The Peril of Paycheck Dispersion: When Fluctuations in Compensation Jeopardize Worker Retention

As employers sought to abdicate their role as the primary risk bearer in employment relationships, they increasingly relied upon variable compensation systems to shift market risks onto individual workers. In doing so, a substantial proportion of the current labor force became prone to experiencing paycheck dispersion, defined as variance in earnings from paycheck to paycheck. Here, we combine multiple sources of qualitative and quantitative data to explore the organizational consequences of paycheck dispersion. Exploratory interviews and surveys from a sample of ride-hailing drivers (N = 63) revealed that workers are broadly averse to paycheck dispersion and constantly look for strategies that could effectively mitigate it. Combining the insights from this data with cognitive appraisal theory, we subsequently proposed that paycheck dispersion will increase voluntary turnover, but only to the extent that workers appraise it as a threat to their welfare. Accordingly, we anticipated two boundary conditions to this relationship: (a) workers’ perceived ability to manipulate their earnings through their own actions and (b) the economic composition of their household. Using matched individual-level survey and archival data from a sample of truck drivers (N = 711) employed by a national transportation company, we found that paycheck dispersion is positively associated with the likelihood of turnover, though this relationship varied along the predicted boundary conditions. Taken together, our findings demonstrate that shifting market risk onto workers through variable compensation can compromise organizations by jeopardizing the retention of human capital.