Corporate wellness programs, often supported by financial incentives, are an essential part of company culture as organizations strive to support employee health, well-being, and productivity. These workplace wellness programs, which often include fitness challenges, mental health support, smoking cessation initiatives, and more, are designed to improve the quality of life for employees while reducing healthcare costs and absenteeism for employers.
However, getting employees to consistently engage in corporate wellness programs can be a challenge. Not only are some companies falling victim to the trend of carewashing, but real-world obstacles like stress, time constraints, and ingrained habits can also make it difficult for employees to follow through on healthy choices even if they intend to. Understanding how to use financial incentives effectively is key to long-term behavior change and a successful corporate wellness program.
We’ll be exploring how financial incentives can be a powerful tool for driving long-term success in your corporate wellness program. By strategically using rewards, companies can motivate employees to build and sustain healthier habits, leading to improved engagement, productivity, and overall well-being. We’ll discuss best practices, common pitfalls, and actionable tips to help you leverage incentives effectively and create a wellness program that delivers lasting results.
Key Highlights
What is Behavioral Economics?
Why Traditional Incentives Often Fail
What are Financial Incentives?
The Importance of Timely Incentives
Using Financial Incentives for Lasting Wellness Program Results
IncentFit’s Findings on Financial Incentives and Corporate Wellness Programs
Sustaining Behavior Change with Financial Incentives
What is Behavioral Economics?
As described in an article by the University of Chicago, “behavioral economics is … that people do not always make what economists consider the ‘rational’ or ‘optimal’ decision, even if they have the information and the tools available to do so.” It offers insights into the factors that influence decision-making, revealing why people might not always act in their best interest.
Unlike rational choice theory, which assumes people always act in their best interest, behavioral economics recognizes that emotions, social influences, and biases affect decisions. This can make it challenging to make lasting, healthy decisions. By aligning wellness incentives with these principles, companies can design more effective programs that drive sustained engagement and positive outcomes.
Let’s dive into some of the key behavioral economic concepts that influence decision-making and how they pose challenges when it comes to designing corporate wellness programs that maintain long-term behavior change.
Key Behavioral Economic Concepts
- Present Bias: People tend to prioritize immediate gratification over future rewards. For example, when trying to lose weight, a person may be more tempted by the immediate pleasure of eating a dessert than the long-term benefit of maintaining a healthy weight.
- Anticipated Regret: This is the anxiety that comes from anticipating negative outcomes. For instance, someone may hesitate to start an exercise program due to the fear that they’ll regret spending their time in the gym instead of relaxing or doing something fun.
- Default Bias: People often stick with their default behavior simply because change requires effort. For example, a person may keep a sedentary lifestyle because they’re used to it, even though they know exercising would improve their health.
- Probability Weighting: People tend to overestimate the likelihood of rare events while underestimating common risks. For example, someone may continue to smoke despite knowing the high risk of lung cancer because they believe they’ll be one of the lucky few to avoid it.
- Social Pressure: People are greatly influenced by social norms and their public image. This can be a double-edged sword, as positive reinforcement from social circles can motivate change, but negative social influences can halt progress.
Practical Application: Quitting Smoking
Take, for instance, someone wants to quit smoking. Rational choice theory suggests that since it’s common knowledge that smoking leads to serious health risks, one should stop. But in reality, behavioral economics recognizes the many obstacles a person faces.
- Present bias may tempt someone to enjoy the immediate relaxation a cigarette brings, even though quitting would benefit their long-term health.
- Social pressure from friends who smoke could weaken their resolve.
- Probability weighting might make them downplay the likelihood of getting lung cancer.
- Default bias may keep them smoking simply because it’s a long-standing habit.
Without the right incentives, a person is likely to continue smoking, despite knowing the risks.
Why Traditional Incentives Often Fail
A common issue is that the “costs” of making a healthy decision are immediate, while the rewards are delayed. For instance, while people know that exercising leads to better health, they often avoid it because the discomfort and effort of working out are immediate, while the benefits, like improved health or physical fitness, take time. Similarly, an employee’s health insurance may fully cover their annual physical exam, but because the exam requires taking time off work or facing potential discomfort, they might delay or skip it.
Examples of Traditional Incentives
- Company swag (such as branded water bottles or T-shirts).
- Raffles or contests for prizes like fitness equipment or vacations.
- Recognition programs (such as certificates or public acknowledgment).
- Non-monetary perks like extra PTO or flexible work hours.
Cons of Traditional Incentives
Lack of Personalization: One-size-fits-all rewards don’t match individual preferences.
Short-Term Focus: Rewards encourage temporary behavior changes, not lasting habits.
Low Perceived Value: Incentives feel insignificant or not worth the effort.
Misaligned Motivations: Extrinsic rewards can undermine intrinsic motivation.
Complexity: Confusing goals or processes discourage participation.
Delayed Rewards: Long wait times disconnect effort from benefits.
This disconnect between immediate costs and delayed rewards can lead to lower engagement in wellness activities, despite employees knowing the long-term benefits. Addressing this challenge requires designing wellness programs that make healthy choices easier and more immediately rewarding.
This is where meaningful and timely financial incentives can make a major difference.
What are Financial Incentives?
Financial incentives in corporate wellness programs are monetary rewards provided to employees to encourage participation in health and wellness activities. When used correctly, these incentives motivate employees to engage in healthy behaviors.
Offering cash or vouchers for meeting fitness goals gives employees a clear reason to stay motivated and make healthier choices, even when the long-term benefits feel distant. A 2013 study from the American Journal of Preventive Medicine found that increasing the immediate rewards of healthy actions, such as providing financial incentives for exercise, boosts participation.
Examples of Financial Incentives
- Cash Rewards: Direct payments for participating in or completing specific wellness activities, like a $50 reward for completing a biometric screening.
Gift Cards: Pre-paid gift cards for popular retailers or online stores, awarded for meeting wellness milestones. - Reduced Health Insurance Premiums: Lower monthly premiums or discounts on health insurance for employees who participate in wellness initiatives, like completing an annual health assessment.
- Health Savings Account (HSA) Contributions: Employer contributions to employees’ HSAs for meeting wellness goals, such as attending fitness classes or getting preventive care.
- Gym Membership Reimbursement: Partial or full reimbursement for gym memberships or fitness classes, encouraging regular exercise.
- Point Systems with Redeemable Rewards: Programs that allow employees to earn points for wellness activities, which can be redeemed for financial rewards or merchandise.
Financial incentives are powerful external motivators that can help people overcome the biases and obstacles identified by behavioral economics. They tap into people’s preference for immediate, tangible rewards.
The Importance of Timely Incentives
Making incentives timely is just as important as making them meaningful. Financial incentives are most effective when delivered promptly.
When employees receive rewards soon after achieving a goal, the connection between their actions and the incentive is clear and motivating. Timely rewards reinforce positive habits, creating a sense of immediate gratification that drives engagement and participation in corporate wellness programs.
Delayed financial incentives, on the other hand, can weaken the impact, leading to disengagement. By delivering incentives in a timely manner, organizations can build stronger wellness programs and keep employees motivated.
Using Financial Incentives for Lasting Wellness Program Results
The use of financial incentives in corporate wellness programs is increasingly popular because, simply put, they work. Employees are more likely to engage in healthy behaviors when there’s a financial reward attached, whether it’s cash bonuses, gift cards, or reduced insurance premiums.
Incentives can also be used to address specific behavioral obstacles:
- Present bias can be countered by providing immediate rewards for short-term goals, like monthly gym visits.
- Social pressure can be combated by creating team-based competitions or rewarding group achievements.
- Default bias can be mitigated by making participation in corporate wellness programs the default option, with employees opting out rather than opting in.
Businesses often use behavioral economics in marketing to tap into our natural decision-making habits and influence buying choices. In a similar way, employers can apply these ideas to encourage healthier behaviors in their corporate wellness programs.
IncentFit’s Findings on Financial Incentives and Corporate Wellness Programs
- Research consistently shows that without financial incentives, participation and effectiveness decline.
- Studies demonstrate their effectiveness in increasing participation in wellness programs and sustaining healthy habits.
- Financial incentives counteract behavioral barriers by providing immediate gratification.
- Leveraging predictable human behavior and motivations by using financial incentives enhances program success.
Delve into our white paper, Incentivizing Health: Unlock the Power of Financial Rewards, for more insight about financial incentives and how to use them to create a successful wellness program. By offering meaningful and timely incentives, corporate wellness programs help employees form healthier habits, creating a more engaged, productive, and healthier workforce.
Sustaining Behavior Change with Financial Incentives
To drive long-term behavior change, it’s important to grasp the psychological and emotional factors that influence decision-making. People often struggle to make the healthiest choices, not because they don’t know how, but because emotions, habits, and cognitive biases can steer them off course. By recognizing these factors, companies can use financial incentives to design corporate wellness programs that meet employees where they are, helping them overcome these barriers.
Ready to transform your wellness program? Connect with one of our Benefits Specialists today to design a tailored plan that leverages financial incentives to energize your employees and elevate your organization’s success.