What are Employee Incentives?

Employee incentives are money-based and non-cash-based perks or forms of employee recognition. They are used to retain talent, recognize worker contributions, improve employee engagement, boost employee morale, inspire workers to reach goals, and improve company culture. Employee incentives give workers a reason to do their best, beyond a paycheck. For some companies, incentives are given out regularly, at specific intervals, while for others they are occasional worker treats. Incentive programs are common in the workplace. In one study, 93% of companies reported offering short-term incentives and 51% offered long-term incentives. Incentives programs can include:

• Profit-sharing programs: In profit-sharing or gain-sharing plans, employees get stock or cash bonuses according to how well the company is doing financially. For example, if profits are 3%, employees might get a 3% cash bonus, stocks equal to that percentage, or even a 401(k)-retirement contribution of 3%.
• Annual plan: Yearly, companies can award bonuses or additional pay to employees who have achieved specific outcomes, such as visiting a certain number of clients or making a set number of sales.
• Spot awards: These short-term incentives reward good work, an accomplishment, or a special contribution to a specific project or job. For example, if a client calls the company to explain that a worker went above and beyond to help with a problem, that employee may be eligible for a spot award.
• Team incentives: In cases where teams work closely together and it would be hard to award incentives based on individual contributions, an entire team may get a bonus or other financial incentives for achieving a specific performance measure.
• Discretionary bonuses: Bonuses are a sum of money awarded to employees, often for meeting performance goals. Discretionary bonuses are not predetermined by a formula. Instead, managers decide how to distribute bonus money.
• Project bonuses: These are awarded for completing a project well and by the deadline.
• Retention bonuses: During crucial times—such as during the holiday rush or when a business is undergoing significant change—retention bonuses can make your staff feel valued, encouraging employees to remain at the company. These bonuses give workers a reason to stay, even when work may be temporarily stressful.

What Are the Benefits of Employee Incentives?

When implemented correctly, employee incentive programs can help your company:

• Boost employee performance: Strong incentive programs can improve worker performance by 22-44%.
• Improve employee satisfaction and loyalty: One study found that performance-related pay could improve trust in managers, employee job satisfaction, and commitment to a workplace.
• Retain top talent: Workers who feel appreciated are more likely to want to remain at their jobs.

What Are the Challenges of Employee Incentives?

While employee incentives have benefits, they can also pose some challenges, including:

• Feelings of resentment: If your company offers team incentives, for example, individual team members may feel upset if they feel they contributed more to a project than their peers. If you offer individual incentives, some employees may feel overlooked if their contributions are not acknowledged. To address this potential issue, make sure you keep careful data about contributions so no one is overlooked. 
• Expectations and entitlement: If incentives are awarded at specific times of the year, employees may come to expect them, and so might become less effective at improving productivity. To offset this, link at least some of your incentives to performance.
• DEI issues: Some groups within your organization may have an unfair advantage. They may be older and have more job experience, for example, or may be able to work longer hours that allow them to reach goals that secure bonuses or other incentives. To avoid discrimination, make sure your incentive programs are not biased. For example, do not base incentives on hours worked if someone on your team is dealing with a chronic illness which does not allow them to work long hours.

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What Are Some Examples of Employee Incentives?

If you’re considering an employee incentive program at your organization, you might want to consider these options for incentives:

Monetary incentives

These incentives include cash and rewards that have monetary value. These can include:

• Cash prizes, bonuses, or other monetary rewards
• Ride-booking credits
• Gift cards and gift certificates
• Electronics
• Trips
• Tickets to sporting or entertainment events
• Clothing
• Sports equipment

Non-monetary incentives

Non-monetary incentives still cost the company money to implement, but they do not have cash value themselves. These can include:

• Praise in the form of a personal note or public shout-outs at the company
• A party or awards ceremony for high-performing workers
• Coaching, mentorship, and training for an employee to help them further their career
• Increased roles and responsibility in the company, such as a new title
• Paid time off or some flex time
• Weekly happy hours
• A special parking spot or other privilege
• Allowing certain days to work from home     

Read our article on Effective Monetary Incentives and Rewards to Motivate & Reward Employees

How To Set Up a Successful Incentive Program at Your Organization

To make your incentive plans a success, you may want to:

• Find out what incentives lead to motivation: Some employees may be most motivated by cash while others may prefer experiences such as travel opportunities. Equally, some employees may prefer public recognition of their work. You can use a tool such as Connecteam to create surveys to find out what form of motivation works best for your individual team members.
• Set up a system: Decide who will give out rewards and incentives, what will trigger incentives, and what perks will be awarded. Write out a plan outlining the details. Review it for fairness and clarity. Are the incentives achievable and fair to your team? Is the plan clear? What are the goals for your incentive program—do you want to motivate workers or build a better company culture, for example? Does your plan support that goal?
• Make goals measurable: If incentives are tied to a specific goal, make sure they can easily be tracked and measured. Instead of saying teams will improve “performance by 3%,” for example, you might want to say that teams will receive incentives if they “complete 10 service calls this week and have an average customer service rating of at least 8.0.”
• Communicate and train your team: Once you have a formal plan for incentives, share the plan and your goals with the team. Offer training to help team members achieve incentives. For example, if your incentives are awarded based on customer satisfaction, offer training on customer support. You can use a platform like Connecteam to develop custom training to help your team strive for incentives and improved performance.
• Make it transparent: Workers shouldn’t be left wondering why they received a specific bonus. When you launch your incentive program, make sure workers understand how the program is structured. Will workers get a specific amount in cash bonuses for every percentage increase in sales? Will they receive a particular reward if they meet a defined goal by a certain time? It can be especially useful to let workers track their progress towards an incentive or bonus. In one study, workers who were able to interact with incentive tools increased sales by 12%. You can use Connecteam timelines to help employees track their progress at your company, and use updates to help employees understand how well they’re progressing towards specific work goals.
• Time it right: Studies have shown that when workers are rewarded for performance immediately following great outcomes, they are more motivated. That motivation remains, even if the rewards don’t continue. You can use Connecteam to organize your incentives and send them instantly to your employee’s mobile devices. Employees can earn tokens, which they can use to purchase gift cards from their favorite brands.
• Don’t leave anyone out: Ignoring some people at your company in incentive programs can make employees feel left out and resentful of your highest performers. Check to see whether there are specific contributions you can recognize in workers who haven’t qualified for an incentive in some time.
• Track the metrics: If you are hoping to use incentives to boost performance or productivity, for example, make sure you measure performance or productivity before and after the incentive program is launched and after incentives are handed out. Are you seeing an improvement? If not, adjust the types of incentives you are offering or conduct surveys to find out what might motivate workers more.
• Go beyond incentives: Alongside cash or non-cash awards, offer sincere and specific recognition of a worker’s or team’s contribution in a written or electronic note. This recognition can make incentives more powerful by showing appreciation for specific work.

Incentives For Your Workers

Employee incentives are cash or non-cash bonuses or rewards, usually awarded for work accomplished or goals met. When they are focused on an employee’s preferences and are linked to clear employee outcomes—such as specific numbers of service calls—incentive programs can motivate employees to do their best. They can even boost motivation, performance, and productivity in your workplace.