Does pay‐for‐performance enhance perceived distributive justice for collectivistic employees?

Purpose To examine the effect of pay‐for‐performance on distributive justice and the moderating effect of commitment performance appraisal in the case of Korean employees. Design/methodology/approach Data were collected from 28 companies and 656 employees. Moderated regression analyses were employed. Findings Findings show that pay‐for‐performance enhances employees' perception of distributive justice only when there is a commitment performance appraisal practice. Additional analysis shows that the commitment performance appraisal practices of a company influence employee perceptions of such practices in a U‐shape fashion. Research limitations/implications Since, data were collected from 28 companies, the results may need to be modified before being generalized to/for Korean companies. Practical implications It is notable that only when accompanied by commitment performance appraisal does pay‐for‐performance enhance employee perception of distributive justice. Managers in Korean companies should consider implementing commitment appraisal practices when they want to utilize pay‐for‐performance. Originality/value This paper notes the fundamental changes in the pay systems in Korean companies, and offers practical implications for managers starting out on a pay‐for‐performance system.