Abstract
Pay secrecy - a pay communication policy restricting employees access to information regarding the level of other employees pay in the organization - is a core issue in compensation administration that has been one of the most controversial, yet under-researched topics in the management sciences. We generated and tested a moderated mediation model of the effects of pay secrecy on task performance. A total of 297 students participated in a lab-based simulation with a 2 x 2 x 2 x 3 repeated measures, mixed-factorial design. The results support this model, suggesting that (a) perceived instrumentality partially mediates the adverse effect of pay secrecy on task performance; (b) performance assessment approach moderates the first stage of the mediation (pay secrecy -> instrumentality), such that this inverse association is amplified when performance assessment is subjective and attenuated when it is objective; (c) performance appraisal rating moderates the second stage of the mediation (instrumentality -> performance), such that this positive association is amplified when performance appraisal rating is absolute; (d) the main direct effect is jointly moderated by performance assessment and appraisal rating approaches, such that this negative effect is amplified when performance assessment is subjective and appraisal rating is relative. The implications of the findings are discussed.
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