Performance Appraisals, Works Councils and Employees’ Presenteeism Behaviour

ABSTRACT Presenteeism behaviour, that is, working despite illness, is a common phenomenon worldwide and can have severe consequences for employees and firms alike. In this study, we investigate the relationship between the use of company performance appraisals and employees’ presenteeism behaviour. We use linked‐employer–employee data (the German Linked Personnel Panel) and apply pooled Poisson as well as linear fixed effects panel estimations. We show that the use of performance appraisals is associated with significantly lower annual presenteeism days in the amount of half a day, which corresponds to a 10% difference from the base rate. The results are driven by performance appraisals that are linked to performance‐related pay, in particular. In addition, the significantly negative relationships between performance appraisals or performance pay and presenteeism only emerge when a works council is present at the workplace. Our study contributes to the understanding of employment relation‐specific behavioural consequences of management practices.