International Journal of Manpower

Are firms paying more for performance?

We use nationally-representative, monthly data on the total wage bill and employment of around 8,500 firms to investigate fluctuations in the economic importance of performance bonuses in Britain over the past 15 years. We decompose the share of the total economy-wide wage bill that is accounted for by performance-related pay (PRP) into: (i) the shares of employment in the PRP and non-PRP sectors; (ii) the ratio of base pay between the two sectors; and (iii) the gearing of bonus payments to base pay within the PRP sector.