When competency-based pay relates to creative performance: The moderating role of employee psychological need

Although competency advocates argue that competency-based pay (CBP) can facilitate the implementation of business strategies and improve organizational performance, few empirical studies on the effectiveness of CBP have been conducted in the workplace. This study examines employees’ perceptions of CBP and their creative performance, along with the moderating role of psychological needs in this relationship. A survey design with a sample of 219 Hong Kong Chinese employees from the hotel and service sectors was adopted. The results support that employee creativity is predicted by both CBP (reward for knowledge and reward for skill) and individual characteristics (need for achievement, need for power). In addition, need for power moderates the relationship between CBP (reward for knowledge and reward for skill) and employee creativity. The implications of the findings and directions for future research are discussed.