You don’t need to spend a fortune to make employees feel valued – but you do need the right approach. An impersonal gift card months after a win won’t do much for employee engagement. But a timely, meaningful reward? That can make employees four times more likely to feel engaged at work, according to Gallup.
Traditional employee rewards systems often miss the mark. The rewards are generic. Recognition is sporadic. They overlook hybrid or remote workers. They don’t consider employee recognition across generations. The criteria for earning rewards aren’t clear, leading to confusion or even perceptions of favoritism.
Despite good intentions, these reward programs can kill employee motivation. The good news is, you can design an employee rewards system that’s fair, consistent, and increases employee satisfaction. This guide will help you understand what an employee rewards system actually is and which common mistakes to avoid. It also includes a step-by-step employee engagement action plan to help you succeed.
What Is an Employee Rewards System?
An employee rewards system is a framework for rewarding employees. It’s a structured way to say, “Hey, we see you and appreciate what you’re doing.” It’s a set of practices and incentives unique to your organization. The goal is to reinforce the behaviours that help your business thrive.
Rewards can be tied to wins like hitting a big quarterly target. They can also be used to acknowledge small but meaningful contributions, such as helping a teammate solve a client issue.
From professional development opportunities to tangible gifts, rewards can take different forms. But the best reward systems aren’t just about handing out perks. They boost employee morale and help create a high-performance culture.
Employee Rewards VS Employee Recognition
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The terms “employee rewards” and “employee recognition” often get mixed up. They’re related, but they’re not the same.
Recognition is the act of acknowledging an employee. It can come with a reward, but it’s not necessary. Rewards are tangible perks given when acknowledging employees.
Examples of employee recognition:
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A manager praising a team member at the all-hands meeting
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An employee spotlight feature in the company newsletter
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A peer shoutout in a Slack group chat
Example of employee rewards:
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Extra time off
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A cash bonus
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Tickets to an event
For best results, your HR strategy should include both employee recognition and rewards.
Common Employee Rewards Program Mistakes
Even the best intentions can backfire without a thoughtful rewards program in place. Here are some of the most common mistakes to avoid when designing yours.
One-Size-Fits-All Rewards
Have you heard of love languages? Think of rewards like the “love languages” of the workplace. People value different forms of appreciation. Some employees love public praise. Others prefer a private thank-you from their boss. Some would like the chance to take on a new challenge. Others would be thrilled with a spa certificate. So, don’t make the mistake of giving only one type of reward.
Delayed Recognition
Timing matters. If you acknowledge a win weeks or months after it happens, it loses its impact. Yet this is a common mistake. No matter how busy you are, give rewards immediately after behaviours or achievements. It shows people that their efforts are noticed and valued.
Over-Relying on Monetary Incentives
Money is a big motivator. Financial incentives belong in a strong employee rewards program. That said, only focusing on bonuses or raises is a mistake. Up to 55% of employee engagement is driven by non-monetary recognition, revealed McKinsey. Other forms of rewards, like flexibility or professional development, are key drivers of the employee experience.
Lack of Consistency
Don’t be inconsistent with employee rewards. Without a structure in place to keep things balanced, recognition can feel random. If one person gets praised constantly while another is overlooked, people will start to think your system is unfair. They might also lose faith in their ability to get recognized. Consistency builds trust. It also motivates people to strive to earn rewards.
Top-Down Only Recognition
Yes, it’s important to be recognized by your manager. But if you only focus on top-down recognition, you dilute the impact of your rewards program. Peer recognition is a key piece of the puzzle. Leaders can easily miss contributions that fly under their radar. Sometimes, a peer is in the best position to notice great work. These shoutouts can be just as meaningful.
Misalignment with Company Culture
What does your company stand for? A well-designed employee program considers this. Rewards should reflect your values and culture. Otherwise, you risk sending mixed signals. Think of the optics of valuing sustainability yet giving gifts wrapped in tons of packaging. On the flipside, aligned rewards strengthen company culture.
Failure to Measure Impact
Management guru Peter Drucker said that what gets measured gets managed. However, many HR professionals fail to measure the impact of their employee rewards system. Conducting employee surveys is one way to do this. Tracking employee recognition data is another one. (Applauz comes with in-depth reports to help fine-tune your tactics).
The Business Case of a Structured Employee Recognition Program
Now that you know what not to do, let’s go through what happens when you get it right. An effective employee rewards system does more than give gold stars. It fosters powerful business outcomes.
Employee recognition fuels engagement. According to Great Place to Work, when each employee has an equal chance of getting acknowledged for their efforts, they are 2.2 times more likely to go above and beyond their usual responsibilities.
Highly engaged employees don’t just do more. They do better. They drive 18% higher productivity and 23% higher profitability, according to Gallup. They also stay longer. Gallup data shows that well-recognized employees are 45% less likely to leave in the next two years.
That’s good news for your bottom line. According to SHRM, the cost of replacing an employee can range from 50% to 200% of their annual salary, depending on their level of seniority and expertise.
When you invest in a thoughtful employee rewards system, you also invest in the success of your organization.
How to Build a Reward System for Employees
Ready to create a rewards program that drives engagement, boosts performance and increases retention? Whether you’re starting from scratch or revamping an existing system, here’s how to do it right.
Step 1: Assess your current state
Understand your starting point. What kind of recognition efforts are already in place? Are they working? Take stock of what’s happening (or not) when recognizing and rewarding employees.
Then, identify gaps. Maybe recognition isn’t frequent enough or feels too random. Perhaps your program only includes one type of reward or doesn’t target different age groups. These are all opportunities for improvement.
Talking to your team is key. What motivates them? How do they really feel about recognition at your company? What would they like to see? What could they do without?
Run an anonymous employee engagement survey. Conduct one-on-one interviews to dive into the employee experience. Deploy a pulse survey to find out how satisfied people are with current rewards. Gather insights through different means – it will make your program more impactful from day one.
Step 2: Define clear objectives
Define clear objectives for your employee rewards system. What would you like your program to achieve? Maybe you want to improve retention or reinforce certain behaviours.
Set measurable goals. If you want to improve retention, track retention rate and set a target. Want to improve engagement? Measure metrics like the Employee Net Promoter Score (eNPS), which asks employees how likely they are to recommend their employer to others.
Align goals to company values. An innovative startup might reward creativity and risk-taking. A people-first company might place importance on collaboration. Tie rewards to what matters the most.
Don’t forget to create a budget. It isn’t as fun as brainstorming reward ideas, but it’s necessary. Know what resources you’re working with to make the most of them.
Step 3: Design your program structure
It’s time to design your program structure. A well-rounded employee rewards program includes financial (i.e., an expenses-paid trip) and non-financial rewards (i.e., employee awards).
Define how often recognition will happen. To create a “recognition-rich culture,” Gallup recommends giving praise every seven days. So, come up with different opportunities to regularly reward employees. Will you give out monthly incentives? Celebrate wins in real-time through a gamified points system? There’s no single right answer, but consistency matters.
Balance manager-led and peer recognition for best results. It helps your rewards program “stick” and fosters a positive work environment.
Step 4: Select the right tools
The right platform can make or break the success of your rewards program. Look for a tool that’s easy to use to encourage participation. It shouldn’t involve a big learning curve.
It should facilitate peer-to-peer recognition, as well as give you the ability to offer customizable rewards. Ideally, employees can choose perks that motivate them.
Automated features can save you time and money. You don’t want to manually track milestones like work anniversaries.
Analytics are crucial for measuring the impact of your employee rewards system and adapting your strategies.
Finally, make sure that any tool you choose is compatible with your other HR tools. And keep scalability in mind – it needs to be able to grow with you.
Applauz is a great example. It comes with features like points and badges that employees can redeem for perks, an employee rewards marketplace with over 30,000 products to choose from and in-depth reporting.
Step 5: Implementation strategy
It’s time to roll out your employee rewards system. Map out a simple communication plan. How will you introduce the program to your team? Leverage different channels, from email to in-person meetings.
Address key points: What is the rewards program? Why is it important? How does it work and how can people get recognized? What are the rewards available?
Use the opportunity to highlight your company’s commitment to employee recognition. Reinforce company values and how they connect to the rewards program.
Your managers need to be on board and equipped to succeed. They’ll help turn the program into a reality, so make sure they’re confident in their ability to do so. Train them to use your employee recognition platform and keep rewards impactful.
Kick things off with a fun launch to build momentum – think, a peer recognition challenge.
Step 6: Measure success
The work isn’t over after you implement your new employee rewards system. Track metrics like participation rate, engagement survey scores or employee retention rate on a regular basis. Look for trends and gather employee feedback often.
Use findings to improve your program over time. Maybe one type of reward is unpopular and you ditch it. Perhaps people really love giving each other shout-outs and earning points. Don’t be afraid to let your program evolve. In fact, don’t expect it to stay the same. Keep it fresh and experiment with new initiatives.
You now have a roadmap to reward employees in a strategic, intentional way. Stay consistent. Adapt your efforts based on data and feedback. Watch your team thrive and your business succeed, one moment of appreciation at a time. Applauz can support your journey.
