Beyond individual performance: collective performance pay and gender wage inequality

Pay-for-performance systems are a defining feature of contemporary workplaces, yet their implications for inequality remain unclear. This paper examines how collective performance pay—where rewards are tied to team-, department-, or firm-level outcomes—shapes gender wage inequality through relational processes of reward distribution. Using linked employer–employee data on 21,339 full-time white-collar employees across 660 South Korean firms between 2006 and 2012, we show that collective performance pay widens the gender wage gap within organizations, especially when collective performance rewards form a larger share of compensation. The gap-increasing effect is strongest under team-level performance pay, where claims-making and negotiation are most active, and under distributional rules that allow greater managerial discretion. These findings reveal that inequality arises from relational dynamics in reward distribution rather than evaluation bias alone. The study highlights how meritocratic and team-based pay systems can inadvertently deepen gender inequality, revealing the relational foundations of the meritocracy paradox.