Budget is important tool for evaluating manager’s performance. Unfortunately, it is succeptible for budget slack. For that, managers will provides pessimistic and conservative estimation for income and expenses. This study aims to investigate the effect of pay scheme and ethics level on budget slack creation. Hypotheses were tested using experiment with 2x2 factorial design. Participant of this study is students who have completed managerial accounting course. The main and interaction effects were analysis using General Linear Model Univariate. The results show that pay scheme play a significant role in decreasing budget slack. Participants who scored high on DIT instrument more likely to create budget slack than participant whose low score DIT. This findings also shows that impact of interaction between payment scheme and ethics level on budget slack is significant.