Wage Contracts and Workplace Misbehaviors

Jeffrey Flory, Andreas Leibbrandt and John List

Natural Field Experiments from The Field Experiments Website

Abstract: Workplace misbehaviors are often governed by explicit monitoring and strict punishment. Such enforcement activities can serve to lessen worker productivity and harm worker morale. We take a different approach to curbing worker misbehavior-bonuses. Examining more than 6500 donor phone calls across more than 80 workers, we use a natural field experiment to investigate how different wage contracts influence workers' propensity to break workplace rules in harmful ways. Our findings show that even though standard relative performance pay contracts, relative to a fixed wage scheme, increase productivity, they have a dark side: they cause considerable cheating and sabotage of co-workers. Yet, even in such environments, by including an unexpected bonus, the employer can substantially curb worker misbehavior. In this manner, our findings reveal how employers can effectively leverage bonuses to eliminate undesired behaviors induced by performance pay contracts.

Date: 2016
New Economics Papers: this item is included in nep-exp, nep-hrm and nep-ltv
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:feb:natura:00583

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