of Variable Pay Schemes on Workplace Absenteeism (2012)
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:iza:izadps:dp5941

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().