Employee Rewards and Recognition: The Complete Guide

Employee Rewards and Recognition: The Complete Guide

Employee rewards and recognition is a system that ensures engagement & productivity through intrinsic & extrinsic ways. So, here is the complete RnR guide.

Rani Joseph
Rani Joseph

Table of Contents

To sum up the importance of employee rewards and recognition, here’s a quote by Mark Twain:

“I can live for two weeks on a good compliment.”

Give and take! A simple transaction that has prevailed through the eons of human evolution. It is simple because it is something even babies can understand. You give something and you get something in return. Every time a baby babbles “ma” or “mama”, s/he receives a trail of kisses from his/her mother. The reward of love makes the word “mama” stick throughout his or her life cycle.

It doesn’t always take thousands of dollars to recognize your workforce.

Some may say that it is instinctive and human nature to feel the need to receive rewards, recognition, and appreciation for what they are and what they do. These underlying psychological tenets can be applied to the workplace as well. Appreciation triggers the release of a hormone called oxytocin, which plays a significant role in social bonding and high spirits, says research by Bersin, Deloitte.

This leads to happiness and positivity in the workplace. Rewards and Recognition are thus, linked intricately and has a positive correlation to Employee happiness. Let’s define reward and recognition, for a start.

What are Employee Rewards and Recognition?

GuardingMind @ Work (GM@W) defines reward & recognition as, “a system where people are acknowledged for their engagement in intrinsic or extrinsic ways. Recognition & Reward is present in a work environment where there are appropriate acknowledgment and appreciation of employees’ efforts in a fair and timely manner. This includes appropriate and regular financial compensation, as well as employee or team celebrations, recognition of years served, and/or milestones reached.”

40% of employed Americans would put energy into their work if they were recognized more often. - Harvard Business Review

In a nutshell, rewards and recognition (R&R) is the acknowledgment and appreciation of the staff’s exemplary performance. In this ultra-competitive business world, the winners are the ones that have staff that is skilled, professional, and well-trained. However, without employee motivation or appreciation of their hard work, even the best of best employees may falter. R&R in this sense, helps companies reinforce positive behaviors, practices, or activities that will lead to better performance and fruitful business outcomes.

Difference between Rewards and Recognition

In the HR realm today, one of the recurring conundrums, is the semantic usage of two very similar yet different terms, reward, and recognition. To fully grasp the meaning of the two words we need to understand the difference between rewards and recognition and then comprehend how these two words complement each other.


To put in simple words, the reward is a gift (something tangible) you choose to give your employees for accomplishing a goal. Employee rewards and recognition can be distributed for a number of reasons, like achieving service milestones, performance goals, and more. Common employee rewards and recognition include branded e-voucher gifts, travel tickets, bonuses, and gift cards.


Recognition means acknowledging an individual’s achievement. These achievements are significant and have specified standards. Recognition can be awarded for any kind of achievement - big or small, for reasons like - thank yous, work anniversaries, birthdays, or going above and beyond the call of duty.

The Importance and Benefits of Employee Rewards and Recognition Program

The Importance and Benefits of Employee Rewards and Recognition

You can dangle a carrot in front of a rabbit’s face, and motivate “it” to do a particular task. However, when it comes to employees, a paycheck is not the only proverbial carrot that motivates people to work hard. Rewards and recognition are very important to keep the wheels of engagement and productivity going. Here are a few points that advocate the importance and benefits of employee rewards and recognition:


There is a popular saying, “people will always work harder when they know they are appreciated,” and there is plenty of research to back this up. According to one survey, 79% of employees say that recognition is their motivation to work harder’, and another 78% feel that they are more productive after being rewarded.

58% of professionals pointed to ‘employee recognition’ as the best way to improve employee productivity. - Psychometrics

With a growing number of Millennials and Generation Z workers entering the workforce, the need for a good R&R is becoming even greater. Now, no one is saying that younger workers are greedy people. It’s just that they want to do work that is meaningful, fulfilling, and purpose-driven. Part of what makes a job more meaningful is recognition for their efforts in the form of praises and awards.

Happier Employees

There are tons of research that indicate that when employees are happy, they are more productive. What keeps them happy? Rewards and Recognition.

Employees are 12% more productive when they’re happy at work. - University of Warwick

There is a direct correlation with employee happiness. People who are satisfied at work tend to be less stressed at home. This significantly impacts employees' ability to do a ‘good job’ and reduce the problem of employee absenteeism.

Instills Trust

Apart from keeping employees happy, employee recognition also increases trust in the workplace. There is a survey that reveals that 90% of employees who had received some sort of recognition for their work on a regular basis have higher levels of trust in their boss, compared to those who don’t get recognized regularly.

90% of employees are more likely to stay with an organization that empathizes with their needs. - BusinessLover

Employees like to know if their efforts are making a difference and are not going unnoticed by the management. R&R instills trust, which not only encourages them to stick around but also to work harder towards their given role.

Rewards Motivate Employees More Than Fear

Many think fear is powerful enough to make people work. After all, being humiliated, demoted, or getting fired is every employee’s worst nightmare. But, did you know motivating employees to act through rewards is far more effective than punishments?

When employees receive a reward or get appreciated, their brain secretes dopamine, aka., “happy hormone”. In short, when you are rewarded for doing something right, like helping your team member, the levels of dopamine in the brain increases. The dopamine high is intoxicating. Hence, employees will make appropriate choices to continue getting recognized and rewarded.

Read our blog on: Improving the Employee Experience Through Total Rewards

Types of Reward and Recognition for Employees

There is no one size that fits all. Rewards and Recognition vary from organization to organization. How a company rewards and recognizes its employees is based on their unique company needs. However, there are several types of rewards and recognition for employees that can be effectively used to engage and motivate them. Here are a few common types -

Top-down Recognition

39% of employees consider their supervisor’s behavior as a benchmark for judging their jobs. - Addison

One of the most common form of rewards and recognition for employees is top-down recognition where supervisors acknowledge the contribution of employees. This can be done through:

  • Spot awards: It is when managers recognize an employee and reward them for doing something momentous. This satisfies the employee’s need for instant gratification. These kinds of awards are quite unpredictable as you never know when your employees will outperform. Hence, it’s better to always be prepared.
  • Service award: This kind of award or reward is given when employees achieve certain milestones.
  • Annual bonuses: Annual bonuses are based on the performance of a certain team or individual, given usually at the end of the year, apart from salary.

Peer to Peer Recognition

89% of HR leaders believe that peer feedback has a positive impact on the organization’s doings. - Globoforce/SHRM

It is a type of recognition system where empowered coworkers recognize the exceptional performance of their colleagues and reward them. This can be done in the following ways:

  • Thank You notes: This is one of the easy, less complicated, and cost-effective forms of recognition in office. There are several ways of doing this like writing a letter or small note on a stick-on, etc.
  • Social Media shout-outs: Let everyone know how awesome a certain team member is. There are intra-office WhatsApp groups or team collaboration tools (Eg - Slack) where you can socially recognize someone’s good work.
  • Peer nominations: In this peers/ team members get to nominate one-another for a certain award. The one with maximum nominations wins the reward.

Day-to-Day Recognition

At most times, high-fives, down-lows, and thank-you’s might be enough.

If you want your employees to give their 100% every day then periodic recognition will not do the trick. You need to motivate and encourage your employees on an everyday basis for them to perform well. A small word of praise or encouragement and constant motivation goes a long way in keeping employees content and in maintaining a positive workflow.

Informal Employee Recognition

This truly depends on the manager. It is the manager’s discretion when and where they want to recognize. They are mostly personalized, consistent, spontaneous, immediate, and meaningful. Here are a few examples:

  • Comp-off: It is a compensation leave you can give your employees for exceptional work, or working on a holiday (mostly because of project deadline).
  • Shout-out in the office ‘wall of fame’.
  • Give employees more autonomy, responsibilities, and freedom to handle individual projects.
  • Opportunity for advanced training/ passes to seminars or conferences.
  • Acknowledge work anniversaries
  • Food is a great motivator. Give employees a cookie, muffin, or simple chocolate for a job well done.
  • Take your team out for lunch or round of drinks on a big sale or project completion.

Formal Employee Recognition

An alternative to the erratic nature of informal recognition, set up a formal recognition program or well-tailored employee Rewards and Recognition platform to moderate and control recognition.

Read our blog on: 20 Creative Employee Recognition Ideas for Leadership & Peers

How to Start Your Very Own Employee Recognition and Reward Program?

Now that we have already established the importance and benefits of employee rewards and recognition programs, what should be the next move? What measures one should follow to curate the R&R program? Or which employee rewards and recognition software to use? This section will answer all your questions.

Set Clear Objectives for Your Employee R&R Program

To curate an R&R program of your choice, it is very important to understand the goals, i.e., what you want to get out of this program. The goal must align well with your company’s policies and fit your office culture.

While some R&R program is management driven (where they set the milestone), others are more employee-oriented. It depends on you to choose a type or amalgamate, by making sure you strike the right balance.

Identify Budget

Expensive rewards (like a trip to Fiji) might motivate employees to finish their tasks fast and with precision, but this might do you more harm than good as such exorbitant rewards are not sustainable. While no one is belittling the fact that recognition is good for the employee and the company, allocating a company budget still seems to be a stressing issue for HR heads.

Companies with employee recognition programs have a 31% lower voluntary turnover. - Deloitte

A recent study found out that while some organizations are spending 10% of payroll on employee recognition, the average budget seems to be 2%. Your answer to budget allocation depends on the goals you have for your recognition program. Once, the budget is finally identified and allocated, be aware of it, and establish a reward budget that is practical and appropriate.

Sit with your finance/ accounts team and figure out a budget that your company can afford for such a program annually. And the best part of such a program is that you do not always have to spend money on such things. Gift coupons, gift cards, a good parking space can also do the trick.

Form a Committee

In order to moderate and manage the functioning of such a program, it is imperative that you form a committee of HR leads, manager level executives, and few other empowered employees. The committee can help you in:

  • Formation of awards/ badges
  • Creation of new reward types
  • Promotion and adoption of the program

Set Guidelines

Every effective recognition program works on a set of criteria. It is important to create core values to keep the program fair and unbiased. Here are a few side notes that you should keep in mind while forming the criteria/ guidelines:

  • Be fair
  • Be transparent
  • Criteria should benefit all.

37% of organizations agree that their rewards programs consider multiple generations in the workforce. - Conference Board of Canada

Identify an Employee Rewards and Recognition Software that Best Suits your Company Culture

No matter how traditional your reward system maybe, a little bit of technology hurts nobody. In fact, R&R platforms and tools can further aid you in creating, managing, implementing, and driving the program the way you want. Today, the HR tech space has a plethora of tools to offer. However, choosing the one that matches your needs and integrates well with your company structure is nothing but like finding a needle in the haystack.

The best thing to do is to keep looking, take several product demos, and then decide what best suits your needs. The goal is to find a holistic solution that benefits you both in the short and long term. To make the choosing process easier for you below is a compiled list of “things to consider” while choosing your reward and recognition  tools:

Q1. Does the program match your company culture?

A1. Opt for a program that lets you use your company values to drive rewards and recognition while encouraging employees to add their own meaning to these values.

Q2. How social is your R&R program?

A2. Choose a program that socializes recognition and allows everyone in the company to see, like, comment, and contribute a recognition activity.

Q3. Who will manage the program – and at what cost?

A3. You need a program that gives you full administration control (for as and when needed situations) and is easy to use. This way you will be able to retain control of timing while cutting down the administration costs.

Q4.Can the program be integrated into your current business tools?

A4. Make recognition a habitual process by choosing a program that goes well with business tools (like SAP, Zoho, Freshworks) that employees already use on a daily basis. Make sure your potential provider offers integrations and will it have an effect on the overall cost of the product.

Q5. How will the data be managed?

A5. If you have complex employee data then look for the R&R program that can pull out data from your HR management system, without your interference. In case,  you don’t have an HR management system, then look for a program where the manual process is simplified and user-friendly.

You might also like: Effective Ways to Implement the Rewards and Recognition Program

Talk to your employees

After forming/installing an employee rewards and recognition software , it is crucial to make your employees aware of the initiative and record their response to your program. After all, it is for them. Once your employees are aware and understand the program and the way it will work, they will be encouraged to pump up their performance. Hence, make sure to develop and distribute reading material that shares useful information like the program, its method, and criteria of evaluation.

28% of the most memorable recognition comes from an employee’s manager. - Gallup

Maintain and repeat recognition program

Everything needs maintenance, so does your “flawless” R&R program. However, it is not just about maintenance but also improving for the better. That means coming up with more creative recognition ideas to maintain the element of fun in the workforce. Define the frequency of the rewards, for example – weekly, monthly, or yearly, etc. Only when the program starts running for a long time, that's when you truly become a part of the corporate culture.


“Appreciation can make a day, even change a life. Your willingness to put it into words is all that  necessary.”  -Margaret Cousins

Employee rewards and recognition is a system that ensures engagement and productivity in an organization in both extrinsic and intrinsic ways. Earlier, employee recognition was based on the foundation of praising only when getting the output or after a certain tenure. But today it is focused more on performance. Recognizing employees for their hard work and efforts builds a happy and engaged workplace culture. While there are countless ways to put the recognition mechanism into motion, there is only one unique office culture, your office culture.

Saying “Thank You” is good etiquette, but it’s not enough. A successful employee rewards and recognition program can only run in an organization that advocates the recognition of top performers. With an employee recognition platform, you can start an employee appreciation program that fosters company values and makes work more human. This will go on to become the foundation of employee engagement, continuous development, and retention strategy for the future.

Rani Joseph

Rani Joseph LinkedIn

Rani Joseph comes with a decade-long experience across the value chain of content and brand marketing. She currently is the Sr. Manager of Content Marketing at Xoxoday.