Lump-sum bonus satisfaction: Testing the construct validity of a new pay satisfaction dimension

Abstract

There are both practical and theoretical reasons to measure lump-sum bonus satisfaction. The practical need for such a measure stems from its increased use as a component in modern compensation practices. Based on the means of administering and allocating lump-sum bonuses, a theoretical case can be built suggesting that lump-sum bonus satisfaction constitutes a separate component of pay satisfaction fitting into the Pay Satisfaction Questionaire's (PSQ) theoretical framework. We develop 4 questions that complement the PSQ, and use a series of techniques to test the convergent and discriminant validity of the measure. Empirical evidence shows that bonus-related items are more related to the lump-sum bonus satisfaction measure than other PSQ dimensions. We also demonstrate that the dimension of lump-sum bonus satisfaction has a substantive relationship with attitudinal variables beyond that provided by pay level variables and the PSQ. The development of this measure should foster greater accuracy when assessing pay satisfaction levels and the effects of lump-sum bonus pay policies.