Does pay-for-performance enhance perceived distributive justice for collectivistic employees?

Abstract

Purpose - To examine the effect of pay-for-performance on distributive justice and the moderating effect of commitment performance appraisal in the case of Korean employees. Design/methodology/approach - Data were collected from 28 companies and 656 employees. Moderated regression analyses were employed. Findings - Findings show that pay-for-performance enhances employees' perception of distributive justice only when there is a commitment performance appraisal practice. Additional analysis shows that the commitment performance appraisal practices of a company influence employee perceptions of such practices in a U-shape fashion. Research limitations/implications - Since, data were collected from 28 companies, the results may need to be modified before being generalized to/for Korean companies. Practical implications - It is notable that only when accompanied by commitment performance appraisal does pay-for-performance enhance employee perception of distributive justice. Managers in Korean companies should consider implementing commitment appraisal practices when they want to utilize pay-for-performance. Originality/value - This paper notes the fundamental changes in the pay systems in Korean companies, and offers practical implications for managers starting out on a pay-for-performance system.