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Bonuses--Not Raises--Boost Employee Performance

Bosses hoping to motivate employees to work harder may want to trade merit-based raises for performance-based bonuses, suggests a Cornell University study.

The four-year study which tracked more than 700 workers found that a 1 percent increase in pay generally led to a 2 percent increase in performance. A lump-sum pay-for-performance bonus of the same amount, meanwhile, inspired employees to improve performance by an average of 15 percent.

"Making a strong link between pay and performance worked with bonuses, but it did not work with pay rises," [study author professor Michael Sturman] said.

"Pay rises build trust between the employee and the company. Bonuses, on the other hand, are highly motivating."

Read more: Bonuses 'better than a pay rise'

ABSTRACT: Using Your Pay System to Improve Employees' Performance: How You Pay Makes a Difference

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This page contains a single entry from Psychology Briefs, the FindCounseling.com Blog, posted on December 15, 2006 4:54 PM.

The previous post was Spinal Fluid May Hold Biomarkers for Alzheimer's.

The next post is Body Image Gap Between White and Black Women May Be Narrowing.

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