Head to head: In workplace wellness programs, is it better to use the carrot or the stick?
While employer-provided wellness programs can include incentives or penalties for members, the industry is divided on which tactic is most effective in encouraging employee participation.
Dominic Cole-Morgan, senior vice-president of total rewards at Scotiabank:
The reality is the workforce has never been more diverse than it is today. No employee’s needs, preferences or backgrounds are the same, so they should be offered the freedom to choose their wellness offerings based on their own criteria.
By incentivizing employees to craft their wellness experience, whether that means allocating more resources towards more fulsome coverage or choosing to invest leftover funds, they’re actively taking ownership and accountability over their own well-being.
Read: A creative way to use wellness credits to boost productivity
A popular “carrot” approach is employer matching, where an employee is actively contributing to a financial program, such as a share ownership plan, and they’re rewarded for taking an interest in their longer-term financial health with an employer match.
These types of programs are successful because employees have a choice in how they’d like to invest their hard-earned money, depending on their own financial circumstances and goals. Active participants make smarter, more informed decisions than passive participants.
To be able to provide a wide variety of programs that promote financial, physical, emotional and mental well-being, customization is critical. Enforcing the same programs for all employees is inefficient and would limit the options available to them, while undermining the responsibility and role they take in maintaining and improving their own well-being.
If employers want to demonstrate their commitment to the well-being of their diverse employee populations, their offerings should be incentivized, but not mandated. Wellness programs that encourage active participation with a high degree of personalization optimizes the best possible employee experience.
Tanjim Hossain, associate professor at the University of Toronto and chief scientist in behavioural economics in action at Rotman School of Management:
If properly used, employer-provided workplace wellness programs can greatly improve employees’ overall wellbeing, while benefiting the organization by boosting morale and productivity. But how should these programs be designed to maximize participation?
Read: What are the ingredients of a successful wellness program?
While it might seem obvious to present these programs as perks that employees can opt into for free and reward them for their participation, research in behavioural economics suggests the opposite approach may work better.
For instance, setting a desired outcome as a default and allowing people to opt out of that choice has been shown to dramatically improve retirement savings and other behaviour, including organ donation. For the latter, Germany uses an opt-in system and has a consent rate of 12 per cent. In contrast, Austria uses an opt-out system and has a consent rate of 99.98 per cent.
In increasing employee productivity, another lesson from recent research in behavioural economics is that carrots dressed as sticks are more effective than simple carrots. In a set of studies, my colleagues and I found that provisionally providing factory workers with a sizeable financial incentive — with the warning the incentive won’t be awarded if they don’t reach a targeted productivity level — increases their productivity by one per cent more than the same incentive awarded as a bonus.
An effectively designed wellness program enrols employees by default, so they have to opt out if they choose not to participate. To go even further, it can provide additional perks to those who don’t opt out, with the warning they’ll be “punished,” by losing the privilege of using the perks if they don’t actually follow through with their enrolment.