Employee Incentives

Compensation incentives, recognition incentives and reward incentives are the 3 major ones. Good business employ them effectively, do you? Check our guide.
  • Author: Siva
  • Last updated: July 11, 2022
  • 5 Minutes
employee incentive explained by Papershift

Incentive schemes for employees can vary from business to business and can include both monetary and non-monetary rewards. They’re usually implemented within a specific time frame and encourage staff to work towards specific targets. This makes them vital for many small and medium -sized businesses so they can keep staff productive and happy.

But which employee incentives work and how do you implement them? If you are an employer, how do you know whether or not it’s worth setting up an incentive for your employees?  

Read on to find the answers to these questions and more.

What is an employee incentive scheme?

An employee incentive scheme is a system where employees are given rewards for achieving certain goals or reaching certain targets. These schemes can be used to encourage staff to work harder, improve their skills or show loyalty to the company.

Why do incentive schemes matter?

One of the most important reasons why employee incentive schemes are important is because they give staff extra motivation to work hard and deliver more. Offering extras above and beyond basic pay and benefits is proven to encourage workers to go the extra mile, which could make the difference between average and outstanding performance.

Dedicated incentive programs also demonstrate the company’s willingness to invest in its workforce. By offering an incentive program, employers are recognizing that the success of the business depends on its employees and that the business will put tangible measures in place to reward those who do well.

What are the most common employee incentives?

Most employee incentive programs fall into one of four categories. Let’s have a look at each category in turn:

Compensation incentives

Compensation incentives include incentives based on financial rewards. These are some of the most effective because most employees place a high value on financial compensation. Some of the most common compensation incentives include:

  1. Pay rises: Offering a pay rise to employees is an effective way to reward employees for their hard work. It also shows the rest of your staff that hard work pays. 
  2. Bonuses: This can take the form of things like Christmas bonuses, performance bonuses, or sales bonusses. 
  3. Stock options: Offering employees the option to take shares in a business ensures that they invest in the business’s future.

Recognition incentives

Recognition incentives are incentives designed to recognise the hard work of employees. These incentives are often small and simple, but when used properly they can promote respect and trust between staff and employers. Some of the most common kinds of recognition incentives include:

  1. Thanking employees: It might sound like a small thing but taking the time to thank staff for their hard work is an easy way to show how appreciated their work is. 
  2. Certificates of achievement: Presenting employees with certificates when they perform well reassures them that their performance has been noticed.

Reward incentives

Reward incentives offer tangible rewards to employees for hard work. Reward incentives are a cost-effective way to encourage employees to work hard and exceed targets. Popular reward incentives include:

  1. Gifts: Gifts, including things like chocolates or flowers and can be a good way to show appreciation for staff. This can be tailored to the individual to make it feel personalised. 
  2. Gift vouchers: If choosing a personal gift isn’t an option, a gift voucher for a popular retailer might do the trick.
  3. Paid time off: If your staff has worked a lot of extra hours during a busy period, you can reward them with extra paid time off. This shows your staff that you acknowledge the extra work they’ve put in.
  4. Event tickets. Offering employees event tickets to things like football matches or a music concert, is a good way to reward employees while also showing that you want them to enjoy a healthy work-life balance. 

Activity incentives

Activity incentives show appreciation through the organisation of activities and team celebrations. These incentives encourage employees to celebrate achievements together and build relationships between co-workers. Some examples of activity incentives include:

  1. Company parties: Throwing a party to celebrate the end of a big project is a simple and fun way to ensure employees feel engaged in the work they do.
  2. Paid work lunches: Treating employees to a paid lunch is a great opportunity to give back to them while allowing them to get to know each other in a social setting.
  3. Birthday celebrations: Recognising employee birthdays is a great way to show co-workers that they are appreciated.

What are the main advantages to having an employee incentive scheme?

Employee incentive schemes can provide companies with a whole host of benefits. These include.

Increased employee productivity

Offering employees’ rewards for reaching targets or completing a good quality of work will help to spur them on in their performance. It doesn’t matter if the actual reward is a hot air balloon ride or a high street retail voucher; the effect will be the same. With the promise of rewards, as well as some clearly defined targets, employees are proven to be more productive.

Increased employee motivation

Many people find it hard to motivate themselves when they are at work. However, the promise of a potential reward in return for a little extra effort will galvanise even the most apathetic individuals. Indeed, the prospect of being rewarded with a holiday, spending spree or ‘adventure day’ generally leads to an increase in motivation levels across the board.

Increased employee loyalty

Rewarding hard work can help businesses secure commitment from employees. Staff incentive programs show workers that their employers value their work. It’s a proven fact that employees who feel valued and appreciated will be far more likely to be loyal to their company.

As an employer, how do I set up an employee incentive scheme?

In order to create a successful incentive scheme for employees, there are a few things a business needs to consider:

Decide on the objectives of the scheme

First, an employer needs to decide what it is they want to gain from the scheme. This could be:

  1. Improve staff skills
  2. Increase profit margins
  3. Increase staff morale
  4. Lower employee turnover

Set targets for the scheme

An employer will need to set targets specific for their workforce. It’s important that everyone feels involved with the scheme to ensure that no one is left feeling alienated. Set targets that encompass your entire workforce and are achievable by all.

Create a clear time frame

Setting a time frame keeps everyone in the loop and allows individuals to assess the amount of work that needs to be done to meet targets. 

Define rewards for success

Be creative with rewards. Monetary rewards are an easy incentive, but it’s important to ask your employees what they would want. Giving them options can help with motivation towards the incentive scheme.  

Reflect on success

In order to know how well the reward scheme is working, a business will need to measure its success. It’s important to make sure the method of measurement is specifically tailored to your business and your schemes.

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In conclusion

Rewards schemes are important for businesses and their staff and are proven to improve staff satisfaction and morale.



Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)