As HRs, you don't need to be told that people are an organisation's most precious asset. Keeping employee engagement, performance, and retention high are always priorities at the top of the HR team's to-do list. Yet, with so many different tasks to do, reward and recognition policies are often neglected, failing to receive the attention they deserve.
Far more than just doling out a Christmas bonus every now and then, an organised and transparent rewards scheme can bring major benefits to your organisation. Ensuring that you are consistently rewarding employees for their hard work and long service to your company is a crucial way to improve employee engagement and satisfaction.
If you want to ensure rewards are being used to their full potential in your organisation, read on to learn about the benefits of an employee rewards scheme.
What is reward?
In general, reward refers to all the financial and non-financial provisions that an organisation makes to employees. This can mean salary, benefits, and non-pay benefits.
Reward is often used to refer specifically to the bonuses and gifts that employees receive in recognition of their hard work. When we talk about reward in this article, we'll be talking about this type of reward, which includes bonuses, gift cards, and other perks such as extra paid time off or flexible working opportunities.
Reward vs recognition
Reward and recognition go hand-in-hand, but there are some key differences between the two. While reward means acknowledging an employee or team achieving a specific goal with a prize such as a monetary bonus or voucher, recognition refers to showing appreciation for employees or teams. Employee recognition can be as simple as giving a verbal shout-out to a team member for doing a great job at the start of a team meeting, or featuring an individual's photo on the company's internal dashboard as 'employee of the month'. Employee recognition is often most effective when it comes from line managers or is peer-to-peer.
Reward and recognition are both important aspects of your company culture. While financial rewards can be a great way to keep motivation levels high in a team, recognition is equally important to boost morale and make team members feel appreciated. Overall, while reward is an occasional and special bonus, recognition is a key part of company culture-building all year round.
Want to learn more about the key differences between reward and recognition? Read our article on the topic here.
What is an employee rewards scheme?
A reward scheme is a way of standardising and formalising employee rewards. By providing a consistent structure to employee reward, HR can ensure that the reward system is working fairly and effectively. This gives every team member the opportunity to reap the rewards if they meet their goals.
Your employee rewards scheme will be unique to your organisation's values, business goals, size, industry, and more. There's no one-size-fits-all approach when deciding how to motivate your employees with rewards. However, here are some features that your employee reward scheme might have:
- Bonuses: An additional cash reward for staff who meet a particular goal, target, or achievement.
- Commissions: Often used in sales roles, commissions are where staff get extra pay based on the sales they make.
- Gift cards or vouchers: Gift cards for a shop, restaurant, or place are often used for rewarding the hard work of a whole team or department.
- Stock options: In some cases, long-term employees may be offered the opportunity to buy shares in the company after working in their role for a particular amount of time.
- Profit sharing: This is where a share of the organisation's profits are shared out between eligible employees.
- Paid time off: Additional holiday time is sometimes offered to staff as a reward for hard work, especially after the completion of a successful project.
- Other perks: Other non-financial rewards may include flexible work options such as flexitime or being allowed to work remotely from another country for a number of weeks each year.
With an effective reward scheme, every employee should know what they have to do or achieve in order to receive their reward. This acts as a powerful incentive and motivates staff to work hard.
The employee reward programme may also make it easier to reward employees for reaching career milestones such as work anniversaries. For example, you might offer a bonus or an extra day of holiday for each year an employee works. With a scheme in place it's no longer the responsibility of one overworked HR manager to remember every employee's start dates and ensure these perks are applied. Phew!
Benefits of an employee rewards scheme
Motivate employees to perform
One of the key benefits of implementing an employee rewards scheme is the motivation it provides. The prospect of rewards is a great incentive; not only do people want the reward, but the sense of achievement they feel after receiving the reward encourages them to work towards future goals, too.
An effective rewards scheme will not only consider individual performance but also align individual employee goals with overall business objectives. This is an effective way to ensure that all staff are working in line with the bigger goals, helping the business move forward with greater productivity.
You may also be interested in: What is the best way to track employee performance?
Boost employee retention
When employees perceive employee reward systems as fair and effective, they are more likely to remain in their current workplace. For example, one study found that 98% of respondents who received a bonus in 2021 remained with the same employer in 2022. On the other hand, 67% said that they would quit or consider leaving their job if they didn't receive a holiday bonus.
Employee reward systems also give staff an incentive to stay working at an organisation for a long time in order to achieve or become eligible for particular rewards. For example, while a new employee may be eligible for bonuses or commissions in their first year of work, it may be a few years before they are eligible for employee rewards such as stock options or profit sharing after a particular work anniversary. This encourages employees to commit and remain in an organisation in the long term -- a great way to hold onto your top talent.
Attract new employees
It's no secret that many people leave old employers in order to chase bigger salaries and better benefits. A clear and consistent reward strategy is a great way to demonstrate that your business is committed to rewarding hard work. This is great for your employer branding strategy and makes it more likely that potential candidates will apply for roles.
Furthermore, advertising your scheme for employee rewards is key to attracting the best talent to your organisation. This is because hard-working and goal-driven individuals are more likely to apply for roles where their work ethic is likely to translate into rewards. Consequently, a clear and transparent approach to employee rewards can be beneficial for recruitment.
Enhance company culture
Standardising your rewards efforts into a consistent scheme is also an effective way to tie rewards to your company values and boost workplace culture. Bonuses and commissions are often tied directly to performance, but it's important to remember that rewards can also be used to encourage employees to embody particular company values.
For example, a rewards system where a gift card or a team dinner/night out is given to the team that has worked best together each quarter is a great way to translate your organisation's value of collaboration and teamwork into real results. Because it's not necessarily performance-related, this type of reward scheme can emphasise the values your organisation most cares about and positively reinforce behaviours that align with them.
Identify your top and bottom performers
With a scheme in place to identify and reward staff for their efforts, it becomes easier than ever to identify your highest and lowest performing team members. This is a crucial aspect of performance management, allowing HR and line managers to put high-flyers up for promotions and step in to ensure lower performers get the support they need to improve.
You may also be interested in: What makes employees go above and beyond?
Building your rewards scheme using HR software
If you're ready to build your scheme to reward and recognise the work of your people, using XCD HR and payroll software is a no brainer. As a powerful single solution, our software allows you to manage rewards and benefits, measure employees' performance and goal progress in our performance management module, and get real-time reports. There's everything you need to create a successful employee reward scheme, all in one intuitive software solution!
And it doesn't stop with rewards. Especially at times when budgets are tight and resources are stretched, we know how important it is to provide employee recognition to motivate and appreciate your team. That's why we've built Appreciation, a dedicated employee recognition platform. Facilitating peer-to-peer appreciation, the employee recognition software encourages everyone in the company to send 'a Appreciation' to each other to highlight achievements and behaviours.
With 69% of HR leaders agreeing that reward and recognition is the most important area of employee experience, XCD's software offers an intuitive and customisable tool for rewarding and recognising your staff. Find out more about Appreciation on the Salesforce App Exchange today by clicking the button below: