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In this paper, we review the literature on pay variation (e.g., pay dispersion, pay compression, pay range) in organizations. Pay variation research has increased markedly in the past two decades and much progress has been made in terms of understanding its consequences for individual, team, and organizational outcomes. Our review of this research exposes several levels-related assumptions that have limited theoretical and empirical progress. We isolate the issues that deserve attention, develop an illustrative multilevel model, and offer a number of testable propositions to guide future research on pay structures.

To examine the effect of pay‐for‐performance on distributive justice and the moderating effect of commitment performance appraisal in the case of Korean employees.

Data were collected from 28 companies and 656 employees. Moderated regression analyses were employed.

Findings show that pay‐for‐performance enhances employees' perception of distributive justice only when there is a commitment performance appraisal practice. Additional analysis shows that the commitment performance appraisal practices of a company influence employee perceptions of such practices in a U‐shape fashion.

Since, data were collected from 28 companies, the results may need to be modified before being generalized to/for Korean companies.

It is notable that only when accompanied by commitment performance appraisal does pay‐for‐performance enhance employee perception of distributive justice. Managers in Korean companies should consider implementing commitment appraisal practices when they want to utilize pay‐for‐performance.

This paper notes the fundamental changes in the pay systems in Korean companies, and offers practical implications for managers starting out on a pay‐for‐performance system.

The purpose of this paper is to analyse the situation of performance management, to be more precise, the usage and attitudes towards pay‐for‐performance on the example of Estonian schools and brings out practical implications for implementing pay‐for‐performance in Estonian general educational schools.

Altogether 298 headmasters and 2,165 teachers participated in this research. The goal of the research was to map the situation of the usage of pay‐for‐performance in Estonian schools and to find out teachers' and headmasters' opinions about the most effective pay‐for‐performance system.

Despite the great expectations of performance management and pay‐for‐performance, it is not being used in many Estonian general educational schools. However, the findings of this research show that both headmasters and teachers have quite positive attitudes towards pay‐for‐performance that gives a favourable platform for implementing pay‐for‐performance in the Estonian educational sector.

The study was mainly quantitative with only a few open questions, which raises limitations for finding complete answers and explanations to questions raised. Therefore, case studies need to be done to find answers to some interesting research questions.

With the view to raising the performance of the Estonian educational system and to guarantee its sustainability, a new course concerning schools' and pupils' individual development must be taken. It can be achieved through performance management and pay‐for‐performance, which also helps to raise teachers' motivation. A central feature of the pay‐for‐performance is that pay must be in accord with performance and must provide an incentive to promote the success of the organisation.

The purpose of this paper is to improve our understanding of why some firms tie compensation to worker performance as well as the variation in type of performance pay system across firms.

The study first presents a theoretical framework that motivates n empirical study of performance‐related pay. The data are based on Norwegian establishment surveys from 1997 and 2003. The empirical analysis addresses determinants of adoption of performance pay systems.

Performance‐related pay is more prevalent in firms where workers of the main occupation have a high degree of autonomy in how to organise their work. Performance pay is also more widespread in large firms, but is less common in highly unionised firms and in firms where wages are determined through centralised bargaining. Results show that performance pay is on the rise in Norway, even after accounting for changes in industry structure, bargaining regime, and union density. Finally, it is found that the incidence of performance‐related pay relates positively to product‐market competition and foreign ownership.

The paper provides new empirical evidence on the use of performance‐related pay. The results support an interpretation of incentive pay as motivated by agency problems, and provide new evidence on the relationship between payment schemes and institutions such as unions and bargaining framework.

Emphasizes the need for coherence between the reward structure and the organizational culture of effective schools. Provides a framework for discussion which includes a typology of rewards, including pecuniary, non‐pecuniary extrinsic and intrinsic rewards. Analyses several pay‐for‐performance strategies, classified by permanency of increases (merit or incentive) and mode of distribution (individual or group). Explores the perceived advantages and disadvantages of various merit and incentive plans in support of effective schools. Suggests that more attention to a closer fit between compensation strategies, organizational strategies, and workforce behaviours is required to increase the positive effects of reward structures.

The purpose of this paper is to investigate the influence of national culture on the adoption of four different incentive pay bundles (incentive maximizer, contingent rewarder, profit rewarder, and incentive minimizer) using GLOBE national culture dimensions in 14 countries. It uses incentive pay bundles derived by Prince et al. (2016).

The study adopted multilevel random-intercept logistic modeling using firm incentive practice usage from the CRANET database and country culture scores from the GLOBE study.

Evidence suggests that in-group collectivism is associated with increased use of the incentive maximizer approach, in which firms use a combination of high levels of individual, team, and profit sharing incentives, and decreased use of the incentive minimizer approach (where firms minimally employ incentives) and the individual and team bonus focused contingent rewarder configuration. Higher uncertainty avoidance is linked to increased use of the profit rewarder approach (where only profit sharing is emphasized) and decreased use of the contingent rewarder approach. Performance-orientation cultures appear to support using the incentive maximizer and avoiding the incentive minimizer bundles.

This study investigates incentive practice bundles that firms use verses separate analysis of practices and use the GLOBE culture metrics. It utilizes multilevel modeling, which has been lacking in past studies of culture and incentives.

Research on the relationship between pay for individual performance (PFIP) and work engagement (WE) is limited. The purpose of this paper is to present a model outlining a threefold association between PFIP and WE: a direct association, an indirect association via pay satisfaction and a joint indirect association via pay level and pay satisfaction.

Structural equation modeling and bootstrapping procedures were used to test hypotheses with regard to these associations based on data obtained from two independent studies: the author’s own research project, and the European Work Conditions Survey 2015.

In both studies, the author found the hypothesized direct association between PFIP and WE; indirect association between PFIP and WE via pay satisfaction; and a joint indirect association between PFIP and WE via pay level and pay satisfaction.

Given its limited cross-sectional design, future longitudinal research in this area is needed to test the model of relations presented in this paper.

The association between PFIP and WE is weak, and partially mediated by pay satisfaction; thus, it seems that to promote WE, it is not solely sufficient to introduce PFIP into remuneration systems, but that, in addition, PFIP should be aligned with employee pay expectations.

This study contributes to the career development literature by proposing and initially testing a model describing the three ways PFIP may be related to WE, one of the most crucial factors in achieving career success.

This chapter provides further evidence on the role of uncertainty and job complexity in pay-for-performance and autonomy decisions. It proposes an encompassing econometric approach in order to explain the differences in previous outcomes that may be due to differing methodological approaches. The main stylized fact is that autonomy and pay-for-performance are positively associated. Additionally, autonomy is positively related to job complexity and uncertainty suggesting that the relationship between these latter variables and pay-for-performance could be through autonomy. After controlling for autonomy, the positive relationship between pay-for-performance and job complexity disappears, while that between pay-for-performance and uncertainty becomes more negative.

This paper aims to look into employee perceptions of politics and fairness in a work setting where a new merit pay system had recently been implemented.

The results are based on employee survey responses from three governmental organizations (n=367) that had implemented analogous merit pay systems.

Hierarchical moderated regression results indicated that perceptions of politics and fairness distinctively and interactively predicted whether the pay system was perceived effective in achieving its objectives. The results suggest that some forms of politics in performance appraisals (e.g. compression) might be perceived less detrimental than others (e.g. favoritism). In a high politics environment, the pay system effectiveness varied as a function of the level of distributive justice. Voice in the pay system development only mattered in a situation where there was a low level of organizational politics.

One of the main limitations of this study is its reliance on cross‐sectional data. Future research should complement employee perceptions about pay system effectiveness with objective data from the organizations studied. Research on the effect of contextual factors, such as national culture on the motives, in and reactions to, organizational politics, is desired.

The result suggests that the adopted merit pay systems were not ineffective or detrimental per se, but that the effectiveness varied as a function of the established political and fairness climates at different levels of the organization.

This study contributes to the discussion on what are the conditions under which politics and fairness are antithetical, and when they are interactively associated with outcomes.

Systems of pay have, appropriately, been the result of the demands of organisational structure. The complex hierarchical organisations of yesteryear were supported by the equally complex “factor analysis” system of pay administration. As organisational structures evolved into flatter, simpler designs, so pay systems became less complex. But now organisations are changing in a very fundamental way. They may appear to have little structure at all. They may just grow to meet the current needs; their structure has become organic. Likewise, pay systems will have to adapt. The author discusses traditional methods of pay for the job, pay for skills and incentives as well as team pay in light of the demands of the organic organisation. Ultimately it appears that pay, as a separate system within HR may disappear altogether. Organisations will move toward attracting, rewarding and retaining their employees through the design of a highly individualised “HR Environment”.