Most studies suggest that when firms have good performance measures, performance-related pay is associated with improved employee productivity and better worker–firm match. If all firms that would benefit from performance-related pay have introduced it, subsidizing other firms to switch through tax breaks and other forms of state assistance will yield lower returns than estimated for current users. But it is also possible that many firms retain existing pay systems when they could do better with performance systems, which would justify state promotion of some schemes. Making pay dependent on company performance may also be a way for firms to share risk with workers through cost adjustments, which could preserve jobs in difficult times. But there is also evidence that incentive schemes do not necessarily improve performance in all contexts and situations. For example, firms often introduce financial participation schemes for reasons that have little or nothing to do with incentives.
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