Pay for Performance Raises Performance

Abstract

Pay for performance intends to raise performance by paying bonuses when certain targets are reached. However, for complex and ambiguous tasks, evidence-based studies have been unable to show that this is the case. The widespread implementation of pay for performance in areas like management, research, healthcare, or public service, therefore, is not justified. In contrast, variable pay for performance worsens performance of such tasks. Nonetheless, enthusiasm for pay for performance remains strong.