Timing Matters: How Pay‐For‐Performance Payment Timing Motivates Lower‐Performing Employees in Pay‐For‐Performance Systems

ABSTRACT Within pay‐for‐performance (PFP) systems, employee motivation changes over time. Lower‐performing employees, in particular, are more likely to reduce their effort in the future as their expectancy perceptions weaken. This study examines a critical yet underexplored design feature of PFP systems: PFP payment timing, which refers to the temporal distance between performance feedback and reward disbursement. Drawing on expectancy theory, we propose that instant PFP payments exert stronger incentive effects on future performance among lower‐performing employees than do delayed PFP payments. We test these hypotheses using a field experiment conducted in a real estate sales firm. The results indicate that, relative to delayed PFP payments, instant PFP payments improve the subsequent performance of lower‐performing employees, although this effect attenuates over time. These findings underscore that PFP payment timing is a human resource management intervention for sustaining motivation among lower‐performing employees, while also revealing the temporal limits of its effectiveness.