When Bonuses Backfire: Evidence from the Workplace

Abstract

Monetary incentives are widely used to align employee actions with employer objectives. We conducted a field experiment in a retail chain to evaluate whether an attendance bonus could reduce employee absenteeism. Apprentices in 232 stores were randomly assigned to a control group or one of two treatment groups in which a monetary or time-off attendance bonus was introduced for one year. We find that neither variant of the attendance bonus led to a systematic reduction in absenteeism. On the contrary, the monetary attendance bonus increased absenteeism substantially by around 50% on average, which corresponds to more than five additional days absent per employee and year. This effect was driven by the most recently hired apprentices. Survey results reveal that the monetary attendance bonus shifted the perception of absenteeism as acceptable behavior. The backfiring effect persisted beyond the end of the experiment, indicating a lasting erosion of social norms. This paper was accepted by Marie Claire Villeval, behavioral economics and decision analysis. Funding: Funding by the Deutsche Forschungsgemeinschaft (DFG; German Research Foundation) [Grant EXC 2126/1–390838866] is gratefully acknowledged. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.00484 .