Ethical Implications of an Employee Incentive Program

Unfair employee incentive plans can do more harm than good.
Unfair employee incentive plans can do more harm than good. (Image: NA/ Images)

If designed properly, employee incentive programs can increase engagement, creativity and productivity among employees, as well as add to bottom line results. However, company leadership must carefully balance ethical concerns with desired behavioral outcomes. Failing to recognize and respond to ethical pitfalls in well-intentioned employee incentive programs can yield frustration, apathy and reduced productivity.

Casual Incentives

Casual incentives, such as a gift certificate to lunch, an extra $50 in the paycheck or public recognition, can be a simple way to encourage desired behavior. However, employers must avoid acting out of favoritism, either real or perceived, or rewarding the employee's popularity versus his productivity. Incentive program designers must also consider the appropriateness of the award. For example, giving away an expensive award during budget cuts is likely to be interpreted as unfair and risks sending a mixed message from leadership. Protections against ethical violations in casual programs include gathering peer nominations, recognizing employees privately and allowing employee input in awards distributed, according to Gregorio Billikopf, author of "Incentive Pay (Pay for Performance.)"

Pay for Performance

Pay for performance, or offering financial bonuses for meeting certain objectives, is one of the better-known employee incentive ideas. In order to create an ethically sound, and effective, pay for performance plan, managers must ensure that targets are realistic, that employees actually have the power, influence or ability to meet the targets, and that goals and measurements are clearly stated and communicated. In addition, plan designers should leave a certain amount of flexibility, such as paying a percentage of the bonus, if circumstances beyond the employee’s control impact his ability to fulfill the agreed-upon goals.

Health Incentives

Tying wellness efforts to financial rewards triggers several ethical considerations, no matter how altruistic the initiative. For example, while money is a powerful motivator, wellness goals such as reductions in obesity or addiction may be unattainable or unrealistic for employees with chronic or long-term problems, according to "The New England Journal of Medicine." Wellness incentives can also have the unintended consequences of embarrassing employees, such as those struggling with their weight or with quitting smoking. Finally, wellness incentives favor the socially and financially advantaged, according to the journal. An executive with an office gym and access to nutritious meals in the company cafeteria is far more likely to meet wellness goals than hourly workers who have few healthy living options.

Sharing the Wealth

When it comes to bonus distribution, ethical programs distinguish between rewarding power versus contribution, and grant rewards that are proportionate to the work performed, according to James O'Toole, an Aspen Institute professor and research professor for the University of Southern California. Fair company leaders ensure they are not taking more than deserved and ask themselves whether the amount of bonus set aside for them is fair when compared to rewards received by other employees, according to O'Toole.

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