Working in HR means you’re always looking for creative and effective ways to retain your top talent. Reward schemes for employees and management can often go a long way as they help employees to feel seen, valued, and appreciated for their efforts.
However, rewards and incentives for employees have their limit as to how much good they’ll be able to do. By supporting employees’ mental wellbeing, you’ll find employees to be more committed to the company and able to show up as their best selves. We’ll talk about all this and more in this article.
An employee reward scheme is a formal way to reward employees for the work and effort they contribute to the company.
By formalizing your approach for rewards, employees understand the expectations and have clear goals to work towards. Employee reward programs are meant to promote equality within the organization and offer everyone a fair chance to gain recognition or rewards. If created properly and with thought, employee reward schemes can increase productivity, engagement, and motivation levels on behalf of employees.
A reward system for employees can be monetary, non-monetary, or psychological rewards. Additionally, you can use extrinsic or intrinsic awards. Extrinsic rewards are in the form of money, awards, or work perks. Intrinsic rewards are related to how employees personally feel when completing their job, such as a sense of pride or fulfillment.
To create an effective reward scheme, there are a few things to keep in mind. For starters, you’ll want to make sure that you are aligning the rewards with your overall business goals and plans. This helps to keep everyone on track.
Devise a scheme that recognizes efforts which are:
Reward schemes for employees and management can bring great value to a business of any size. With an employee reward scheme, you may be able to:
Employees who feel valued for their efforts are more likely to remain motivated to do their job as best as they can. Without rewards or recognition, employees may build resentment and frustration, which could lead to disengagement and even employee absenteeism.
Each type of reward plays a role in shaping your company’s culture. For example, you may grant employees with time off as a reward or provide them with extra financial bonuses. Whatever you choose to do, your reward scheme can be used to reinforce your company’s culture and depict its values in action.
Successful performance incentives contribute to increased productivity. By rewarding positive behaviors, you reap positive outcomes as employees are more focused on doing their job to the best of their abilities. In fact, 69% of employees said that they would work harder if they felt their efforts were better recognized.
You can devise a reward scheme that incentivizes better collaboration and teamwork by recognizing when people do good to help others, not just themselves.
When employees don’t feel rewarded or recognized, they are much more likely to turnover. With adequate recognition comes increased retention because employees feel valued for the value they contribute.
Along with the benefits you’ll experience by implementing reward schemes for employees and management, there are objectives to keep in mind to make sure it works in your favor rather than against your business.
Strategically, reward schemes must be in line with the organizational strategy as a whole. To depict, if your strategy is one focused on differentiation, it’ll be useful to deploy a reward scheme that provides greater benefits for staff when they reach predetermined targets to promote high-level skills.
Managers are often the first in line to make decisions that support the goals of the organization. If the reward scheme feels like managers are going to take on too much risk, then their risk aversion will hold them back. In turn, they won’t meet their targets or the organizational targets.
That’s why it’s important to set up reward schemes that mirror the overall organization's risk tolerance levels.
Keep in mind that there are employment laws, such as minimum wage and the prevention of discrimination, for example. Be sure that your reward schemes take these into account and comply with regulations.
Fixed remuneration rewards are becoming a thing of the past as companies move towards reward systems that are performance-based rather than financially-based. This helps to level the playing field and support ethical decision-making.
Reward schemes naturally incur a cost to employers. As such, employers should take this into account and create schemes that are enticing enough but do not come as a detriment to the business.
There are several types of reward schemes for employees and management, which include:
Base or basic pay is the minimum amount that employees earn for their work. An annual salary is an example of base pay. However, base pay could be supplemented by another type of remuneration, such as overtime.
Managers could receive performance pay on top of their base pay, or a blue collar worker may receive overtime for every hour they work beyond 40 hours a week.
This is a type of reward system that bases remuneration on performance, which can be team-based on individually assessed. There are subcategories of performance-related pay to consider, such as:
Rewards can be a great aide, but also could potentially become a terrible master. If you work only based on rewards, you could inadvertently promote negative behaviors or behaviors that end up harming your employees in the long-run.
For example, if employees are incentivized to reach a goal that has them working overtime or leading to burnout, it could backfire. It’s best to reward employees for efforts over outcomes and base rewards on capabilities.
And, rather than solely focusing on rewards, keep in mind that employees’ mental health is what can drive them or lead to disengagement if not properly cared for.
When people feel that their company is looking after their mental health, they are more likely to be motivated to perform. In the event they are facing mental health challenges, such as feelings of stress or anxiety, more money won’t solve the problem.
Rather, having tools, knowledge, and resources to manage and support their own mental health is what will make all the difference in how they feel and show up to work.
Just like your business may operate by setting SMART goals (specific, measurable, attainable, relevant, and time-based), target setting offers similar guidelines for designing reward schemes.
The building blocks model by Fitzgeral and Moon defines the three necessary standards for setting targets, namely: Ownership, Achievability, and Fairness. For the reward scheme to work, it should consist of: Motivation, Clarity, and Controllability.
As you can tell, there are multiple moving pieces to creating reward schemes. Despite the many considerations for devising a scheme, there’s more that goes into motivating employees than just rewards.
It’s also crucial to support employees’ mental wellbeing as that’s what drives their thoughts, behaviors, actions, and ultimately, motivation. With an employee wellbeing platform, you can empower employees to better understand their mental wellbeing and utilize techniques to better themselves.
This results in promoting their capabilities over outcomes, enabling their growth and a positive mindset, and advancing their knowledge to better manage challenges.
This way, employees can perform at their optimal levels, and then, be rewarded for doing so. Ultimately, the best employee reward you can provide is to take care of employees’ mental health.
If you are struggling to attract or retain talent, reduce absenteeism, overcome workplace stress, then rewards will only go so far. Throwing rewards at the problem is like placing a band-aid on a recurring wound, rather than addressing why it’s happening in the first place.
In the long run, it won’t provide the results you seek. It’s of greater value to overcome the heart of the problem and improve mental wellbeing. By doing so, you’ll be able to resolve your HR challenges at a fraction of the cost and apply this solution as part of your long-term strategy.
When working with performance-related reward schemes for managers and employers, you’ll have to conduct appraisals or assessments to determine how they are performing. Typically, appraisals take place on a regular basis, or at least twice a year. During this time, managers can set targets and rewards for the next period.
Some organisations look to pension schemes as a form of rewards. They can either be defined pension schemes, in which employees pay a pension to former employees based on the former employees’ final salary and the number of years of service to the organisation. However, these can incur a liability for employers and immense uncertainty.
Alternatively, a defined contribution scheme may be used in which case an employer pays a certain percentage of the employee’s salary into an account and the employee can choose to contribute to it.
Another type of reward scheme is benefits in kind, which are indirect forms of payment that can be provided to employees on top of base pay and performance-related pay.
These types of benefits include meal vouchers or health insurance, for example. Employers can offer cafeteria benefits in kind schemes, which grant employees the option to choose the reward they value most for a menu of options.
To determine the level and extent of employee benefits to offer, you have to balance two things: internal equity and competitiveness.
You’ll have to provide pay that is competitive with the industry in which you operate. This way, you can recruit top talent and attract employees who are willing to work for those rates. However, costs can’t be too high because you have to consider your bottom line.
Additionally, take into account internal equity, or the wage gap between your own staff. If remuneration is known to be unfair, then staff will be easily demotivated and more likely to leave.
Reward schemes for employees and management are a desirable way to motivate and engage employees for the long-run. There are many examples of incentives to consider when devising your own rewards scheme.
But remember, no matter how many rewards you offer, at a certain point, nothing will be enough if employees are not happy and in a healthy state of mind. By always prioritising employee mental wellbeing (alongside a rewards scheme), you can help employees to perform at their highest potential, show up focused and engaged, and equip them with tools and techniques to overcome challenges.
