Less is Sometimes More: Consequences of Overpayment on Job Satisfaction and Absenteeism

Abstract

This article investigates the responsive and purposive consequences of overpayment by studying changes in job satisfaction and absenteeism over time. Overpayment is defined as the positive deviation from the net earnings subjectively considered being fair. Two theoretical approaches are tested providing differing predictions: The self-interest model predicts that any increase in earnings always increases individual job satisfaction and that no changes arise in the number of days absent. The justice model predicts that overpayment reduces individual job satisfaction, and that absenteeism decreases in the period that follows. These predictions are tested with longitudinal data from a large-scale survey by means of fixed-effects regression analysis. The results show that increases in pay that are perceived as overpayment decrease job satisfaction and reduce absenteeism in the subsequent period.