Efficiency of Pay for Performance Programs in Romanian Companies and the Mediating Role of Organizational Justice

Abstract The present research examined the influences of pay for performance programs on employee performance in the Romanian context, by comparing a sample of employees in companies in which such programs are implemented to a sample of employees in organizations in which performance is not used as a criterion in deciding financial rewards. Results show that the work performances of the former, as evaluated by the direct supervisors of each employee, are significantly higher than those of the latter, and that this effect of performance pay is partly mediated by its positive effects on employee perceptions of distributive and procedural justice. Furthermore, results indicate that the individual - level financial incentive systems are more efficient in fostering work performance than the team - level performance pay programs in the Romanian employee sample, and that they also have stronger effects on the two dimensions of organizational justice.