The Difference Between Reward and Recognition

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Recognition and reward. Reward and recognition. These are two concepts that are so often grouped together that we frequently forget that they’re two very different things. While reward and recognition both relate to the same general goal — showing employees that their work is valued — they do so in very different ways.

Why does this matter for HR? In short, a failure to distinguish between the uses and benefits of the two strategies means that neither employee recognition or reward can be used to their full effect. Neglecting one in favour of the other can be disastrous to employee morale and engagement, leading to knock-on effects for your productivity, and employee retention rates. Moreover, it can have a real impact on your workplace culture. 

So, what exactly are employee reward and recognition, and what are the key differences between them? Let’s take a closer look.

What is employee reward?

Reward refers to tangible and often monetary gifts that are given to an employee when they achieve a particular goal. For example, a monetary bonus, gift card, or voucher may be a type of reward given in your organisation when a certain target is met by an individual or team. 

While these types of financial reward are common, other types of reward given to employees may include perks such as paid extra days off. While the employee is not directly being given a financial reward, this still has a cost for the company as they are paying for less productivity.

Employee rewards act as an incentive, motivating employees to work hard and strive towards achieving their goals. Transparency is key for this to work; employees need to know the goals and KPIs to strive for to achieve rewards. 

What is employee recognition?

Unlike reward, employee recognition is intangible and doesn’t cost anything. Recognition simply refers to showing appreciation (usually in a public way) for an employee’s hard work.

For example, this might include mentioning a particular employee’s hard work in a company-wide email, featuring them as employee of the month on your internal intranet message board, or highlighting their achievements in front of their peers in a group meeting. It could also mean publicly showing appreciation and giving positive feedback to an entire team or department. 

While the concept of employee recognition may seem slightly vague and fluffy, its importance is no joke. Research has found that the majority of employees are more motivated by recognition than money. Organisations with a recognition programme are leading the way in employee engagement and performance.

Now that we’ve explained these two terms, let’s look at the key differences between the two. 

Reward costs money; recognition is free

In an ideal world, every employee would get all the bonuses they deserve 100% of the time. Unfortunately, rewards cost the business money, whether this is spent on a bonus, a gift, gift card, or even indirectly by gifting employees more paid days off. This can hamper your reward efforts; it’s not always possible to provide the rewards your employees deserve every time, especially for SMEs with limited resources.

On the other hand, recognition is always free. It costs nothing to give a shout-out to a hardworking employee in your monthly newsletter, congratulate them on their successes in a department meeting, or put their photo on your intranet homepage. This means that while reward is strictly limited, recognition is unlimited. No matter how limited the resources of an organisation, a recognition strategy is always achievable and important. 

You may also be interested in: How HR can motivate employees

Rewards are tied to goals; recognition is not

Another major difference between rewards and recognition is that reward is often tied to specific goals within an employee’s role or in the business. For example, your organisation may use a monetary reward or a gift card to motivate the sales team to reach their annual targets. This reward strategy encourages the team to work hard because they can look forward to a treat at the end of the year if they meet their goals. The goal needs to be quantifiable, for example to achieve a certain number of sales, or to complete a project by a particular date. 

In contrast, employee recognition does not need to be tied to quantifiable goals. Let’s continue to use the example of a sales team member. Despite being extremely hard working and passionate about their role in general, the team member may underperform for a month or two because of personal circumstances such as illness or family situation. In this type of situation, employee recognition is very important. The employee may not be able to meet their goals and do not qualify for a financial reward, but instead employee recognition can be used to show the team member that their contributions are valued and that they are an important member of the team. This provides positive reinforcement and contributes to a healthy and supportive company culture. 

Moreover, recognition allows employees to be celebrated for achieving things that are personal and specific to them. For example, you might have a team member who excels in the day-to-day duties of their role but struggles with a less common aspect such as public speaking. Providing recognition for this employee when they go out of their way to improve their public speaking skills is a great way to offer positive reinforcement and recognise their personal achievements.

This can also go hand-in-hand with peer mentorship programmes, coaching, and other programmes your organisation may have to develop team members. 

Reward attracts people; recognition retains them

It’s important to note that while reward and recognition may appear to have similar purposes, they play different roles for current and potential employees. The rewards an organisation offers its employees may be a key aspect of your employer branding, boosting the reputation of your business as a great place to work. This may make candidates more likely to apply to positions in your organisation. 

On the other hand, recognition only tends to become clear once an employee is already working in their role. It creates the welcoming and appreciative atmosphere that makes employees want to stay in an organisation.

The data shows that recognition-rich workplaces can have a real impact on retention. Various studies have found that 63% of employees feel they get insufficient praise at work, while 79% of job leavers cited lack of appreciation as a major factor in their decision.

With retention being a priority for many HRs at the moment, recognition is a key strategy for ensuring employees remain emotionally invested and engaged in their work for the long term.

You may also be interested in: Why only 1 in 10 employees are engaged

Which is more important: recognition or reward?

Employee rewards and recognition are in some ways two sides of the same coin. Although they have their differences, both are ultimately about supporting and motivating team members by showing them that their work is valued. 

Recognition has a real impact on employee engagement and retention and therefore needs to be a priority in any business. Even businesses with few resources to spare can create an employee recognition programme to ensure that appreciation is being shown for employees.

However, reward is also key. According to one survey in December 2022, 67% of respondents said that they would quit or consider quitting their jobs if they did not receive a holiday bonus. Moreover, 98% of employees who received a bonus in 2021 stayed with the same employer in 2022.

In short, recognition goes a long way but reward is still important, too. A successful organisation will incorporate both strategies in order to ensure that employee engagement and motivation are maintained. 

Enhancing recognition & reward with HR software

With XCD HR software, ensuring that your employee reward and recognition programmes are airtight has never been easier.

Our payroll and reward module makes it easy to assign, track, and measure rewards. Closely aligned with the performance management functionality, this gives HRs a transparent and effective way to manage how employees are rewarded. Plus, advanced reporting capabilities means that reward strategy can be viewed and evaluated at the click of a button.

Moreover, our employee relationships functionalities are a key part of any recognition programme. With the customisable internal company dashboard and easy-to-use internal comms functions, it’s easy to give teams and individuals the public recognition they deserve.

To take employee recognition to the next level, we’ve recently introduced Appreciation, our employee recognition tool designed to facilitate peer-to-peer recognition. Allowing anyone in the organisation to send personalised recognition messages and to any team or individual doing great work, Appreciation encourages everyone to take ownership of recognition.

Want to learn more about how XCD Appreciation can boost your reward and recognition strategy? As a standalone product, anyone can use it. Find out more on the Salesforce AppExchange.