Employee Rewards and Recognition Programs: What You Need to Know

More than one in three employees hasn't received recognition for a job well done in over a year. 80% would work harder if they felt more appreciated.

When employees feel recognized for the work they do, they'll happily do more of it. That's why it's so important to have an employee recognition program.

What is an employee rewards and recognition program?

An employee rewards and recognition program is a system that incentivizes employees to perform at their best. With this type of program, the company gives spot awards for employee achievements, then publicly recognizes them for their efforts.

Spot awards are given out on an ad-hoc basis for instances of exceptional performance. Public recognition can be anything from a shoutout during an all-hands meeting to a spotlight on the company blog or a LinkedIn post.

A successful employee rewards and recognition program boosts employee engagement, makes them more likely to stay with the company, and reinforces positive company values.

Creating and launching a rewards and recognition program is within reach for every organization with the right recognition platform.

Employee rewards vs. employee recognition

Employee rewards and recognition are different sides of the same coin. Together, they amplify each other's impact.

Recognizing employees for the work they've done is great. But at some point, you have to put your money where your mouth is.

Sending a cash bonus when they do something outstanding is also good. On its own, however, it seems hollow and transactional.

It takes two to tango.

Employee rewards

Employee rewards are the monetary (or non-monetary) incentives you give to employees for taking action.

Examples include:

  • A spot bonus for leading a huge project to completion
  • A pay raise and equity for hitting important KPIs
  • Extra PTO for winning a department-wide outbound sales contest
  • A gift card for an employee who received an excellent customer review
  • An all-expense paid trip for an employee's 5-year anniversary
  • A work party on a Friday afternoon to celebrate the company meeting its goals

These are the tangible rewards your employees will use for themselves. They're supposed to benefit them emotionally, financially, and/or physically.

Employee recognition

One of the biggest mistakes employers make when launching an employee reward program is failing to also recognize them for their work. Seeing a "+$250" in their bank account, receiving an email with a gift card, or walking into the office to something on their desk isn't enough. There's no human element to that.

Employee recognition is the social element of your program. It includes peer-to-peer and top-down recognition.

  • Peer-to-peer recognition — Employees give each other kudos for their work. For example, your team members can give each other awards such as "Most Helpful," "Hustler of the Week," or "Team Player Award." You could even take it a step further by creating a peer bonus system.
  • Top-down recognition — Managers and leaders acknowledge an employee's good work. That could be social media shout-outs, handwritten notes from the leaders, or anything that makes the employee feel appreciated by the higher-ups. It also includes work outings, celebrations (e.g., for work anniversaries), and team-building events.

Recognition is what really makes appreciation for your employees a part of your company culture. When you extend your gratitude to deserving employees, others will join in. As your company grows, continuous timely recognition means motivating others will be second nature to your employees.

Why it's so important to recognize your employees

Recent data compiled by Gitnux tells us a lot about the current state of employee recognition and why it's so important to change that.

  • Nearly 30% of employees say they haven't been recognized or rewarded for their work in over a year. Many haven't been recognized at all.
  • 80% say they're motivated to work harder when they receive recognition.
  • 69% of those planning to quit their jobs say they wouldn't if they started to receive recognition and rewards.
  • 85% of companies that spend at least 1% of payroll on rewards and recognition see a net positive impact on employee engagement levels.
  • Companies with successful employee rewards and recognition programs see 31% lower rates of voluntary turnover.

Aside from motivating employees, improving employee retention, and developing your company culture from the inside, there's a huge case for employee rewards and recognition from a financial standpoint.

The true cost of employee turnover varies wildly.

On the lowest end, the average cost to replace an hourly minimum wage worker is about $1,500 (which, by the way, is still less than the cost of whatever reward you might give).

On the high end, SHRM estimates the cost of attrition to be as much as 200% of an employee's salary. That's well into six figures for lots of your employees.

Since 79% of employees who quit their jobs cite "lack of appreciation" as a key factor in their decision, your rewards program really could save you a lot.

Even if it worked once, you're looking at hundreds of thousands in savings on recruiting costs and lost productivity.

When to recognize your employees' efforts (and how)

Frequent recognition might be your first idea. While rewarding every team member for showing up and getting things done is certainly valid, it can't be the foundation of your plan.

You want your employee rewards and recognition program to have impact. It simply won't if you recognize achievements too often.

You need to be as specific as possible when you recognize employees.

Here are some of our favorites:

  • Reaching specific goals or targets — Exceeding a sales quota, closing a specific number of deals, filling a certain number of roles, or any other tangible goal can be the basis for recognition. These might change throughout the year, so you'll need to tailor your criteria based on what will help you need them.
  • Special projects — Successfully executing a GTM launch, internal product feature rollout, huge client campaign, or any other "one-off" project with a set timeline is cause for celebration. For everyone involved, this could be a work happy hour or catering event. For the main drivers of project completion, it could mean $200 spot bonuses.
  • Team wins — When a team collectively contributes to the success of the organization, effective rewards include team lunches, extra days off for everyone, or a trip.
  • Above and beyond — Individual contributions like going the extra mile to help out teammates or doing something special for customers should be rewarded with more than just a pat on the back. Appropriate rewards include gift cards or experiences they could enjoy with family members.
  • Company metrics — Put a bonus system in place that rewards different departments based on their contributions to company health. You could tie this to revenue milestones, customer satisfaction levels, Net Promoter Score (NPS), or any other areas where you measure success.
  • Embodying company values — This is a bit subjective. Rewarding people for embodying your company values (e.g., integrity, proactivity) is an amazing way to reinforce desired behaviors and ensure employees continuously meet those standards.

6 steps to implement your employee rewards and recognition program

In a lot of ways, an employee rewards and recognition program is like a diet. It's about consistency over time.

Companies with successful programs offer frequent, personalized rewards and recognition to their employees.

Reward employees the right way by taking these six steps:

1. Set up your employee rewards and recognition platform

Trust us on this one. You don't want to use spreadsheets and email to manage everything. That'll be a nightmare for your HR manager.

Life is a whole lot easier when you have a rewards and recognition platform that handles everything for you.

Here's a quick look at how your rewards program operates when you use a centralized system:

  1. Determine your reward and amount.
  2. Set it in the system
  3. Determine eligibility and set rules.
  4. Every time an employee meets the criteria, they get rewarded (either through a request/approval or manager input).
  5. It's automatically reflected on the books for tax, accounting, and expense management purposes.
  6. You track employee engagement levels on a user-friendly dashboard.
  7. When you have to change something, you make a few clicks. Then, boom. It's deployed across the whole program.

Since employees pay taxes on monetary spot bonuses like they would regular W-2 or 1099 income. But this doesn't apply until they receive them, which creates some confusion.

Even more confusing is how your rewards and recognition program looks with all your other employee perks. When it comes to benefits and inventives, rewards really are a tiny part of the equation.

Compt is 100% tax-compliant. It takes the micromanagement out of rewards and recognition, so you can focus on delivering impactful experiences your employees appreciate. Plus, you can use it to offer your entire benefits package.

2. Gather input from your employees

Employee feedback is the ideal starting point for setting up an effective rewards and recognition program.

To find out what type of rewards your employees would appreciate, start by surveying the team. You can use the survey data to come up with ideas and implement a program that works for everyone.

For the sake of data, your survey should ask questions that can easily be turned into values.

For example:

  • "A reward like _____ would motivate me to do better at work" (Agree/Disagree)
  • "I would like to receive a reward for _____" (Agree/Disagree)
  • "I would participate in a reward program that offered _____" (Yes/No)
  • "Out of the four options below, which reward is most appealing to me?" (Choose one)

It's also a good idea to gather some data on the current state of your work environment. Add a few questions centered around how employees feel at present and whether or not they're happy with the current recognition levels.

3. Determine your criteria

Every company will have different criteria for which employees' achievements warrant which types of compensation. When offering your own employee rewards, you'll have to consider tons of factors.

  • Significance of the achievement — How big must the accomplishment be for it to deserve recognition? And which achievements deserve what types of rewards? Don't be able to offer larger bonuses for high-impact contributions.
  • Timeliness — Sometimes, annual bonuses are the best time to recognize your employees. But a delayed reward is less impactful than instant gratification when the reward is tied to a short-term project or immediate goal.
  • Employee value — It's important to give more recognition to higher performers, but don't forget about everyone else. Recognizing the work of new employees for onboarding successfully, attaining their first quota, or starting to set an example for other colleagues will motivate them more.
  • Cost-effectiveness — Allocating monetary rewards for every big achievement isn't always an option. Be realistic about what you can afford when setting rules for your program.

You'll also want to specify which metrics define your program's success. Using a rewards and recognition platform, you can keep track of employee engagement and participation, but there are other factors to consider.

Employee retention rate, eNPS (employee Net Promoter Score), employee performance against KPIs, and leadership activities like 1:1 meetings are all tied to employee rewards and recognition programs. If it's effective, they improve.

4. Decide which rewards to offer

Employee rewards and recognition is an inexact science. Most companies use a mix of numerous different kinds. For larger ones, there might even be some deliberation among leaders.

Your mix should include the following six categories:

  • Monetary incentives — Bonuses, pay raises, equity, and revenue share
  • Non-monetary benefits — Extra PTO and work-from-home options
  • Personalized gifts — Gift baskets, trips, thank you notes, health and wellness perks, company swag, concert tickets, and local events
  • Individualized awards — Plaques, work anniversary gifts, framed certificates and trophies
  • Special team events — Dinner parties, happy hours, and after-work get-togethers
  • Public recognition — Shout-outs at all-hands meetings, social media posts, press releases, and awards ceremonies

Companies offer these on a case-by-case basis. You'll have to use your best judgment when rewarding employees.

As a general rule of thumb, don't undermine your program by offering too many rewards. Save the cash, trips, and celebrations for the important stuff.

But definitely give recognition whenever you can. For macro-level achievements (e.g., a promotion or big project launch), an all-hands meeting shout-out or LinkedIn employee spotlight is appropriate. For smaller wins like new deals, create a Slack channel where managers and team members can shout each other out.

5. Spread the word

Employee rewards and recognition programs only work when your team knows to participate.

Make sure everyone knows how frequently you plan to recognize top employees (and the channels you'll use to do so). And when you offer rewards, you have to tell your employees precisely what the criteria is.

For your employees, it's a good idea to create a master document that includes all the details of your program. Make it accessible on the company portal or website.

Managers should be well-versed in the program's specifics. But they also need training on how they can set a positive example for their team members.

6. Continuously collect and act on feedback

It goes without saying that this isn't something you can set up and forget about.

Realistically, you probably won't get it right the first time. So you'll need to solicit feedback through pulse surveys and track engagement in your rewards and recognition platform. Otherwise, you won't really understand how to enhance and refine the program.

To get the most out of all your gathered information, you need to quantify and act on it. This is a collaborative effort between HR leaders and managers.

Before rolling out changes to your program, test them in one department or with a smaller group of employees.

Creative ideas for employee rewards

You should always look for ways to reward your best employees. It helps to think of ideas beforehand. That way, you won't be scrambling to put something together when they do a great job.

Here are some of our favorite ideas for effective employee rewards:

  • Spot awards/bonuses — The easiest way to recognize good work is to give out spot bonuses or awards. They're easy to set up in your system, approve, and account for.
  • Personalized company swag — Planners, water bottles, and other branded merchandise your employees will actually use.
  • Health and wellness perks — Contribute to a healthier lifestyle for your employees or give them some time to destress.
  • Experiences — Vacations, day trips, and exclusive events they can go to with their friends, work colleagues, or a significant other
  • Something personal — If you know a particular employee's interests, it's always better to do something personal, like tickets to their favorite band or a 'welcome' basket for someone who just moved to a new city.
  • A surprise party — For big work anniversaries (e.g., 5-year, 10-year), surprise your employees with a small gathering.

Creative ideas for employee recognition

Recognizing your employees doesn't have to be difficult. Sometimes, all it takes is a quick message. There are plenty of ways to make it meaningful, though.

Here are a few employee recognition ideas we love:

  • A Slack channel — To make employee recognition an integral part of your organization, create a channel dedicated to peer-to-peer and top-down recognition.
  • A handwritten note — Everyone loves a meaningful message. In this day and age, it's always more impactful when done by hand.
  • Employee nominations — Ask your team to submit nominations for a colleague who's gone above and beyond. Give them a shoutout at the next all=hands meeting.
  • LinkedIn spotlights — Your employee can reshare the post with their network and boost their personal brand as well.

Compt: The best employee rewards and recognition software

Plenty of companies give out small rewards like cash and gift cards. We're here to tell you that's impersonal and an absolute nightmare for your finance department.

Spot awards and perk stipends make it so employees can get the reward they want, when they want it.

When you offer employee rewards through Compt, you put your employees in the driver's seat. You set the parameters, they get to choose how they use their reward.

And Slack integration makes it easier than ever to recognize them. The whole team can appreciate their efforts right there in the channel.

Our innovative approach to rewards won us the 2024 Transform Rewards Trailblazer Award: Total Rewards Strategy of the Year.

Click here to learn more.

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