The differing effects of individual- and group-based pay for performance on employee satisfaction: the role of the perceived fairness of performance evaluations

Abstract

This study examines the varied effects of individual-based pay for performance and group-based pay for performance on three measures of employee satisfaction: pay satisfaction, organizational satisfaction, and job satisfaction in the public sector. Examining a twelve-year panel data set, this study finds that individual-based pay for performance has a significantly positive relationship with organizational and job satisfaction, but group-based pay for performance has a significantly negative relationship with pay satisfaction. Meanwhile, the results show that the perceived fairness of performance evaluations has significantly positive relationships with pay satisfaction, organizational satisfaction, and job satisfaction.