Employee reward system: A quick reference
- Team Advantage Club
- January 12, 2023
Today’s organizations recognize it is necessary to build mutual respect between employers and employees to build a sustainable workplace. Also, It is no secret that by making your employees feel appreciated and valued, an organization reaps more wondrous and extended returns. Employees who receive acknowledgement tend to have stronger self-esteem and more confidence. They are more willing to take on new tasks and are keener to be inventive and innovative. Therefore, Employee Reward System is a win-win situation for employers and employees.
Employee reward system: Basics
What is an Employee reward system?
The employee reward system is a crucial instrument management may use to direct employee motivation in desirable directions. In other words, reward systems are designed to get individuals to join the company, retain them, and encourage them to perform well.
What are the components of a reward system?
A strategic approach to a well-balanced reward system focuses on the three main components
a. compensation
b. benefits
c. recognition
Types of employee reward systems
As a part of employee performance management, organizations offer two types of reward systems:
Outward rewards
Extrinsic rewards are typically financial or tangible rewards given to employees in exchange for completing a task. For e.g. a trophy or medal, a certificate, pay raises, bonuses, and other monetary benefits. These incentives help engage and motivate employees in a short-term situation to push them toward a goal. They are extrinsic or outward rewards because they are given to a person for doing an activity and do not come from within the person.
Inward rewards
Intrinsic rewards are intangible psychological rewards that employees get from doing satisfying work. They are inward or intrinsic as they arise from within the person, for example, a sense of achievement or satisfaction after helping someone or doing something well. These awards are critical for developing a long-term culture of motivation to achieve new or similar goals over time. At the same time, Intrinsic awards instil a positive emotion in employees, allowing them to be more self-managing and add value to their work. By making employees feel involved, an organization can influence intrinsic motivation.
Maintaining a balance between the two types of rewards will result in improved performance from your employees. It contributes to both individual employee development as well as overall business success.
Key features of an Employee reward system
Peer-to-peer recognition
Peer-to-peer recognition is an efficient method of recognizing your employees. Employees are overjoyed when their co-workers recognize their efforts. When employees feel valued by their peers, their performance improves, and productivity rises. A reward system that allows employees to recognize and nominate their peers for monetary rewards improves company culture, cultivates a sense of belonging, and helps build strong teams.
Performance management
A performance-based reward system assesses employees on how they add value to a task and accomplish it. The rewards focus on their performance and contribution to the company, so employees feel motivated and driven to perform better.
Rewards points
Employees earn points for completing tasks and meeting objectives in a point-based reward system. These points are redeemable for a gift, a day off, or another benefit, and because they have monetary value, employees are ecstatic when they receive them. The point-based reward system is transparent and effective because managers can specify the types of events for which employees should receive reward points and monitor their employees’ performance. As the reward is received in points, it allows easy currency conversion. The system is practical for organizations with a global workforce.
Social recognition
Non-monetary employee recognition and reward system are known as social recognition. It is easy to kickstart the social recognition program. Start with a simple message of gratitude and appreciation during staff meetings. The system allows employees to feel valued for their efforts. The social recognition program is significant because it improves employee retention, morale, and engagement and positively impacts the company.
Feedback loop
Feedback is essential for improving, adjusting, or maintaining the recognition and reward programs. Evidently, employees who are given the opportunity to provide feedback are more likely to be excited about the program and engage wholeheartedly. Feedback is the most effective way to ensure that the program is received positively and especially to ensure that all challenges are overcome. Involving employees in the feedback loop is an excellent way to build rapport and foster a culture where people feel comfortable giving and receiving feedback.
Flexibility of choice
A vital feature of a successful rewards platform is that it is tailored to the organization’s values and responsive to changing employee needs. One of the practical benefits of a modern employee reward system is that it allows employees to choose their rewards. The reward point system works best when the employees can redeem vouchers and gift cards for things of their choice. Providing reward flexibility is one way of keeping the hybrid workforce motivated and engaged.
Cloud-based system
Cloud-based systems have become a necessity for all organizations now. Evidently, some features of a cloud-based reward and recognition system are seamless integration, scalability, flexibility, real-time reporting, and reward tracking. Users can access the employee recognition platform from any device using the system. This adaptability allows you to deliver information and functionality to your global workforce. Additionally, cloud-based reward and recognition platforms are simple to set up. So, you can get full customization to meet your specific requirements.
Implementing an Employee Reward System
Define the goals and objectives
It is crucial to define the goals and objectives you want the reward system to cater to. As you can design a targeted employee recognition program only if you know your company’s specific goals. Some businesses devise a strategy to
- Increase productivity
- Recruit and retain top talent
- Improve day-to-day performance and innovation
Brainstorm your company's objectives
Brainstorming the company’s objectives helps develop a well-researched plan that boosts workplace morale and motivation while meeting your organization’s objectives.
Determine which employee behaviours you wish to reinforce
Firstly, decide what types of activities and actions will receive reward and appreciation and then base it on the values you want to instil in your company. It could be productivity, teamwork, work ethics, or all of the above.
Create key performance indicators for individuals and groups
The next step in implementing reward programs is to comprehend the indicators that would comprise a concrete program:
- Congratulate someone as and when they achieve their goals. Waiting for recognition dampens the excitement and impact of an award.
- Recognition should be a two-way street, with no sound work going unnoticed. It is about appreciating not only significant accomplishments but also minor ones.
- Be specific in your appreciation so that employees understand that a particular type of performance will result in praise. It gives the impression that you are paying attention and value their efforts.
Choose the rewards that you believe will best fit your company culture
Employee rewards and recognition programs aim to make employees feel engaged and valued. So, do some preliminary research to find rewards that interest your employees and make them happy.
Introduce, explain, and roll out the employee reward system to employees correctly
Describe the eligibility criteria to your employees in detail. Explicitly explain to employees whether it applies to all or only permanent employees. Also, whether a minimum length of service is mandatory and whether an employee can receive a reward more than once. Make the program as simple as possible to understand. Inform employees about the benefits and how to use them.
Make sure you define the performance and accomplishments that can lead to rewards and recognition for an employee
As previously stated, there are various kinds of recognition programs to appreciate and reward your workforce. The best practice is that you specify which performance and accomplishments meet your company’s strategic objectives. You can use an employee reward system to get a fair idea of rewarding methods based on performance.
Suggested Read: Success Factors For Employee Recognition And Rewards Program
When employees feel valued as professionals and individuals by their employer, they are more likely to show gratitude with top performances, excellent work, and genuine engagement that advances the culture and organization. A thoughtful employee reward system is an effective pathway for recognizing and rewarding employees and helping companies meet their goals. These workplace reward systems boost employee morale, increase worker retention, reinforce company culture, and increase productivity
