Time is (Not) Money: Incentive Effects of Granting Leisure Time

ABSTRACT

Employees spend a considerable amount of their working time enjoying on-the-job leisure. While this demonstrates a management control problem, it can also function as a novel domain for bonuses. In this study, I investigate the effect of an unconditional bonus (gift) in the form of more off-the-job leisure time. In particular, I examine how the gift of an intentional reduction of working time affects employee work behavior compared to a cash gift. A real-effort laboratory experiment shows that a cash gift neither alters employees’ on-the-job leisure time nor performance. A gift of more off-the-job leisure time, however, does reduce the on-the-job leisure time of employees and increases their performance. A follow-up vignette study among human resource (HR) professionals further provides external validity for these results. Moreover, it also displays the other positive influence of leisure time offered as gifts on several different employee outcomes such as satisfaction, commitment, and health.

Keywords:

• Non-cash gifts
• Management control
• Experiment
• Employee motivation

Acknowledgments

An earlier version of this paper was part of my PhD thesis at the University of Cologne. I thank my advisor, Dirk Sliwka, and my examiners, Matthias Heinz, Oliver Gürtler and Robert Dur for valuable feedback and discussions. I further thank Victor Maas and two anonymous referees for very helpful comments. Moreover, I gratefully acknowledge the suggestions by Charles Bellemare, Sebastian Butschek, Lea Cassar, Gary Charness, Jana Gallus, Katlijn Haesebrouck, Bernd Irlenbusch, Matthias Mahlendorf, Jonathan Meer, Lea Petters, Simeon Schudy, and Sebastian Tonke. Moreover, I would like to thank the participants of the Cologne Corporate Development Brown Bag Seminar, the Cologne Seminar in Applied Microeconomics, the 20th Colloquium on Personnel Economics in Zurich, the C-SEB annual conference 2017 in Cologne, and the 10th Maastricht Behavioral and Experimental Economics Symposium. Tobias Danzeisen and Anya Marchenko provided outstanding research assistance. Furthermore, I thank the German Association for Human Resource Management (DGFP) for its cooperation in running the survey. Financial support from the DFG Research Unit FOR 1371 has been received with appreciation. This project is registered under AEARCTR-0001397. The University of Cologne (the author’s previous institution) did not have an IRB at the time the experiment was carried out. However, the rules of the laboratory were used to enforce an ethical standard.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplemental Data and Research Materials

Supplemental data for this article can be accessed on the Taylor & Francis website, https://www.org/10.1080/09638180.2022.2096089.

Notes

1 I will refer to an ‘incentive’ as a performance-contingent extra payment, and a ‘gift’ as something given voluntarily without any expectations. A ‘bonus’ refers to all forms of additional compensation. In addition, a ‘cash incentive’ refers to a purely monetary incentive.

2 The greater perceived value might then also lead to increased performance. Studies evaluating non-cash incentives have mainly supported this predicted positive effect (Bareket-Bojmel et al., 2017; Choi & Presslee, 2022; Kelly et al., 2017; Mitchell et al., 2022; Presslee et al., 2013). Recent research provides evidence that this also holds true for creative tasks (Cardinaels et al., 2020) and team settings (Kachelmeier et al., 2020).

3 See the online Appendix for the instructions, a screenshot of the working stage, and a screenshot of the internet stage.

4 The post-experimental questionnaire provides some evidence that the subjects perceived the task as labor and that they used the internet as a leisure activity. Subjects evaluated different statements on a 7-point Likert scale (1 = strongly disagree, 7 = strongly agree) after the experiment. Across all treatments, they described low enjoyment of the task (mean = 2.43, SD = 1.76; Wilcoxon Signed-Rank Test of equality to neutral response of 4: z = −9.551, p < .001) and stated that they did not do anything productive during their internet time (mean = 3.35, SD = 1.86; Wilcoxon Signed-Rank Test of equality to neutral response of 4: z = −4.763, p < .001).

5 To make this incentive compatible, I used the Becker-DeGroot-Marschak mechanism (Becker et al., 1964). One subject was randomly selected after each session to stay in the lab. Precise explanations, examples, control questions, and the explicit statement that it was not optimal to deviate from the true minimum value increased understanding of the mechanism. Instructions can be found in the online Appendix.

6 I deliberately chose the wording of ‘additional compensation’ instead of ‘gift’ or ‘reward’ in the instructions to be as value-free as possible. That avoided inducing too-high levels of additional reciprocal intentions stemming from the wording and focused on appreciation instead of the time gift. Technically, however, the additional compensation was similar to a gift. If anything, the effects of this study would be more pronounced with different wording. Reciprocal intentions were arguably further reduced by detaining a potential beneficiary. Again, having an additional beneficiary would likely only further increase the effects of this study.

7 Note that both treatments, CashGift and TimeGift25, granted the gift for the first working period. The only difference was that, in CashGift, subjects received €6 additionally, and in TimeGift25, subjects received 25 min of leisure time instead. Both gifts were paid out only after the first working period.

8 In the control treatments, a total of 158 students participated in July 2016 (CashPfP), March 2017 (NoGift35), and May 2019 (TimeGift10 and TimeGift40). New treatments were developed over the course of this project to improve the study constantly, and thus, the treatments were executed at different times. However, all treatments in the same month were randomized within sessions, and the online platform always sent out randomized invitations. Moreover, Table 1 shows that the treatments were balanced with respect to the main observables.

9 As this is non-incentivized data, it might be viewed with more caution than incentivized data. However, it is not clear that subjects have incentives to deviate from their true preferences, although questions are only hypothetical. Sliwka and Werner (2017) used a similar analysis (although a different non-incentivized reciprocity question) to show that their effects are driven by reciprocal subjects.

10 The treatments did not show significant differences in the subjects’ willingness to return.

11 Controlling for age, a gender dummy, a dummy for economics/business students, ability (completed tasks in the trial period), dummies for the different times of the day, and the WTA does not qualitatively change the results.

12 The respective test statistics are as follows. t-test: TimeGift10 = 0, t(276) = −2.85, p = .005 (Table 5, column 1); t-test: TimeGift40 = 0, t(276) = −2.77, p = .006 (Table 5, column 1); Wald test: TimeGift10 = CashGift, F(1,282) = 11.93, p < .001 (Table 6, column 1); Wald test: TimeGift40 = CashGift, F(1,282) = 11.45, p < .001 (Table 6, column 1); Wald test: TimeGift40 = TimeGift10, F(1,282) = 0.05, p = .821 (Table 6, column 1); Wald test: TimeGift40 = TimeGift25, F(1,282) = 0.43, p = .514 (Table 6, column 1); Wald test: TimeGift10 = TimeGift25, F(1,282) = 0.70, p = .404 (Table 6, column 1).

13 It is well established that bonuses, in general, can signal various things, from social norms (Cardinaels & Yin, 2015) to prosocial interests (Cassar & Meier, 2021) and mistrust (Christ, 2013). However, please note that it is not necessarily an unusual finding in gift-related literature that differently sized gifts do not lead to different effects (e.g., Ockenfels et al., 2015).

14 Yet, the CashPfP treatment is also the most expensive treatment. Consider, for instance, the money paid per completed task in the first working period. The CashPfP treatment is 37.88% more expensive than the TimeGift25 treatment. Moreover, there exists evidence for a crowding-out effect after the performance pay was removed in the second working period. While, for instance, the performance in the first working period was approx. 55% larger in CashPfP than in NoGift, the overall performance after both working periods is comparable.

15 DellaVigna and Pope (2018) show that experts do a good job forecasting certain outcomes concerning incentives.

16 The invitation and survey instructions are provided in the online Appendix. The online Appendix further displays the precise survey items and all means and standard deviations.

17 I define the time gift as a leisure bonus which is ‘a leisure spot-bonus (-award,-reward), thus an immediate, one-time permission to work less without wage reductions,’ and the money gift as a money bonus which is ‘a financial spot-bonus (-award,-reward), thus an immediate, one-time additional financial payment.’ Importantly, it is not mentioned that the bonus is for rewarding good performance.

18 Because all the HR professionals were already acquainted with both the time and the cash gift on the first page of the survey, the possibility of it slightly affecting their subsequent answers cannot be completely ruled out.

19 Interestingly, and in contrast to the laboratory experiment, HR professionals also anticipated that this effect would be sensitive to the amount of leisure time granted. A potential reason might be that subjects in the laboratory experienced the effect themselves, whereas HR professionals had to anticipate it.

20 In fact, a follow-up field study motivated by the current study (Alfitian et al., 2021) showed the effects of granting money or vacation days for regular attendance at work in a field experiment. While a bonus of money backfires and leads to less attendance, vacation days do not backfire. Moreover, granting vacation days leads to an increase in employee satisfaction and job commitment.