According to the U.S. Bureau of Labor Statistics, the Great Reshuffle is far from over. As of April 2022, 4.4 million Americas quit their jobs by choice, leaving employers scrambling.
To retain talent today, organizations have to look beyond the basic benefits package, and add incentives that keep employees motivated, engaged and appreciated.
What makes an employee incentive program work?
The most effective incentive programs leverage human behavior by linking activities with goals that tie to company objectives. Instead of year-end rewards, the employee has the opportunity to earn incentives—from money to recognition to prizes and more—by completing those activities throughout the year.
This immediate gratification pays off.
Research from Cornell University showed that employees who are rewarded more frequently are more intrinsically motivated , as well as assigning more value to work goals.
The key to a successful incentive program is to ensure that it offers something for everyone—not just something that appeals to a certain segment of employees. The best approach is offering a broader program with a range of opportunities and rewards.
The three types of employee incentives
When most people hear the word “incentive,” they think about financial rewards. While money is a motivator, it is only one of the three types of employee incentives: Economic, Social and Moral.
The best programs incorporate aspects of all three to appeal to a mix of employees. Here’s a high-level look at what each category includes:
1. Economic incentives
Economic incentives pay employees for their performance when they hit predetermined goals or objectives. These incentives, which enable employees to earn cash or other items of monetary value, above their base salary, can be rewarded to individuals, for group accomplishments, or both. They can include:
Bonuses: These bonuses can be delivered annually, quarterly, or when certain benchmarks are reached, or accomplishments obtained. Companies can also set aside a certain amount for discretionary bonuses that can be offered up when an employee or team goes above and beyond, referral bonuses for recommending a new hire, or merit bonuses for employees who come up with an idea that saves the company time or money. The faster the employee receives the bonus after accomplishing the goal, the greater the motivation to contribute more.
Sales commissions: Employees earn a set percentage of the dollar value of the goods or services they sell, so, the more they benefit the company, the more they benefit personally. To keep the momentum going, give employees a way to track their progress, so they stayed fired up and engaged.
Gift cards and vouchers: These incentives can range from a voucher for a car wash and detailing service, to a gift card to a spa, the grocery store or an online retailer, to round-trip airfare, tickets to sporting events and everything in between.
The key is to match the reward to your target employees’ preferences, or make it a generic Visa or American Express gift card that the employee can use anywhere.
Again, frequent awards throughout the year will typically achieve greater results than annual or semi-annual awards.
Paid days off: There are few things more valuable than time, and employees will always appreciate some well-earned, extra time away from work.
2. Social incentives
Everyone wants to feel seen, heard and recognized for their work, so they feel like an integral part of the company, not just another cog in the machine. Social incentives, or recognition incentives, put employee contributions and successes in the spotlight.
The goal here is not necessarily to come up with some grandiose gesture (though it can be). It’s more about remembering to show employees that you see their work, you appreciate their work and you’re thankful that they are part of the team. Incentives can include:
Personal letters: A sincere, personal letter from the company president, a department head or even the direct manager, thanking the employee for an accomplishment or recognizing a milestone, can go a long way. A letter with a photo, an award or an additional incentive compounds the value.
Awards, trophies and certificates of recognition: Who doesn’t remember bringing home that first ribbon, trophy, certificate—whatever physical reminder it was that you accomplished something great? Creating an event and providing those awards to top achievers every month or quarter can do a lot for morale and employee satisfaction.
But, don’t stop with the department or the location of the person being recognized. Let everyone knows about the accomplishment through the company intranet, newsletters and other communication channels. The goal is to make every awardee feel like a rock star.
Team events: Did a particular team make it through a high-volume season, a rough patch or rally to exceptional performance? Call out that great work and reward it. Whether that reward comes in the form of a catered lunch, some fun and games during working hours, a happy hour or fun evening event (if the situation and employee lives allow) it enables teams to come together (physically or virtually) and celebrate their accomplishments. They bond as a team and strengthen their bond with the company.
Team events can include:
- Have a homecoming week at work with different themed days. Games or challenges can be sprinkled throughout the workweek to bring people together and give them a break from the stress of work.
- Have a chili cook-off, cookie-decorating or some other cooking competition. Make sure whatever you select includes employees with food allergies or on special diets, or specific cultural food restrictions, to ensure everyone can participate.
- Have a virtual happy hour, game night or team lunch or dinner to celebrate a job well done.
Or, let your team vote on what they’d like to do as a group from a list of options.
3. Moral incentives
These incentives underscore the fact you care about your employees’ physical and mental health, their causes and their communities. Incentives can include:
Health and fitness support: Organizations can offer free health programs for weight loss or smoking cessation, onsite yoga classes, or stipends for gym memberships. They can also offer free counseling services, meditation instruction, or a number of paid “mental health” days a year.
Workload balancing: Check in on your employees regularly to see how they’re doing with their workload and expectations. Let them know that, if they’re overwhelmed or if they have too much work to get done without continual night and weekend efforts, they can voice their concern, without negative repercussions. The idea is to prevent burnout and reduce unnecessary stress by opening the lines of communication.
Volunteer days: Serving the community and contributing to causes that are important to your employees shows that your organization cares about sustainability and giving back. Have quarterly volunteer days where different departments volunteer for an organization of their choosing during working hours. Give employees paid time off once or twice a year to support their favorite charity.
Companies can also set aside financial donations to go to employee causes, as well as match any employee contributions. By showing employees that your organization is a good citizen of the world, you will increase loyalty and job satisfaction.
How to implement incentive programs that work
One of the best ways you can determine what kinds of incentives your employees value is simply to ask. Put together a multi-disciplined employee incentive task force to come up with ideas, have departmental brainstorming sessions, or send out online surveys go get employee feedback and their ideas on what to add to your incentive program.
Take votes on the different options, by department or as an organization. Keep your offering fresh, relevant, and always let your employees know about any new incentives that are coming—particularly those that came from their input.
How to measure the success of your incentive program
It’s important to know that just creating an incentive program and putting it out there isn’t enough. Monitor its effectiveness, use and employee response.
Also monitor which employees are receiving the incentives. Some awards, like commissions or bonuses will based on performance. But, make sure you monitor the use of days off, volunteer time, lunches and gift card distribution. Are the incentives being used company-wide, or just by a few departments or segments of employees? If they’re not being widely utilized, find out why. Is it a manager issue, a lack of interest, a lack of awareness, or something else?
Keep track of how often each type of award is being given to ensure the program is being administered correctly. Look at the impact on retention. Then, survey employees for their feedback, so you can continue to refine the program.
A strong employee incentive program can improve job satisfaction, retention and morale—if what you offer resonates with employees. Get employee input, put the program in place, and keep it fresh from year to year, and you will see positive results.
