Background to the project


Men….when liberally paid by the piece, are very apt to overwork themselves, and to ruin their health and constitution in a few years”.  Adam Smith


As early as the mid-18th century, Scottish economist Adam Smith observed that there may be a link between performance related pay (PRP) - pay that is contingent on workers’ performance - and poor health. Despite this, research on PRP has mainly focused on how PRP affects performance. Therefore, it is not clear whether PRP causes poor health or if people with poor health are more likely to be employed in jobs with PRP.


There are three possible ways in which PRP may influence workers’ health. Firstly, PRP may encourage risk-taking by rewarding a faster work pace, resulting in more work-related accidents. Indeed, a link between PRP and work injuries have been found in various work sectors (Freeman and Kleiner, 2005; Artz and Heywood, 2015). Secondly, it is possible that there is a trade-off between hours spent at work and hours spent engaging in healthy or restorative behaviour. For example, there is some evidence suggesting that workers paid by PRP are more likely to engage in coping behaviours such as smoking and drinking (Bender and Theodossiou, 2014). Finally, it is possible that the uncertain flow of earnings lead to elevated stress levels, which in turn increases the risk of other stress-related health conditions. Indeed, Bender and Theodossiou (2014) found that workers who spend more time in PRP jobs rate themselves as more stressed than those who spend less time paid through PRP.


To test this third pathway an experimental pilot study was designed in which individuals were randomly assigned to complete basic mathematical calculations, either paid by performance or a fixed fee (if they met the minimum target of 10 correct calculations). Stress was measured through self-report as well as through salivary cortisol. As hypothesised, it was found that individuals randomly assigned to the PRP contract were more stressed than individuals assigned to a fixed payment contract (Allan, Bender and Theodossiou, 2019). The design of the pilot study provides the basis for the experiments in the current project, which will directly test different aspects of the relationship between PRP and stress. In total, seven controlled laboratory experiments will take place. The experiments will test how the link between PRP and stress is influenced by external factors, including control over selection of payment contract, intensity, anticipation, perceived stakes and monitoring by peers/supervisors.