Abstract
Abstract The present study investigates the motivational effects in a sample of Romanian employees in private companies that implement pay for performance programs of one of the characteristics of these programs, namely pay dispersion, and on the potential mediating role of organizational justice in these effects. To this aim, we examined the relationships between the amounts of pay dispersion introduced by the respective financial incentive system, employee perceptions of distributive and procedural justice, work motivation, and base salary, respectively. The results of the data analysis, performed through structural equation modeling, support our hypotheses concerning the positive effect of performance – related pay dispersion on motivation and the mediating role of the two dimensions of organizational justice in this effect. Larger financial rewards allocated by the financial incentive system for high performers increase employee perceptions of distributive and procedural justice, which, in turn, foster work motivation. Base salary was also found to influence pay dispersion, as well as perceived distributive justice.
Highlights
One of the main solutions adopted by companies worldwide to the challenge of increasing their business performances is to develop and implement flexible pay systems that would stimulate the motivation, efforts and consequent performances of their staff (Milkovich et al, 2013)
The present paper focuses on the motivational effects of one of the characteristics of these financial incentive systems, namely pay dispersion, and on the potential mediating role of organizational justice in these effects
Pay dispersion emerged as significantly and positively related to distributive justice, procedural justice and work motivation; base salary was related to distributive justice, while the latter and procedural justice appear as significantly associated to motivation
Summary
One of the main solutions adopted by companies worldwide to the challenge of increasing their business performances is to develop and implement flexible pay systems that would stimulate the motivation, efforts and consequent performances of their staff (Milkovich et al, 2013). In these “pay for performance” programs, employees are evaluated according to a set of criteria and standards communicated beforehand and they are rewarded according to their results or behaviors in the previous period. We describe the aims, hypothesis, methodological details and results of the empirical study conducted on the topic of the influence of pay dispersion on motivation in Romanian companies currently implementing pay for performance programs
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