How does the size of a person’s salary affect performance in a mixed compensation scheme? | The Oxford Review - OR Briefings

How does the size of a person’s salary affect performance in a mixed compensation scheme?

Research Briefing

Keywords: compensation, mixed compensation, reward, pay, performance -related pay, psychology, salary

Imagine that there are two people doing the same job

Person A receives a fixed salary and a fixed amount for doing a task (performance related pay)

Person B receives a higher fixed salary than person A and the same amount as person A for doing each task (same performance related pay?)

Who is likely to make the most effort, and complete more tasks, person A or B?

At the heart of this question is whether or not people tend to engage in relative thinking in their judgement and decision-making around pay and reward.

If relative thinking is the process that people tend to use, then we would expect that person A would complete more tasks. This is because, when person A looks at the relative amount that completing the task is worth compared to their salary, it is higher than the relative amount person B receives for completing the same task.

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