Employee Rewards and Recognition: The Complete Guide

Did you know that employee rewards and recognition can increase sales by as much as 35%? Or that an unhappy employee is 11 times more prone to customer complaints?

Employees are the backbone of any organization. Employee rewards and recognition can play a vital role in making your organisation a successful and profitable one. Rewarding and recognizing employees is an excellent way to boost their morale and motivate them to work harder.

Research by Bersin and Deloitte says appreciation triggers the release of a hormone called oxytocin, which plays a significant role in social bonding and high spirits, which leads to happiness and positivity in the workplace. Rewards and Recognition are thus, linked intricately and have a positive correlation to employee happiness.

Let’s understand what employee rewards and recognition, are for a start.

What are Employee Rewards and Recognition?

This includes appropriate and regular financial compensation, as well as employee or team celebrations, recognition of years served, and/or milestones reached.

In a nutshell, rewards and recognition (R&R) is the acknowledgement 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.

According to HBR, 40% of employed Americans would put energy into their work if they were recognized more often.

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 behaviours, 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.

Reward 🎁

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

Recognition 🥇

Recognition means acknowledging an individual’s achievement. These achievements are significant and have specified standards. Recognition can be awarded for any achievement, big or small, for thank yous, work anniversaries, birthdays, or going above and beyond the call of duty. Therefore, presenting awards for any occasion can be a great way to show appreciation and gratitude to your employees.

Importance of Rewards and Recognition for Employees

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:

1. Productivity

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.

According to Psychometrics, 58% of professionals pointed to employee recognition as the best way to improve employee productivity.

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.

2. 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.

The University of Warwick says that employees are 12% more productive when they’re happy at work. 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 reduces the problem of employee absenteeism.

3. 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.

According to an article by BusinessLover, 90% of employees are more likely to stay with an organization that empathizes with their needs.

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.

4. 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 increase. The dopamine high is intoxicating. Hence, employees will make appropriate choices to continue getting recognized and rewarded.

Types of Employee Rewards and Recognition

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:

1. Top-down recognition

One of the most common forms 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.

2. Peer to peer recognition

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.

3. 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.

4. 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 a round of drinks on a big sale or project completion.

5. 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.

How to Start Your Own Employee Rewards and Recognition Program?

A lot of companies have a reward and recognition system, but it often fails to achieve the desired results. It becomes easy for employees to lose motivation after getting rewards for performing the same job for months. The proper employee rewards and recognition can be instrumental in keeping the employees motivated.

Creating an employee reward and recognition program suited to your organization doesn't have to be complicated. Following are a few key steps that can help you start.

1. 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.

2. 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 stressful issue for HR

According to Deloitte, companies with employee recognition programs have a 31% lower voluntary turnover.

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, or a good parking space can also do the trick.

3. 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 a 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

4. 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.

5. Identify employee rewards and recognition software

No matter how traditional your reward system may be, 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.

6. Talk to your employees

After forming/installing 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 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 the criteria of evaluation.

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

7. Maintain and repeat the R&R program

Everything needs maintenance, and so does your “flawless” rewards and recognition 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, weekly, monthly, yearly, etc. Only when the program starts running for a long time that's when you truly become a part of the corporate culture.

Conclusion

“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 praised only when getting the output or after a specific 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. Successful employee rewards and recognition programs can only be run in an organization that advocates the recognition of top performers.

You can start an employee appreciation program that fosters company values and makes work more human with an employee recognition platform. This will go on to become the foundation of employee engagement, continuous development, and retention strategy for the future.

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