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Ethical Implications of an Employee Incentive Program

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A well-built incentive program motivates employees to accomplish organizational objectives by rewarding them in ways beyond just salary. For example, offering employees a commission on the sales they make pushes them to maintain high sales revenue, benefiting employees and the business as a whole. But incentive programs also introduce a host of ethical issues that businesses must consider.

Manipulative Programs

An employee incentive program requires funds or resources, so an obvious ethical concern is whether those funds and resources might serve employees better if the organization chose a different means of rewarding staff. For example, instead of funding an incentive program, a company might give its employees an across-the-board raise. In other words, a company’s use of employee incentives might be, or appear, manipulative rather than mutually beneficial.

Negative Effects

Potential negative consequences are also an ethical concern. For example, suppose an employee incentive program designates a performance threshold -- such as a sales number -- above which an employee will earn significantly more money in bonuses. Striving to meet that threshold might be a constant source of stress for employees -- especially if the base take-home pay is low. The unintended result is lower worker morale, which undermines the purpose of the employee incentive program. While no company can predict all the outcomes of an incentive program, careful analysis on a periodic basis allows a company to adjust the program as necessary to minimize negative effects.

Fair Distribution

Another ethical problem arises if an employee incentive program doesn't distribute benefits fairly. For example, the nature of some employees’ responsibilities might make it easier for them to earn rewards. Other employees never get the chance to gain similar benefits, so resentment builds and morale plummets. For this reason, a business must carefully evaluate its incentive program to ensure all workers have equal access to potential benefits.

Gaming the System

Unethical employees might find ways to game the system. For example, if the program rewards production numbers rather than quality, some employees might cut corners to boost their rewards. Careful design of a program can forestall obvious forms of abuse, but sooner or later, loopholes will emerge, requiring the business to reevaluate and perhaps overhaul its program.


Stan Mack is a business writer specializing in finance, business ethics and human resources. His work has appeared in the online editions of the "Houston Chronicle" and "USA Today," among other outlets. Mack studied philosophy and economics at the University of Memphis.

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