Cheating in the workplace: An experimental study of the impact of bonuses and productivity

•We investigate experimentally how bonuses and productivity interact with workplace cheating.•Exposing workers to a compensation scheme based on random bonuses makes them cheat more.•We also find that more productive workers behave more dishonestly.•Our results are consistent with cheating responding to the perceived fairness of the compensation scheme.

We use an online real-effort experiment to investigate how bonus-based pay and worker productivity interact with workplace cheating. Firms often use bonus-based compensation plans, such as group bonuses and firm-wide profit sharing, that induce considerable uncertainty in how much workers are paid. Exposing workers to a compensation scheme based on random bonuses makes them cheat more but has no effect on their productivity. We also find that more productive workers behave more dishonestly. These results are consistent with workers’ cheating behavior responding to the perceived fairness of their employer's compensation scheme.