The Role of Firm Size and Performance Pay in Determining Employee Job Satisfaction Brief: Firm Size, Performance Pay, and Job Satisfaction

Abstract

Job satisfaction reflects the on-the-job utility of workers and has been found to influence both the behavior of workers and the productivity of firms. Performance pay remains popular and widely used to increase worker productivity and more generally align the objectives of workers and firms. Yet, its impact on job satisfaction is ambiguous. Whereas the increased earnings increase job satisfaction, the increased effort and risk decreases job satisfaction. This paper finds empirical evidence that on net performance pay increases job satisfaction but does so largely among union workers and males in larger firms. Copyright 2008 The Author. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2008.

Are the HR responses of small firms different from large firms in times of recession?

“…A cost saving scheme for constrained smaller firms to maintain survival rather than close down is to reserve cash and alleviating financing constraint by introducing pay cuts or freeze pay. Finally, employees in smaller firms tend to have a more personal relationship with the manager/owner as well as with colleagues, and closer participation in -or at least awareness of -organisational decision making (see, for example, Artz, 2008). It is conceivable that employees in smaller firms are perhaps more amenable to pay cuts or freezes during recession for the benefit of the business because they understand the rationale for such decisions.…”

High performance work systems and workers' well-being: a sceptical view

“…Some recent findings based on a detailed job satisfaction indicator (15 items) show that individual merit pay systems increase the satisfaction of workers in larger firms in which the trade unions are present, but they have no effects in smaller firms (Artz, 2008). In regard to the role of trade unions, moreover, another study by Artz (2010) shows that job satisfaction increases during the first period in which a worker is enrolled with a union, while it decreases in subsequent periods.…”

The Moderating Effect of Work-Life Balance on Job Satisfaction

“…Performance pay increases job satisfaction by creating a work environment that rewards hard work and effort and; a higher level of satisfaction is evident. Performance pay increases productivity and therefore job satisfaction if workers can witness this and gain pride, confidence and self-worth (Artz, 2008). According to Luddy (2005), it is difficult to indicate that pay improves job satisfaction.…”

“…The fairness of pay structures in organisations are extremely significant because employees should feel that they are being compensated for the content of the work they deliver (Artz, 2008). Employees are in agreement that salaries will increase the job satisfaction and the resultant effect is that individual performance is also increased (Al-Zoubi, 2012).…”

“…With incentives, employees exert greater effort (Artz, 2008) and; promotions will only be an effective mechanism for eliciting greater effort if workers place significant value on the promotion itself . Otherwise, organisations would simply use pay increases to reward effort and productivity.…”