Pay for performance and employee outcomes: The mediating roles of controlling and informational perceptions of pay

Based on self‐determination theory, we develop a theoretical model where the effects of pay for performance (PFP) on autonomous motivation, job‐related anxiety, and turnover intention are mediated by controlling and informational perceptions of pay. After controlling for several contextual and demographic variables, the empirical results of three field studies provide general support for the model. In a two‐wave study of 952 participants, perceived PFP was positively associated with both controlling and informational perceptions of pay. In a second three‐wave study of 819 participants, a controlling perception of pay mediated the negative (positive) associations between perceived PFP and autonomous motivation, job‐related anxiety, and turnover intention, whereas an informational perception of pay mediated the positive (negative) associations between perceived PFP and autonomous motivation and turnover intention. In a third two‐wave study of 256 real estate agents working under a high‐powered pay plan, a controlling perception of pay mediated the positive associations between variable PFP intensity and job‐related anxiety and turnover intention, but not a negative association with autonomous motivation. Taken together, our research suggests that PFP has both favourable and unfavourable perceptions and that these are, in part, explained by controlling and informational perceptions of pay.