Pay for individual performance: Aiding or harming sustainable intrinsic motivation?

Abstract

This study aims to understand the effect of pay for individual performance (PFIP) on employees' intrinsic motivation. Although several studies have analyzed this relationship, until now, the role of satisfaction with variable rewards has not been considered. It was hypothesized that employees who are satisfied with variable rewards would find in PFIP a source of feedback that would contribute to the satisfaction of their basic psychological needs. An empirical study was conducted with 184 professionals working in human resource consulting firms. Data were collected using an online survey, and the PROCESS macro for SPSS was used to analyze the proposed hypotheses. The results indicate that, in this context, PFIP has a direct positive effect on intrinsic motivation. It also has an indirect positive effect, which is partially and sequentially mediated by satisfaction with variable rewards and satisfaction of basic psychological needs. Employers should emphasize the informational nature of rewards, and also seek alignment between the objectives of the compensation system and employee expectations and values. The present findings broaden our understanding of how a PFIP system influences a sustainable intrinsic motivation.