Honestly, who doesn’t like to get appreciated for their hard work? Employees get the nudge to do their best when their performance is recognized in their organization.

A strong HR department would design a reward system that keeps its employees motivated while maintaining the work culture of the company. Understanding different types of rewards lead to better implementation of such programs.

In the post- COVID-19 scenario, it has become more difficult for HR leaders to assess employee performance and create reward programs accordingly. But, a reward program is a pat on the back which in turn leads to better productivity. Not having a good reward program may lead to a higher staff resignation rate. Every year, this voluntary turnover of employees causes a loss of more than $1 Trillion.

While it is impractical to assume a 0% rate of employee turnover, your HR department can work in the direction of minimizing it and holding on to the best of your workforce.

Here, you will find 5 types of rewards that work excellently in any organization. But first, let’s look at the benefits of employee reward programs.

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Objectives of An Employee Reward Program

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Think about an employee who gives his 100% into a project and takes it all the way up to its successful execution. He feels happy with the execution, but this feeling is multiplied manifold when his work is appreciated in the right manner. Therefore, employee recognition plays a crucial role in a company.

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Rewarded employees feel a sense of ownership for their hard work. It makes them bond with the organization and boosts their morale. To unlock the maximum potential of your employees, they should be applauded with an authentic and deserved reward program. This serves some key objectives such as:

1. Displays Achievement of Target

A good employee reward type should be able to align itself with the goals of the company as well as the employees.

2. Retention of Skills

Reward programs allow the organization to retain and recruit employees with the best skills.

3. Motivation of Efforts

Not just the best performance, recognition can also be given to the amount of effort put in by the employee.

4. Risk Alignment

Reward schemes allow the organization to align its risk factors with that of the employees.

5. Boosts Productivity

A well-tailored reward policy can boost employee performance by 44%. Also, 85% of employees work better when rewarded through incentive plans.

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5 Most Popular Employee Reward Types

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There are a lot of ways to recognize employee performance. Since everybody ranging from managers to executives need to be assessed and rewarded, no one type of reward plan can work for all. Here are 5 types of rewards that work well for employees in any organization.

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Type 1: Extrinsic Rewards

● Extrinsic rewards are rewards that are tied to employee skills, behavior, or role. The effectiveness of the reward can be determined by its relevance to the employees’ performance.

● The HR leader needs to understand how much value the reward is for the employee. For example, an overworked member of the staff would highly appreciate a lighter workload or vacation time rather than any monetary benefit.

● Bonus, praise, incentive prizes, and awards are all examples of extrinsic rewards. The motivation must be right and appropriate. These rewards are dependent on base pay, performance, contribution, or skills.

● Benefits such as sick pay pension and health insurance are also a part of extrinsic rewards.

Type 2: Intrinsic Rewards

● Intrinsic rewards act like feel-good factors. They are highly valued by the employees, yet the HR department should use them wisely.

● Intrinsic rewards are directly connected to the employee feeling good about the hard work that he has done. Putting in a larger effort or playing a key role in a team project should come from appropriate job enrichment.

● Job enrichment helps in improving the work process by eliminating any elements which are dysfunctional and handing over key responsibilities as a reward to the employee.

● It is difficult to develop an effective intrinsic reward system as it focuses more on the psychological necessities of the employee.

Type 3: Monetary Rewards

● They are the most common form of employee rewards.

● A rise in pay, pension, bonuses, and other forms of life insurance is a part of monetary benefits.

● Monetary rewards are elementary. For example:

−     a rise in base salary

−     extra pay based on performance

−     seniority pay which is dependent on the time the employee has spent in the organization

−     other bonuses depending on the achievement of the individual on a personal level or in a group.

Type 4: Non-Monetary Rewards

● Non-monetary rewards do not provide any financial aid to the employee.

● They focus on providing the employees with the best possible tools to improve their performance by making the work process smooth and easy.

● Providing new training and improving the quality of gadgets, both are parts of non-monetary rewards.

● These can also include a dedicated parking space, better furnishings, and a better workspace experience for the employee.

● Though the details of compensation given by the company are not known the non-monetary rewards are generally visible and create a sense of inequity in the organization.

● This might work both ways. Employees willing to stay in the firm for a long time may work towards improving their performance or it can lead to employee turnover.

Type 5: Rewards Based On Performance

● A pay structure based on performance encourages the employees to perform better towards achieving the target.

● Though it is thought that performance-based recognition of work is a good way to improve the performance of employees, it puts them under a lot of pressure.

● Moreover, the commission might get split up among other employees performing equally well towards the same target.

● According to the U.S. Bureau of Labour Statistics, sales executives in the retail industry earn only an average of $24,340 per year.

Other types of reward programs include point systems and public recognition.

Some Pro Tips

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When you are not clear about, how to begin with the apt recognition program for your organization, using employee reward platforms is a wise choice. This makes it easier for you to collect employee feedback and track their performance.

Set up realistic rewards for realistic goals. Anything unachievable or hard to strive for will disinterest the employees.

Keep the reward system flexible so that the employees can get a change of reward system especially, around holidays.

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FAQs

1. What is peer-to-peer recognition?

It is a type of reward system wherein the key performers are appreciated by their co-workers. It creates a work culture where gratitude and taking up initiative are given importance.

2. How to begin setting up a reward system?

The first step is to define and plan out the values of your organization. The types of rewards that you tend to use must cater to the needs of your workforce while being aligned with these values.

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Find out how Compport can help you manage all your Employee Benefits process, book a demo today!