This study investigates whether employees are incentivized to cheat under different compensation systems. Using a laboratory experiment, the authors compare performance under target-based compensation, linear piece-rate, and tournament-based bonus systems. The anagram game was used as the experimental task. Results show that productivity was similar across all three schemes. However, target-based compensation led to significantly more cheating, measured by the number of overclaimed words, the number of work/pay periods with overclaims, and the number of participants making at least one overclaim. This suggests that while target-based compensation can lead to more cheating, it does not necessarily result in lower performance. The study provides evidence that cheating can be mitigated without completely abandoning performance-based compensation.This study investigates whether employees are incentivized to cheat under different compensation systems. Using a laboratory experiment, the authors compare performance under target-based compensation, linear piece-rate, and tournament-based bonus systems. The anagram game was used as the experimental task. Results show that productivity was similar across all three schemes. However, target-based compensation led to significantly more cheating, measured by the number of overclaimed words, the number of work/pay periods with overclaims, and the number of participants making at least one overclaim. This suggests that while target-based compensation can lead to more cheating, it does not necessarily result in lower performance. The study provides evidence that cheating can be mitigated without completely abandoning performance-based compensation.