DOI: 10.5255/ukda-sn-856877
title: Experiments on Performance-related Pay and Stress: Performance-related Pay Penalty, 2020

description: As described in the overarching funded project description, the focus of the research is to examine the relationship between performance-related pay and stress using experimental methods. Importantly, stress is measured here both subjectively (i.e. asking the stress level of participants) and objectively (i.e. collection of salivary cortisol). 

The basic experiment is generally the same across all of the experiments in the project. Subjects are recruited by using a database at the university where the experiments took place. All experimental sessions happened at 1400 to control for the diurnal patterns of cortisol. Participants were also told to avoid exercising, smoking, drinking caffeine and eating two hours before the experiment since these also affect cortisol. During the experiment, participants are told generally about the experiment and enter a 10-minute relaxation period where they can colour in a mindfulness colouring page if they wish. Then they are asked questions about their subjective stress and a baseline cortisol measurement. Next, participants are given three example maths questions to complete in their own time and then allocated their employment contract. The performance-related pay (PRP) contract is piece rate based on the number of correct answers while the minimum performance contract (nonPRP) is a flat rate once ten questions are answered correctly. Then, participants are given 10 minutes to complete as many questions of maths problems (up to 50) without the use of a calculator. The computer screen gives the number of correct answers and for the nonPRP group, a banner is shown when they answer 10 questions correctly. After the task, a screen shows how much they earned from their performance, including the show up fee. Another measure of cortisol is taken and a survey administered to collect information on subjective stress and to collect demographic information. Participants had a 10-minute rest period of colouring after which a third cortisol sample was taken. Then participants had one final 10-minute rest period after which a fourth and final cortisol sample was taken. Finally, participants were called into the control room and given their payment. Cortisol samples were frozen and after all were collected were sent to a laboratory for analysis.

In this experiment, we want to allow for a more ‘real life’ example from the labour market – building in a quality measure by deducting £0.10 for incorrect answers by those in the PRP contract. This penalty for low quality theoretically would generate more stress both because of money being potentially taken away and because participants may take more time on each question meaning less time to complete questions. Thus, in this experiment in addition to the basic description of the experiment above, the allocation of the contract type is done randomly (and thus not subject to potential selection biases) and is done into one of three conditions: nonPRP (£5 flat payment when 10 maths questions are answered correctly), standard PRP (£0.20 for each correct answer) and PRP with penalty (£0.20 for correct answers and £0.10 taken away for each incorrect answer). As with Experiments 2.1 and 1.2, the higher show-up fee of £7.50 was used to increase the sample pool.

The preliminary analysis of the data suggests that the PRP with penalty generates lower subjective stress than the PRP and nonPRP conditions, but there were no differences in the change in cortisol.