Abstract

What effects do significant increases in variable pay have on the employees receiving them and on their colleagues? What changes in the wage-earner’s attitude and interactions with others? This analysis of the impact of increasing the variable proportion of pay borrows from academic literature on this topic and the author’s observations in the financial industry between 1990 and 2012. Firms consider this sort of pay to be efficient for reaching targets, such as attracting new talent or retaining current employees. The literature on these effects is more ambivalent. Many findings, in published statistical studies and quantitative compa­risons, have drawn diverging conclusions. The author’s observations made in everyday situations cast light on how the behavior of wage-earners changes.