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  • Bonus and Salary IR Final Submission

    Rights statement: This is the peer reviewed version of the following article: Green, C. P. and Heywood, J. S. (2016), Don't Forget the Gravy! Are Bonuses Just Added on Top of Salaries?. Industrial Relations: A Journal of Economy and Society, 55: 490–513. doi: 10.1111/irel.12147 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/irel.12147/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.

    Accepted author manuscript, 321 KB, PDF document

    Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License

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Don't forget the gravy!: are bonuses and time rates complements?

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Published
<mark>Journal publication date</mark>07/2016
<mark>Journal</mark>Industrial Relations
Issue number3
Volume55
Number of pages24
Pages (from-to)490-513
Publication StatusPublished
Early online date1/06/16
<mark>Original language</mark>English

Abstract

The press often depicts bonuses as extra payments to the already well compensated and calls for reform. Yet, these calls typically ignore the efficiency argument that bonuses are potentially risky performance pay that substitute for salary compensation. This paper uses representative UK data to estimate that bonuses appear not to substitute for salary in cross-sectional estimates. Yet, when controlling for time invariant characteristics in panel data, bonuses emerge as partial substitutes. Each pound of bonus comes at a cost of 40 pence in
other earnings. The degree of substitution is far larger at the bottom of the earnings distribution and far smaller at the top of the earnings distribution where, indeed, bonuses look more like gravy.

Bibliographic note

This is the peer reviewed version of the following article: Green, C. P. and Heywood, J. S. (2016), Don't Forget the Gravy! Are Bonuses Just Added on Top of Salaries?. Industrial Relations: A Journal of Economy and Society, 55: 490–513. doi: 10.1111/irel.12147 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/irel.12147/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.