High Performance Work Systems, Industrial Relations and Pay Settings in Europe

The present study uses data for workplaces in all sectors of ten European countries to investigate whether firms that have introduced new forms of work organization are more likely to use variable pay schemes. Also the role played in by institutional forces and employees’ representatives is investigated. New regimes of work organization are characterised by both new work practices – such as teams, job rotation, multitasking and flat hierarchies - and higher levels of employees’ direct participation. We find that, in general, schemes of variable pay are more likely to be introduced where new work practices are in place. The presence of employees representatives increases the probability of variable pay, but only when they cooperate with the management in decision-making.