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When Bonuses Backfire: Evidence from the Workplace

Author

Listed:
  • Sliwka, Dirk
  • Vogelsang, Timo
  • Alfitian, Jakob

Abstract

Monetary incentives are widely used to align employees’ actions with the objectives of employers. We conduct a field experiment in a retail chain to evaluate whether an attendance bonus reduces employee absenteeism. The RCT assigned 346 apprentices for one year to either a monetary attendance bonus, a time-off bonus or a control group. We find that neither form of the bonus reduced absenteeism, but the monetary bonus increased absence by around 45%. This backfiring effect is persistent and driven by the most recently hired apprentices. Survey results reveal that the bonus shifted the perception of absenteeism as acceptable behavior.

Suggested Citation

  • Sliwka, Dirk & Vogelsang, Timo & Alfitian, Jakob, 2021. "When Bonuses Backfire: Evidence from the Workplace," CEPR Discussion Papers 16282, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16282
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    More about this item

    Keywords

    Compensation; Monetary incentives; Time-off incentive; Absenteeism; Crowding-out; Field experiment;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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