Variables Influencing the Perceived Relationship Between Performance and Pay in a Merit Pay Environment

The purpose of the study is to gain a better understanding of the pay-for-performance perception. Such a knowledge may allow for improvement in the effectiveness of incentive compensation plans. Sample comprises 406 employees whose salary changes were conditioned by a merit pay plan. Results suggest that pay-for-performance perception is related to the actual pay-for-performance link, their trust in decision-makers, their procedural justice perception, the size of their outcomes—that is, pay increase and performance rating—and their satisfaction with these outcomes.