Why is it bad for employees to overwork?
Another drawback of the performance-related pay scheme is that it may cause employees to overwork themselves in an attempt to achieve the goals and targets set out for them. It can be argued that while the increased pressure from work may improve performance in the short term, it may have lasting effects on the employee’s health in the long term. A study using employee-employer data for a sample of French manufacturing firms showed that individual bonuses in managerial occupations are likely to exert high work pressure.
However, performance-related pay has been shown to increase productivity in the workplace as demonstrated by Lazear (1986) who found that moving from an hourly rate of pay to piece rate increased productivity of the business by 41%. This is an important benefit of the performance pay as it also benefits the business and can be linked to higher employee satisfaction. This is also supported by Peter Reilly (2003) who states that rewards not only increase employee satisfaction but can also lead to business success. Adversely some critics argue that performance-related pay does not increase productivity and can reduce employee motivation if some workers feel like the rewards aren’t being distributed fairly. This drop-in motivation would occur because employees feel that they are not being recognised for their work or achievement and may cause them to feel undervalued by the business. This again links in with Hertzberg’s two-factor theory which Labels recognition as a motivator factor which when improved increases job satisfaction.