When money isn't enough: The effect of equity sensitivity on performance-based pay systems

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The value of performance-based pay has been supported by numerous empirical studies, yet such plans are not effective for all individuals. Although the norm of equity suggests that individuals seek equity and thus should work more effectively under pay-for-performance systems, this may not be the case. This article proposes that the effectiveness of performance-based pay systems is a function of the equity sensitivity of the individual. Thus, some individuals prefer conditions in which they are over - or underpaid rather than equitably compensated. These individuals will be less likely to find pay-for-performance systems to be motivating and satisfying. © 1992.

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Human Resource Management Review

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