Title: The Link of Merit-based Pay to Performance Improvement in Government: Fact or Myth?
Abstract: Merit-based pay has been believed to improve organizational performance by motivating employees through financial incentives and also help them to develop their work-related skills and expertise with help of feedback from supervisors. This study examines that merit-based pay motivates public employees to perform high as we anticipate, analyzing the 2008 data from the federal government. To do so, first I test how the implementation of merit-based pay have affected federal employees’ perception on performance evaluation and reward for performance, by comparing those in agencies that have instituted merit-based pay and in others that have not. Then, I test the effects of merit-based pay on organizational performance. The findings show that employees in agencies with merit-based pay are less likely to believe that their performance is properly rewarded and their performance evaluation and evaluator treat them fairly than those in other agencies. In addition, they also perceived less strong connections between rewards for performance and trust in performance evaluation and evaluator and organizational performance. Conversely, they reported greater commitment to their work and also stronger connection between work commitment and organizational performance than those in agencies without meritbased pay. Interestingly, no significant difference was found in pay satisfaction and in the relationship between pay satisfaction and organizational performance between employees in agencies with merit-based systems and those in others.
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: article
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