performance-related pay in finland
an interesting study by hannu pickkola assessed the impact of performance-related pay on the performance of workers and firms in finland over the 1996-2002 period. Both productivity and profitability increased by about 6 percent as long as performance-related compensation exceeded 3.6 percent of the workers salaries. the alignment of the incentives of the firms and workers clearly resulted in a mutually beneficial outcome.
it is important to note that performance-related pay is most effective in environments where performance is measured at the individual level rather than at the group level. foe example,instituting a performance-related pay for teams may result in "shirking" by individual workers in anticipation that they would "free ride" on other teammates performance. furthermore, when a worker's responsibilities are contractually ambiguous,performance may be more concentrated in reward-connected tasks.