A new study from Cornell University in the US finds that giving an employee a bonus is more effective when it comes to staff motivation and performance than giving them a pay rise.
While giving an employee a one per cent pay rise boosted their job performance by around two per cent, offering the same money in the form of a bonus that was linked to a job well done boosted their performance by around 20 per cent, according to the study.
Although only one large US company with nearly 700 employees had been focused on for the research, the results still had relevance for employers, said Michael Sturman, associate professor at Cornell University's School of Hotel Administration, who conducted the study.
He commented: "The point is pay methods can be used strategically to improve performance.
"The payroll is not merely an expense to be reduced, but an investment that can be used strategically."
The report also concluded that raising pay rates across the board in one year would mean a better performance the following year and that paying above the market produced a higher performance.