People work for money but go the extra mile for recognition, praise, and rewards.1
Dale Carnegie
Although people work primarily for money and survival, a little recognition or a gift can go a long way to lift people's spirits. As such, employee rewards can play an essential role in an organization's culture as they can help motivate employees, improve performance, and increase overall job satisfaction.
Keep reading if you are interested to learn more about how an organization can improve its employees' satisfaction with rewards!
Employee Rewards Definition
Let's first define what constitutes an employee reward:
Employee rewards are ways to motivate, reward and recognize individuals' performance within an organization.
An employee reward is an excellent way for an organization to show appreciation and recognition for its employees' hard work. In addition, it can be considered an incentive to increase employee satisfaction and motivate them to improve their performance.
There are many different ways an organization can reward their employees: by giving out vouchers, stock options, praising employees, offering company paid trips, etc.
An employee reward is an intrinsic component of a famous motivation theory developed by Victor Vroom: "The expectation theory". This theory states that people are more motivated and work harder if they think their efforts increase their performance and can help them get a reward.
There are three fundamental principles to Vroom's expectancy theory:
- Expectancy: It's someone's belief that if they work harder, they can achieve a specific goal.
- Instrumentality: It's someone's expectation that they will get a reward if they reach a specific goal.
- Valence: It's how valuable a reward is to someone.
You can check out our article on Expectancy Theory for more information on how you can motivate your employees by rewarding them.
Importance of Rewarding Employees
What is the importance of rewarding employees? An employee reward can be as simple as praise to acknowledge the employees' good work on a project, but it can also be a monetary bonus to reward their entire year of work.
If put into good use, employee rewards can have a significant impact on the organization.
- Motivation & performance: A promising reward is a great way to motivate employees and improve their overall job performance.
- Recognition: An organization that rewards its employees shows that it recognizes and appreciates its employee's hard work. Employees feel more valued, and as such, they will be more engaged in their daily work.
- Employee self-esteem: Recognition of their excellent work in front of their peers is a great way to improve employees' self-esteem.
- Attract and retain talent: Companies that offer generous rewards to their best-performing employees attract performance-driven employees. It can also be a great way to compete with other companies to attract performance-driven employees.
- Job satisfaction: A reward can go a long way to improve overall employee job satisfaction.
According to a study by Office Team2, 66% of employees would likely leave their jobs if they didn't feel appreciated. From this study, we can conclude that employee recognition and rewards play a crucial role in retaining an organization's best talents.
Employee Rewards Policy
What is the best way of structuring an employee rewards policy? When rewarding employees, the organization must follow specific rules; otherwise, they might create discord between employees for favoritism or even confront some legal issues.
For this reason, an organization must create a program to reward its employees fairly. This program is called a reward policy.
A reward policy is a set of rules and guidelines that define how a company rewards its employees.
A reward policy must be:
- Fair: A company reward policy can't work in any way to favor employees. It has to be fair to everyone.
- Accessible: To ensure that all employees know that the company has a fair reward policy, it should be easily accessible and understandable by all eligible employees.
- Clear: Everyone should easily understand the reward policy; there shouldn't be any space for misinterpretation.
- Well-structured: A document with a clear structure, such as an introduction, purpose, scope, target, guidelines, and reward.
A reward policy must have the following:
- Performance target: A reward policy must have an achievable numerical target.
- Valence: The reward must be something employees are interested in and value.
You can decide to allocate rewards based on your employee's performance. This practice is called performance-based reward. It's when you reward your employees based on their performances. In other words, when they have achieved a specific goal or reached a target.
Employee Rewards Types
What are some types of employee rewards? There are many different ways an organization can reward its employees. For this explanation, we will categorize employees' rewards into four types3:
- Monetary: You can give rewards with an economic value, such as bonuses or stock options.
- Non-monetary: You can give your employees non-monetary rewards such as flexible working hours or the possibility to leave work earlier.
- Recognition: Those are the rewards that recognize the employee's values and boost their self-esteem, such as praise and personal notes.
- Assistance: Those are the rewards that help employees' health and work-life balance, such as gym membership or free healthy food.
There isn't one type of reward that is better than the other. It all depends on the situation and the person's needs. For example, although many people might appreciate an extra cheque of 100$, it won't necessarily be much for a high-paid manager who would prefer something different.
If you are looking for the type of reward that will motivate your team, you can check out our article on Motivation Theory, where you will find a variety of theories and resources that can help you.
Employee Rewards Ideas
Let's go over some employee rewards ideas! There are many different rewards you can offer to your employees; you can find below some classic examples of employee rewards, but also some more creative rewards.
- Praise and recognition: Most employees would leave if they didn't feel appreciated. Therefore praise and recognition might be one of the most important rewards you can gift to an employee. Showing that you respect them and acknowledge and praise their excellent work in front of their peers or in a one-to-one meeting with them will drastically improve their self-esteem.
- Note or a message: A simple email or a letter signed by the CEO of a large company is a great way to show employees recognition for their work and impact on the company.
- Self-development: You can show your team that you are interested in their self-development by rewarding them with a book, a training program, a seminar, or a course they are interested in.
- Stock options: Although it can be an expensive reward for a corporation, it will vastly interest people who believe in the company's long-term success.
- Monetary prize: Monetary prize will always be appreciated; nobody will ever complain about receiving a 100$ bonus.
- Gift cards: An organization can often strike a deal with another company to purchase gift cards in bulk at a discount and give them to their employees.
- Subscription: Whether it is to a gym, a Spotify account, a magazine, etc. As long as it is something valuable for the employee, it would be an appropriate reward.
- Company trinkets: A t-shirt or a mug are not significant gifts, but they are always appreciated.
Employee Rewards Considerations
What are some considerations that need to be taken into account with respect to employee rewards? There are many advantages to employee rewards; however, there are also major inconveniences that you must consider.
It can be easy for some departments to define targets and specific goals, such as the sales department, where you can set up a number of sales you target. However, it can be much more difficult for other departments, such as the HR department. In this case, as we are touching on the human and psychological factors, it is much more challenging to set numerical targets.
Employee rewards can create jealousy and discord among employees, as some will often outperform others. Furthermore, some people might only be interested in individual rewards rather than the overall group work and might even sabotage other people's success.
Employee rewards offer great advantages, but it's essential to think carefully before implementing a new employee rewards policy, as it can have drastic repercussions on the all organization.
Employee Rewards - Key takeaways
- Employee rewards are ways to motivate, reward and recognize individuals' performance within an organization.
- Employee recognition and rewards play a crucial role in retaining an organization's best talents.
- An employee reward is an intrinsic component of the expectation theory. This theory states that people are more motivated and work harder if they think their efforts increase their performance and can help them get a reward.
An organization must create a reward policy to reward its employees fairly. A reward policy is a set of rules and guidelines that define how a company rewards its employees.
There are four types of employees' rewards:
- Monetary
- Non-monetary
- Recognition
- Assistance
References
- Goodreads. https://www.goodreads.com/quotes/8921921-people-work-for-money-but-go-the-extra-mile-for
- Victor Lipman. 66% Of Employees Would Quit If They Feel Unappreciated.15/04/2017. https://www.forbes.com/sites/victorlipman/2017/04/15/66-of-employees-would-quit-if-they-feel-unappreciated/?sh=a913be368979
- Indeed. What Is a Rewards System? (Plus Types and Tips to Use) 03/01/2018. https://www.indeed.com/career-advice/career-development/reward-systems
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