A study compared different firms' methods of recognizing and rewarding employee performance and examined the impact of such recognition and reward on such factors as involuntary and voluntary labor turnover and worker productivity. Data from a survey of 3,412 employers that was sponsored by the National Institute of Education and the National Center for Research in Vocational Education in 1982 indicated important differentials between firms with respect to the prevalence and power of merit-based pay. Although workers' reported productivity relative to peers had important and reasonably rapid effects on relative wage rates at small- and medium-sized nonunion establishments, it had almost no effect at unionized establishments with more than 100 employees and at nonunion establishments with more than 400 employees. Relative wage rates did respond positively to the large differences in productivity between workers doing the same job; however, these responses were incomplete. When considered against the background of the inevitability of significant errors in measuring productivity, the wage differentials of employees with about 1 year of tenure create a strong a priori case that compensation for greater productivity is often only partial. (An appendix to this report describes the data collection measures and sample population on which the study's conclusions are based.) (MN)