Motivational effects of pay dispersion in pay for performance programs implemented in Romanian companies

The present study investigates the motivational effects in a sample of Romanian employees in private companies that implement pay for performance programs of one of the characteristics of these programs, namely pay dispersion, and on the potential mediating role of organizational justice in these effects. To this aim, we examined the relationships between the amounts of pay dispersion introduced by the respective financial incentive system, employee perceptions of distributive and procedural justice, work motivation, and base salary, respectively. The results of the data analysis, performed through structural equation modeling, support our hypotheses concerning the positive effect of performance – related pay dispersion on motivation and the mediating role of the two dimensions of organizational justice in this effect. Larger financial rewards allocated by the financial incentive system for high performers increase employee perceptions of distributive and procedural justice, which, in turn, foster work motivation. Base salary was also found to influence pay dispersion, as well as perceived distributive justice.