The effect of performance related pay in employment services

This paper investigates the effects of performance-related pay (PRP) in Danish local employment administration on unemployed social clients’ employment outcomes. PRP implies here that employees in the employment administration are rewarded each time a social client gets a job. There are different schemes involved in the programme – schemes with collective payoffs and schemes with private payoffs and schemes with monetary payoffs and non-monetary payoffs, such as training activities. The main conclusion is that PRP seems to promote employment chances of social clients. Especially it seems that PRP schemes with collective monetary payoffs have a positive effect. Furthermore it seems that the PRP schemes are most productive for social clients with relatively high prior employment opportunities. A skimming effect does not seem to occur. This seems to indicate that the PRP schemes increases productivity of the local employment administrations.