Fixed Pay for Output or Time? Implications for Work Speed and Quality

Abstract

This paper explores the influence of two fixed payment arrangements—time-based and output-based wages—on worker behavior and performance in a multidimensional task setting. We examine how these wages affect the time workers spend on individual units of a task and their work quality. We contend that fixed compensation schemes can implicitly communicate standards of acceptable work. Our empirical evidence from MTurk experiments and a laboratory experiment indicates that workers on output-based wages deliver higher quality and spendmoretime on individual units than their time-based counterparts. These findings are consistent with output-based wages, implying a standard of acceptable quality—without a conflicting standard of speed—to which workers respond. Our results emphasize the power of implicit cues from fixed compensation schemes and offer insights for employers, suggesting the choice between output- and time-based wages should be informed by whether quality or turnaround time is valued more.