Incentive wages - A case study of a restaurant

The article shows that a model of incentive compensation can be used to analyse problems that arised when a tip-based wage system was introduced for the waiters in a restaurant in Helsinki. A customer survey shows that customers' perception of service quality had improved after the introduction of the new wage system. Indirectly this would imply that the new system had increased the efforts of the waiters. It is, however, noticeable that two thirds of the waiters decided to move to another restaurant within the same restaurant chain soon after the introduction of the new system. The new wage system functioned as a screening factor by choosing waiters with not only desired, but possibly also undesired qualifications.