The second volume in The SAGE Handbook of Industrial, Organizational and Work Psychology looks in detail at how teams and individuals function and perform. It covers motivation and organizational socialisation as well as the latest research into diversity and organizational culture in the workplace. Chapter topics include goal setting, employee development, team design and trust at work. Volume II is a key resource for anyone working in or studying organizational psychology.

Chapter 8: Pay Levels and Pay Changes

Pay Levels and Pay Changes

Pay Levels and Pay Changes
Jason D. Shaw


A paradox confronts industrial and organizational psychologists studying compensation and financial incentives in the workplace. On one hand, academic and practitioner circles widely discuss pay-related issues. They find, for example, strong evidence that financial incentives are positively related to individual performance (Jenkins, Mitra, Gupta, & Shaw, 1998) and retention (Dineen & Williamson, 2012; Gerhart & Rynes, 2003; Shaw & Gupta, 2007), and that financial incentives typically have stronger effects than other organizational interventions for enhancing motivation and performance (Aguinis, Joo, & Gottfredson, 2013). Also, practitioner-oriented circles frequently spark heated media debates about compensation-related issues. Even in the United States, long a bastion of pay-for-performance, much controversy surrounds debate ...

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