Dive Brief:
- Performance-based pay may incentivize worker productivity, but it also can produce significant mental health issues, according to a new study by researchers at Washington University in St. Louis and Aarhus University in Denmark. Whether in the form of commissions, bonuses, profit sharing, piece rates or goal achievements, it's estimated 70% of the global workforce receives some form of performance-based compensation.
- By examining records of more than 300,000 workers in Denmark whose companies use pay-for-performance compensation, the study assessed the effects workers experience when their organization moves to such an arrangement. The study found a 5.4% increased likelihood that existing employees would use medication for anxiety and depression.
- "This is the tip of the iceberg, and we don’t know how deep that iceberg goes beneath," said a study co-author in a statement. "What this study shows is that pay policies have broader health and wellness implications."
Dive Insight:
Employees say they like getting bonuses; in fact, it's what the majority of respondents said they most wanted as a holiday gift in a Research Now SSI survey published in December 2018. These most recent findings, however, may illuminate why that majority was one of only 40%. While workers often cite salary as the factor that most attracts them to a job, performance-based pay may cause more headaches than it's worth.
And when it comes to hourly workers, early studies show predictable schedules (and thus, predictable pay) improve productivity and sales. Proponents argue that without a stable schedule, employees can't budget and can't make medical appointments.
But if a major pay practice shift isn't on the table, HR may be able to combat worker stress and mental health issues from a different angle. It's a known issue: 96% of workers report high stress on the job. To alleviate the burdens this puts on morale and productivity, some employers have begun offering wellness programs that introduce employees to self-care, habits that foster relaxation and strategies to boost productivity and reduce stress and anxiety. Employers that work to reduce work-related stress may enjoy reduced health care costs, improved retention and lower absenteeism.
