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# Employee Rewards

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People work for money but go the extra mile for recognition, praise, and rewards.1

Dale Carnegie

Although people work primarily for money and survival, a little recognition or a gift can go a long way to lift people's spirits. As such, employee rewards can play an essential role in an organization's culture as they can help motivate employees, improve performance, and increase overall job satisfaction.

## Employee Rewards Definition

Let's first define what constitutes an employee reward:

Employee rewards are ways to motivate, reward and recognize individuals' performance within an organization.

An employee reward is an excellent way for an organization to show appreciation and recognition for its employees' hard work. In addition, it can be considered an incentive to increase employee satisfaction and motivate them to improve their performance.

There are many different ways an organization can reward their employees: by giving out vouchers, stock options, praising employees, offering company paid trips, etc.

An employee reward is an intrinsic component of a famous motivation theory developed by Victor Vroom: "The expectation theory". This theory states that people are more motivated and work harder if they think their efforts increase their performance and can help them get a reward.

There are three fundamental principles to Vroom's expectancy theory:

• Expectancy: It's someone's belief that if they work harder, they can achieve a specific goal.
• Instrumentality: It's someone's expectation that they will get a reward if they reach a specific goal.
• Valence: It's how valuable a reward is to someone.

You can check out our article on Expectancy Theory for more information on how you can motivate your employees by rewarding them.

## Importance of Rewarding Employees

What is the importance of rewarding employees? An employee reward can be as simple as praise to acknowledge the employees' good work on a project, but it can also be a monetary bonus to reward their entire year of work.

If put into good use, employee rewards can have a significant impact on the organization.

• Motivation & performance: A promising reward is a great way to motivate employees and improve their overall job performance.
• Recognition: An organization that rewards its employees shows that it recognizes and appreciates its employee's hard work. Employees feel more valued, and as such, they will be more engaged in their daily work.
• Employee self-esteem: Recognition of their excellent work in front of their peers is a great way to improve employees' self-esteem.
• Attract and retain talent: Companies that offer generous rewards to their best-performing employees attract performance-driven employees. It can also be a great way to compete with other companies to attract performance-driven employees.
• Job satisfaction: A reward can go a long way to improve overall employee job satisfaction.

According to a study by Office Team2, 66% of employees would likely leave their jobs if they didn't feel appreciated. From this study, we can conclude that employee recognition and rewards play a crucial role in retaining an organization's best talents.

## Employee Rewards Policy

What is the best way of structuring an employee rewards policy? When rewarding employees, the organization must follow specific rules; otherwise, they might create discord between employees for favoritism or even confront some legal issues.

For this reason, an organization must create a program to reward its employees fairly. This program is called a reward policy.

A reward policy is a set of rules and guidelines that define how a company rewards its employees.

A reward policy must be:

• Fair: A company reward policy can't work in any way to favor employees. It has to be fair to everyone.
• Accessible: To ensure that all employees know that the company has a fair reward policy, it should be easily accessible and understandable by all eligible employees.
• Clear: Everyone should easily understand the reward policy; there shouldn't be any space for misinterpretation.
• Well-structured: A document with a clear structure, such as an introduction, purpose, scope, target, guidelines, and reward.

A reward policy must have the following:

• Performance target: A reward policy must have an achievable numerical target.
• Valence: The reward must be something employees are interested in and value.

You can decide to allocate rewards based on your employee's performance. This practice is called performance-based reward. It's when you reward your employees based on their performances. In other words, when they have achieved a specific goal or reached a target.

## Employee Rewards Types

What are some types of employee rewards? There are many different ways an organization can reward its employees. For this explanation, we will categorize employees' rewards into four types3:

• Monetary: You can give rewards with an economic value, such as bonuses or stock options.
• Non-monetary: You can give your employees non-monetary rewards such as flexible working hours or the possibility to leave work earlier.
• Recognition: Those are the rewards that recognize the employee's values and boost their self-esteem, such as praise and personal notes.
• Assistance: Those are the rewards that help employees' health and work-life balance, such as gym membership or free healthy food.

There isn't one type of reward that is better than the other. It all depends on the situation and the person's needs. For example, although many people might appreciate an extra cheque of 100$, it won't necessarily be much for a high-paid manager who would prefer something different. If you are looking for the type of reward that will motivate your team, you can check out our article on Motivation Theory, where you will find a variety of theories and resources that can help you. ## Employee Rewards Ideas Let's go over some employee rewards ideas! There are many different rewards you can offer to your employees; you can find below some classic examples of employee rewards, but also some more creative rewards. • Praise and recognition: Most employees would leave if they didn't feel appreciated. Therefore praise and recognition might be one of the most important rewards you can gift to an employee. Showing that you respect them and acknowledge and praise their excellent work in front of their peers or in a one-to-one meeting with them will drastically improve their self-esteem. • Note or a message: A simple email or a letter signed by the CEO of a large company is a great way to show employees recognition for their work and impact on the company. • Self-development: You can show your team that you are interested in their self-development by rewarding them with a book, a training program, a seminar, or a course they are interested in. • Stock options: Although it can be an expensive reward for a corporation, it will vastly interest people who believe in the company's long-term success. • Monetary prize: Monetary prize will always be appreciated; nobody will ever complain about receiving a 100$ bonus.
• Gift cards: An organization can often strike a deal with another company to purchase gift cards in bulk at a discount and give them to their employees.
• Subscription: Whether it is to a gym, a Spotify account, a magazine, etc. As long as it is something valuable for the employee, it would be an appropriate reward.
• Company trinkets: A t-shirt or a mug are not significant gifts, but they are always appreciated.

## Employee Rewards Considerations

What are some considerations that need to be taken into account with respect to employee rewards? There are many advantages to employee rewards; however, there are also major inconveniences that you must consider.

It can be easy for some departments to define targets and specific goals, such as the sales department, where you can set up a number of sales you target. However, it can be much more difficult for other departments, such as the HR department. In this case, as we are touching on the human and psychological factors, it is much more challenging to set numerical targets.

Employee rewards can create jealousy and discord among employees, as some will often outperform others. Furthermore, some people might only be interested in individual rewards rather than the overall group work and might even sabotage other people's success.

Employee rewards offer great advantages, but it's essential to think carefully before implementing a new employee rewards policy, as it can have drastic repercussions on the all organization.

## Employee Rewards - Key takeaways

• Employee rewards are ways to motivate, reward and recognize individuals' performance within an organization.
• Employee recognition and rewards play a crucial role in retaining an organization's best talents.
• An employee reward is an intrinsic component of the expectation theory. This theory states that people are more motivated and work harder if they think their efforts increase their performance and can help them get a reward.
• An organization must create a reward policy to reward its employees fairly. A reward policy is a set of rules and guidelines that define how a company rewards its employees.

• There are four types of employees' rewards:

• Monetary
• Non-monetary
• Recognition
• Assistance

## References

2. Victor Lipman. 66% Of Employees Would Quit If They Feel Unappreciated.15/04/2017. https://www.forbes.com/sites/victorlipman/2017/04/15/66-of-employees-would-quit-if-they-feel-unappreciated/?sh=a913be368979
3. Indeed. What Is a Rewards System? (Plus Types and Tips to Use) 03/01/2018. https://www.indeed.com/career-advice/career-development/reward-systems

Here are five examples of employee rewards:

• Praise and recognition
• Note or a message
• Self-development
• Stock options
• Monetary prize

There isn't one type of reward that is better than the other. It all depends on the situation and the person's needs. For example, although many people might appreciate an extra cheque of 100\$, it won't necessarily be much for a high-paid manager who would prefer something different.

According to a study by Office Team, 66% of employees would likely leave their jobs if they didn't feel appreciated. From this study, we can conclude that employee recognition and rewards play a crucial role in retaining an organization's best talents.

It's the core basis of the expectation theory by Victor Vroom.

This theory states that people are more motivated and work harder if they think their efforts increase their performance and can help them get a reward.

There are three fundamental principles to Vroom's expectancy theory:

• Expectancy: It's someone's belief that if they work harder, they can achieve a specific goal.
• Instrumentality: It's someone's expectation that they will get a reward if they reach a specific goal.
• Valence: It's how valuable a reward is to someone.

There are many different ways an organization can reward its employees:

• Monetary: You can give rewards with an economic value, such as bonuses or stock options.
• Non-monetary: You can give your employees non-monetary rewards such as flexible working hours or the possibility to leave work earlier.
• Recognition: Those are the rewards that recognize the employee's values and boost their self-esteem, such as praise and personal notes.
• Assistance: Those are the rewards that help employees' health and work-life balance, such as gym membership or free healthy food.

It's when you reward your employees based on their performances. In other words, when they have achieved a specific goal or reached a target.

You can decide to allocate rewards based on your employee's performance. This practice is called performance-based reward. It's when you reward your employees based on their performances. In other words, when they have achieved a specific goal or reached a target.

## Employee Rewards Quiz - Teste dein Wissen

Question

Intrinsic motivation is the act of doing something because it is enjoyable and interesting rather than because of pressure or an ____ incentive.

Outside

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Question

When you do something for the pure enjoyment of it, you are ____ motivated.

Intrinsically

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Question

What are examples of extrinsic desires?

Rewards

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Question

Intrinsic

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Question

If it is your assignment deadline that lands you on this explanation, you are then acting upon ____ motivation.

Extrinsic

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Question

An ____ is the act of doing something to gain an external reward.

Intrinsic motivation

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Question

What are the two categories that differentiate extrinsic motivation and intrinsic motivation?

Goals and motivation

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Question

Some psychologists believe that all behaviors are driven by external rewards. For intrinsic motivation, such reward is the ____ itself.

Activity

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Question

Basic human ____ needs, such as hunger or thirst, are the motives behind our intrinsic motivation to do something.

Psychological and biological

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Question

Some prominent psychological needs that can encourage people to act intrinsically include competence, autonomy, relatedness, or self-satisfaction. In this sense, all the needs arise from ____ and push individuals to thrive forward.

Within

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Question

An employee recognition program is a company's plan to show ____ appreciation for specific employee behaviors and contributions.

Formal

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Question

Can intrinsic rewards be biased and unfair?

Yes

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Question

An employee recognition program is fair when its results are determined based on measurable figures or ____ data.

Quantitative

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Question

The over-justification effect takes place when ____ incentives decrease an individual's ____ motivation to do something.

Extrinsic, intrinsic

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Question

In intrinsic motivation, you do something because it is ____ rewarding.

Internally

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Question

What are employee benefits?

Employee benefits are advantages employees can get from their employer in addition to their regular salary. Typically employee benefits cover retirement packages, health insurance, company cars, etc.

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Question

What are the advantages of offering employee benefits?

• Attract and retain talent
• Cost efficient
• Motivation & performance
• Reputation
• Job satisfaction

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Question

How can employee benefits be cost-efficient for a company?

It's much more cost-efficient for a company to purchase perks in large quantities at a discount and offer them to their employees rather than offering them a higher salary.

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Question

Is it generally fiscally advantageous for a company to offer employee benefits?

Yes

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Question

What are the four factors affecting job satisfaction?

• Working conditions
• Personality
• Corporate social responsibility
• Pay

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The employees' _____________ will affect how they see their working conditions and how satisfied they are

personalities

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How does corporate social responsibility affect job satisfaction?

People are generally concerned about the environment, and other social responsibilities companies can have. They like to be part of an organization that can contribute and has a positive impact on the world.

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Question

What are the four types of employee benefits

Insurance, retirement plan, working flexibility, and other.

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Question

People are not interested in health insurance benefit anymore?

False

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Question

What is a stock option?

A stock option gives the right to buy shares of a company at a specific price. With stock options, employees can often buy shares of their company in the stock market at a discount.

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There are no disadvantages to offering employee benefits?

False

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Question

What are examples of employee benefits?

Health insurance, retirement plans, stock options, flexible working hours, special discounts, etc. These are all employee benefits.

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Question

What are popular employee benefits?

Company-sponsored retirement plans and flexible working hours are the most sought-after benefits.

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How employee benefits can affect a company's reputation?

Offering significant benefits to your employee will reflect on your company's reputation, as people will know that the company genuinely cares for their employees.

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What types of insurance can companies take for their employees?

For example, life, health, vision, and dental insurance.

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Question

A pay structure, also known as ____ pay structure, is a collection of organized grades, bands, or levels of employees' wages classified by their job types within an organizational hierarchy.

Internal

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Question

A pay structure, also known as internal pay structure, is a collection of organized grades, bands, or ____ of employees' wages classified by their job types within an organizational hierarchy.

Levels

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Question

Pay structures link salary ranges with each ____

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Question

Well-defined pay structures provide managers with precise ____ in pay rise management and pay decisions.

Guideline

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Question

Yes

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Question

What is NOT among the four main types of pay structures?

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Question

In traditional pay structures, the distance between each pay grade is relatively:

Narrow

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Which type of pay structures is more controllable for managers?

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Question

Does broadband pay structures divide pay levels based on employees' job titles?

No

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Question

Market-based pay structures rely on the current market ____ of similar positions to determine employees' salary ranges and pay grades.

Average

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Question

Step pay structures consider employees' ____ to determine their salaries and pay grades.

Time with the organization

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Commission pay structures determine the ways companies ____ their employees for employees' work and contribution.

Compensate

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Team-based pay structures tie employees' wages or bonuses to the success of their ____ goals.

Team

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Question

Which is NOT an internal factor that can influence a company's determination of pay structures?

Laws and regulations

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Which is NOT an external factor that can influence a company's determination of pay structures?

Organizational strategy

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Question

What is an employee reward?

Employee rewards are ways to motivate, reward and recognize individuals' performance within an organization.

Show question

Question

What is the expectancy theory?

This theory states that people are more motivated and work harder if they think their efforts increase their performance and can help them get a reward.

Show question

Question

What are the three components of the expectancy theory?

• Expectancy: It's someone's belief that if they work harder, they can achieve a specific goal.
• Instrumentality: It's someone's expectation that they will get a reward if they reach a specific goal.
• Valence: It's how valuable the reward is to someone.

Show question

Question

Why are employee rewards important?

Employee recognition and rewards play a crucial role in retaining an organization's best talents.

Show question

Question

What impact can employee rewards improve in an organization?

• Motivation & Performance
• Job satisfaction
• Employee recognition
• Employee self-esteem
• Attract and retain talent

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