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Eight in 10 employers say low engagement is the biggest obstacle to the success of their corporate wellness solutions. With health care premiums rising, more employers are turning to incentives to boost engagement in their wellness programs and encourage the formation of healthy habits. Almost 90% of employers used them in 2012.


Incentives come in the form of “carrots,” or rewards, and “sticks,” or penalties. Rewards have long been the more popular approach. Many employers give out cash or gift cards to employees who take a health risk assessment or award prizes those who lose a certain amount of weight or walk a certain number of steps. But recently, employers have started using “sticks,” or penalizing employees who fail to meet wellness guidelines. Wal-Mart, for example, charges smokers an extra $2000 a year for insurance. Western and Southern Financial levies insurance surcharges on employees whose BMIs are too high. Indiana University Health deducts money from the paychecks of overweight employees.

More employers are now interested in using “sticks” to motivate wellness. In 2011 only 10% of companies used penalties; by 2016, almost 50% plan to.

The Pros and Cons of Carrots and Sticks

Rewards and penalties both have their pros and cons. Rewards are popular with employees and can, with a little creativity, add variety and excitement to your wellness program. They can range from virtually cost-free (giving a prime parking spot to the winner of the biggest loser contest) to inexpensive (water bottles, t-shirts, gift cards) to costly-but-highly-motivational (reducing insurance premiums for employees who meet certain benchmarks). They can provide immediate gratification when used as incentives for one-time activities (such as $100 in exchange for taking a health risk assessment) or promote habit formation when given as prizes for long-term competitions.

That said, rewards do have some drawbacks. They can lose their motivational power if they’re not enticing enough or employees become bored with them. And they may not be as effective as penalties in driving participation. According to some experts, avoiding a penalty is three times as motivational as anticipating a reward. Johnson and Johnson saw up to 99% participation in its wellness program when it docked $500 a year from the paychecks of at-risk employees who didn’t take steps to improve their health.

But penalties can land companies in legal and ethical hot water. CVS and Broward County, Florida were the subjects of two high-profile lawsuits when they fined employees for not completing health questionnaires or undergoing biometric screenings. Employees at Pennsylvania State University publicly protested its wellness program, which required them to report sensitive health information or face penalties of up to $1200. Doctors have voiced concerns that wellness penalties are coercive and unfair to people whose socioeconomic circumstances make it hard for them to receive health care or lose weight. And employees tend to feel resentful of penalties or threatened by them.

As both the “carrot” and “stick” approaches have their strong points and drawbacks, you must carefully consider which is better for your workplace. Are rewards effective enough? Are penalties worth the risk of disgruntled employees or legal hassles? It’s not an easy decision, but, with health care costs rising, it’s one many employers will soon be forced to contemplate.

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About Us

RivalHealth is a fitness-based wellness platform that engages employees with daily exercise and nutrition activities and sustains engagement through social interaction, challenges, incentives and outcomes.