Sickness absence, performance pay and teams

Purpose – Performance pay is growing in importance. Even in a centralised economy such as the Norwegian economy, the prevalence of performance pay has increased significantly from 1997 to 2003, and internationally changes in payment methods also occur increasingly. The purpose of this paper is to analyse how performance pay and team organisation and the interaction between these affect publicly‐financed sickness absences of workers. Design/methodology/approach – Standard panel and cross‐section non‐linear and linear regression techniques are applied to Norwegian panel register and questionnaire data on private sector workers and workplaces during 1996‐2005. Findings – Team organisation and performance pay are found to be negatively related to sickness absence incidence rates and sick days, partly due to strong negative relationships in workplaces providing jointly performance pay and team organisation. The negative effect of performance pay on sickness absence survives even when fixed job effects are taken into account. The negative effects were stronger for weak incentives than stronger, and they are primarily related to group‐based incentive schemes. Practical implications – Introducing weak group‐based incentive schemes might be one way to successfully tackle absenteeism for firms. Originality/value – The paper's findings contribute to the growing literature on how performance pay and team organisation affect absenteeism.