Performance-based Pay System from Workers Viewpoint
Shingo Tatsumichi & Motohiro Morishima
The Japanese Journal of Labour Studies Sep. 2006 (No.554)
This paper analyzes the realities of the performance-based pay system from workers
'point of view. The results of the analysis show that: 1) Many people support the
system as a basis for wage distribution, appreciating the principle of rewarding workers
' job experience and ability; 2) They want their pay to be determined according
to the performance of the company, division, or team rather than the individual; 3)
They are very suspicious of the performance-based pay system introduced in the
companies they work for; and 4) Dissatisfaction with the performance-based pay system
is growing among workers because it is still at an incomplete stage. Analysis of
wage differences clarified the following four points. 1) The performance-based pay system is causing wage differences to grow. 2) Wage differences are small at companies that have introduced a performance-based pay system after 2000. 3) Workers expect greater wage differences than at present. 4) Greater wage differences may reduce workers' satisfaction, but companies that have measures to secure satisfaction
can prevent such a drop in satisfaction.
Tatsumichi and Morishima (2006) examined the within-firm wage differenticals in the firm with performance-based HRM practices. Expecially, Tatsumichi and Morishima compared the firms that introduced performance-based HRM practices before and after 2000. They found that wage differences were small in companies that have introduced a performance-based pay system after 2000.
