Social and economic exchange relationships and performance contingency: differential effects of variable pay and base pay

Abstract

In this study, we tested hypotheses derived from social exchange theory by investigating the relationships between employees’ base and variable pay and their social and economic exchange relationships with their employer. In a cross-lagged study of approximately 30 months duration including 488 respondents, the amount of accumulated base pay was positively related to a social exchange relationship, whereas the accumulated amount of variable pay was positively related to an economic exchange relationship. We discuss the theoretical and practical implications of these findings and propose future research on the relationship between pay and social and economic exchange relationships.

Keywords:

• Performance contingency
• social exchange theory
• employee-organization relationship
• pay systems
• cross-lagged