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: employee motivation, non-cash gifts, rewards, leisure, informal controls, time-off, management control, experiment

JEL Classification: C91, J33, M52