Does A Performance-Based Pay System Affect Your Mental Health? Study Says Yes

Workers who rely on performance-related pay (PRP) are at an increased risk of depression, a new study has found.

A study, conducted at Scotland's Aberdeen University, found that people whose salary depends on their performance are more likely to require anti-depressant medication. The findings of the research were published in the journal Industrial Relations.

What is performance-related pay (PRP)?

Performance-related pay, aka merit-based pay, is a target-oriented framework in which employees' salaries are determined by their ability to meet predetermined objectives and produce outstanding performance to help the company reach its goals.

The study said increased levels of the chemical fibrinogen – it is associated with depression – were found in the blood of workers whose salaries directly depended on their performance.

Such employment contracts can have unintended effects on workers, researchers warned, while suggesting companies should think about how these arrangements would affect the health and well-being of their employees.

Professor Keith Bender, chair of economics at Aberdeen University and one of the study co-authors, said companies must implement supportive policies to offer better solutions to the problem.

"Our study provides evidence for physiological wear and tear in PRP workers and is consistent with previous research showing they are more likely to have poor health, including self-reported mental health issues and cardiovascular health issues," Bender said. "For the first time, we also show that PRP employees – particularly men – have higher blood pressure and higher levels of fibrinogen, which are closely associated with chronic stress."

"In summary, our results indicate the use of PRP contracts may have unintended consequences for employee health impacting employee well-being and long-term productivity in the workforce. With this in mind, it's important for firms to consider the potential impact on their employees and implement policies to support their wellbeing," Bender added.

The team also outlined some factors that could generate a substantial level of stress in workers.

"Chronic stress in PRP employees may be due to the need to put in more effort at work, work under time or performance target pressure, or stress associated with an uncertain income stream. Regardless of the causes, chronic stress may exacerbate health issues by adding strain on to physiological systems or leading to unhealthy coping mechanisms such as alcohol and drug use," fellow co-author Daniel Powell explained.