When bonuses backfire
Managing people can be frustrating. You just want them to turn up and do a good job. While it sounds simple, getting employees to turn up can be surprisingly difficult, and unplanned absences can negatively impact your customers, your team’s morale and your stress levels. So, will a bonus for attendance encourage employees to turn up?
That’s what researchers were interested in testing.
Working with a large German supermarket retailer, 346 junior staff (“apprentices”) were assigned to one of three experimental conditions. One group was offered a monetary bonus for perfect attendance each month, another a time-off bonus, and the third, no bonus related to attendance.
In an average month, an average apprentice was absent 3.23% of their regular work days (0.73 days).
During the 12 month research period, the company saw a rise in absenteeism across all stores, including those outside the experiment. This signalled an escalating issue for the business, separate to the research being undertaken, and reiterated why resolving issues of absenteeism was imperative.
But here’s where it gets interesting.
Staff in the monetary bonus could earn as much as 240 euros during the year. For each month they had a perfect attendance record, they earned 1 point. These points could then be converted to money at the end of the year.
Staff in the time-off condition could trade their points for up to 4 extra days of annual leave.
Those in the ‘no bonus’ control condition were surprised with a lump-sum bonus of 120 euros at the end of the research, in recognition of them missing out on the other bonus opportunities during the course of the experiment.
So, what happened?
The opposite of what they expected. Those who could receive a monetary bonus increased their rate of absenteeism by 84%, which was the equivalent of 5 extra days absent per year.
Those in the time-off condition increased a little, but not much more than was happening across the business.
Why money may increase absenteeism
Following up with a survey of staff, the researchers wanted to know why money encouraged absenteeism, and who it most affected.
Bottom line, offering a monetary bonus signalled to staff that absenteeism was an acceptable behaviour.
In other words, by the employer having to pay an attendance bonus, staff inferred that rates of absenteeism were high. Believing it was normal, they felt less guilty being absent and less obliged to come to work.
It seems that when money is on the table it washes away the feeling of moral discomfort (the intrinsic costs) of absenteeism.
However, there are two pieces of good news:
- A monetary bonus can also reduce presenteeism – when people turn up when they are sick – because they feel less pressure to do so. They may be giving up money, but this mitigates the sense of letting down their employer.
- The bonus backfire tended to impact new employees more. This is because they haven’t had as much experience in the workplace culture and therefore look to policies to signal what’s acceptable. For longer term employees who know the lay of the land, the monetary bonus reduced absenteeism.
Implications for you
Monetary bonuses get thrown around as a quick and easy fix. People say they like money, so we assume that will incentivise desired behaviour.
This and similar research suggests that we should be very careful about offering monetary bonuses. In particular, new employees who are looking for clues as to what is acceptable behaviour might assume paying people to attend means it is acceptable not to.
This article also appeared in Smartcompany.
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Ref: Alfitian, Jakob and Sliwka, Dirk and Vogelsang, Timo, When Bonuses Backfire: Evidence from the Workplace (April 3, 2023).
