Financial Incentive Examples to Reward Employees

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70% of UK workers have reported that they will be looking for a new job in 2024, with 55% saying that they want or need more money this year.

It’s no surprise – with rising energy bills and supermarket prices, lots of us are feeling the squeeze.

While financial reasons have always been pivotal in employees’ decisions to remain or leave jobs, the economic pressures of the last few years have made this especially important. In one survey, low salary was the second most popular reason employees decided to quit their jobs (closely following toxic company culture).

So, how can HR strategists ensure that employees are receiving sufficient reward for their work to maintain high motivation and retention?

Here are our top financial incentive ideas to reward and motivate employees.

Firstly, what’s the definition of a financial incentive?

Financial incentives are simply monetary rewards given to employees. These are sometimes considered tangible rewards because of their inherent monetary value (in contrast, an intangible reward such as praise from a manager or a mention in the company newsletter has no inherent financial value).

Financial incentives, also sometimes referred to as monetary incentives, are often the first thing we think of when it comes to reward. However, they are not the only type of incentive provided in the workplace.

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Salary and raises

An employee’s salary or wage is perhaps the most obvious type of financial reward. Two in three people surveyed in a 2020 YouGov poll stated that a competitive salary was their number one must-have in a job. The prospect of a raise is a key incentive that motivates employees to work hard in their jobs, take on new responsibilities, and go above and beyond.

Without the right financial incentives, employees are more likely to look for other employment. In one survey, US employees were asked about their financial motivations for quitting their jobs. The top financial reasons were:

  1. Seeking higher pay in general (47%)
  2. Seeking better benefits in general (42%)
  3. Insufficient raises (41%)
  4. Needs not met by pay (40%)
  5. Pay inequality (39%)

So, when it comes to incentives for employees, salaries and wages are often the first place to start. In fact, according to CIPD, 30% of employers plan to increase wages this year to help employees with the cost of living.


As one-off payments made to employees to reward a particular achievement or at a specific time of year such as Christmas, bonuses are another popular incentive that motivates employees.

Some reasons a company might provide an employee with a bonus include:

  • Spot bonus: As a reward for completing a successful project or task
  • Retention bonus: As an incentive for employees to stay at an organisation for a specified amount of time
  • Sign-on bonus: On joining a company
  • Referral bonus: As a reward for taking part in an employee referral programme
  • Holiday bonus: To coincide with a holiday such as Christmas

A bonus might also be awarded on a work anniversary or other important career milestone. It may be used as a reward to show appreciation for an employee who consistently goes the extra mile.


Allowances such as dearness allowance are a sum of money that employers provide to employees on top of their normal salary. Dearness allowance helps offset the impact of the rising cost of living. The amount given often depends on inflation levels, consumer price index, the employee’s base pay, and where they live.

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A common financial incentive for sales teams is a commission. In addition to earning their base salary, these team members can earn a percentage of the profits from sales they make. Commissions are a great financial reward to boost productivity and motivate employees to work hard. In some cases, employees may be hired on a commission-only contract meaning that they do not receive a salary but instead make all their money from commissions.

Profit sharing

Profit sharing is an incentive where individuals who work for a company receive a proportion of the organisation’s profits, measured by revenue or net profit growth (or both). This reward means that employees get more money when the company performs better, which motivates them to work hard towards the long-term success of the organisation.

While sometimes the proportion of profits is split evenly between individuals, on other occasions the reward may be adjusted based on their performance. Sometimes individuals will have to work for a company for a particular amount of time before they are eligible to be included in a profit sharing reward scheme.

Some types of profit-sharing plans include:

  • Current profit sharing: This is paid out as immediate rewards to employees but is taxable as regular income.
  • Deferred profit sharing: In this plan, the share of profits given to the employee cannot be accessed immediately and may be withdrawn at retirement or end of employment. While this type of reward doesn’t provide short-term gratification to employees, it can have benefits for employee retention.
  • Hybrid profit sharing: A combination of the above two plans, part of the profits are given to employees straight away while the rest goes toward their retirement.

Overall, profit sharing can be a great incentive to encourage employees to work hard to achieve success for the organisation because their impact on profits will be directly rewarded.

Wage incentives

Wage incentives such as overtime pay or additional pay for completing a project outside of regular working hours are a financial incentive that employees may receive. This is an incentive that encourages them to go beyond their usual duties.

Stock options

Another monetary incentive that organisations may use is offering employees the opportunity to buy shares in the company at a discounted rate. This means that employees can purchase stock at lower than market value and can own part of the business. If the company performs well over time this then benefits the shareholders; this encourages them to work hard for the success of the company.

Using stock options as a financial reward is often referred to as incentive stock options or statutory stock options. These can be an advantageous type of incentive for companies who want to motivate and retain staff but offer lower salaries and fewer benefits. The organisation profits from the purchases in the short term but can offer monetary gains to employees later on.

Referral programmes

A great way to find high quality talent and great company culture fits for your organisation, referral programmes are another financial incentive for current employees. These incentives give a cash reward to the referring employee when the candidate they recommend is hired.

With a referral bonus available and their reputation at stake, employees are given an incentive to take the time and care to find the best candidates. Despite the cost of this incentive, this means that organisations can often save money on hiring in the long run thanks to the increased efficiency.

One-off cost of living payments

In response to the rising cost of living, some employers are giving employees one-off payments to aid their financial situations. For example, HSBC, Virgin Media O2, and John Lewis have all offered payments to staff for this reason.

Similar to a bonus, many of these cost-of-living payments are available only to those employees whose earnings are below a particular threshold. For example, Virgin Media O2 staff who earn £35,000 or less are receiving payments of £1,400 from their employer.

However, these cost of living payments are currently not very common, with only 5% of businesses with 250+ employees and just 1% of smaller businesses offering this financial assistance to workers.

What about non-financial rewards?

While monetary incentives are a great way to reward employees, they’re just one tactic in your arsenal. There are also a range of other ways to reward and motivate employees, and many of them can be implemented easily on a tight budget.

For other ways to improve employee morale, productivity, and retention, check out our list of examples of non-financial rewards. In particular, praise and recognition can go a long way. With 63% of employees reporting that they don’t get enough praise at work, rethinking your recognition strategy is a great place to start.

To help you build a recognition-rich workplace, we’ve developed our brand-new tool: Appreciation. As a standalone peer-to-peer recognition platform, Appreciation provides you with a company-wide channel for recognising each other’s achievements.

Want to learn more about how XCD Appreciation can boost your reward and recognition strategy? As a standalone product, anyone can use it. Click the button below to learn more: