A Distributive Justice Approach to Performance Bonus Systems

Abstract

The largest operation cost for many organizations is employee compensation. An important management task is therefore the design of an appropriate system to reward and recognise employees. Many practitioners and scholars have advocated the use of pay-for- performance systems (i.e. performances bonuses or merit pay) to increase employee motivation. However, empirical findings are inconsistent and less supportive than expected. To add more clarity in this research stream, we draw on distributive justice research and the instrumental justice perspective to analyse the mechanism and boundary condition of the effects of different performance bonus systems on employee outcomes. To test our hypothe..