Labor Relations Commons^™

Employee Choice Over Pay Mix, Kevin F. Hallock

Economics Faculty Publications

Suppose the company set the level of pay and then let employees choose the fractions they wanted as guaranteed salary, stock options and at-risk bonus. The fraction in at-risk bonus was capped at 20% of total pay and the payout was between 0 and 2.5 times the amount put at-risk and was a function of individual and group performance. This is not a theoretical example; it's real. And, it is interesting for a variety of reasons, including that it is so extreme and because the organization invited some researchers inside to study the fascinating choices made by employees. They were …