Corruption in higher education, particularly institutional corruption, is increasingly recognised as a critical issue, though its manifestations remain underexplored. This study uses the case of Austrian public universities to explore how indicator-based funding and the employment arrangements adopted by universities under the collective agreement, which sets the framework for various employment relationships, including tenure-track positions for academic staff, encourage institutional corruption. The study uses a deductive approach to analyse the effects of these institutional designs to identify potential gateways to corruption. Findings reveal that the unique nature of university outputs and the discretion granted to scientists make funding metrics less effective and prone to conflicts. Furthermore, the predominant reliance of universities on precarious employment conditions exacerbates inequalities in indicator incentives, particularly for young academics. The study calls for re-evaluating the indicator-based funding and the collective agreement to better align with the broader purposes of the higher education sector.