DP16282 When Bonuses Backfire: Evidence from the Workplace

Author(s): Jakob Alfitian, Dirk Sliwka, Timo Vogelsang
Publication Date: June 2021
Keyword(s): Absenteeism, Compensation, Crowding-Out, field experiment, monetary incentives, time-off incentive
JEL(s): C93, D91, J33, M52
Programme Areas: Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16282

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.