Good managers know it’s possible to motivate employees by recognising and rewarding traits that a business wants to encourage. It’s the reason why many public-facing firms have ‘employee of the month’ boards; their aim is to have happy employees as well as business success.

A recognition and rewards scheme can do much more. Used properly, it can reduce staff turnover. For Charles Cotton, senior reward and performance adviser at the Chartered Institute of Personnel and Development (CIPD), a reward policy can not just support an organisation to reach its goals, it can also “guide an organisation’s objectives and legal obligations as well as the needs of its employees… it can enhance a firm’s reputation as an employer of choice.”

Any scheme and its processes require thought about the end results and the steps needed to get there. This means, in practice, rewards ought to ignore sales targets (because that often leads to bad sales), and instead look at, say, service and customer satisfaction.

Setting up

Setting up a scheme isn’t hard, but it does require consideration, says Lauren Sweeney, head of people at Virgin Incentives. She advises “defining the objectives and the reasons for starting a reward and recognition scheme as this will impact what firms offer.” 

Ms Sweeney notes that rewards must be used strategically. Activity won’t increase because of a gift on someone’s birthday. Similarly, loyalty doesn’t follow from performance-based rewards. In her opinion, the best way to create a reward and recognition scheme is to find out what employees want. As she highlights, “some might want traditional rewards like long service awards, but others might want in-the-moment recognition to keep them motivated day-to-day.”

As to the rewards themselves, cash isn’t always best and, in fact, can become quite expensive. A bonus in one year becomes a benchmark that needs to increase annually to hold value. Further, cash can easily be lost on the triviality of everyday life. The best alternative is vouchers and gift cards – they are distinct from cash and can be held separately from daily spending.

Rollout is important too. While Ms Sweeney says rewards may be publicly announced, given via a payslip, emailed or posted, the process should be on-going. In particular, she says: “It’s important to check in with people to get their views of the scheme and how it could be improved - there’s no point setting up a rewards scheme if your people aren’t going to use it.”

Be even handed

Many firms engage with employees over business decisions. And it should be no different when it comes to rewards, says Mr Cotton. “Benefits offered to employees often depend on their grade, location or occupation. However, it’s important that benefits are fair, otherwise the purpose is undermined.” 

Another point to consider is how perceived values can change over time. Where parties and hotel stays may once have been in vogue, they become less valuable when children arrive.

Beyond that, Mr Cotton points to “research that shows that non-financial rewards can be just as important as pay.” Here, he cites personal and career development, flexible working, employee involvement in work processes and changes that improve the work-life balance. “Employers have become increasingly aware of the importance of supporting the wellbeing of their staff, particularly since the onset of the pandemic,” he says.

Right now, employers might find cycle to work schemes more valuable than season ticket loans, for example. And it’s logical that employees will value a £25 voucher for a shop they frequent over a £50 voucher for one they don’t. 

Beyond that, it’s possible to offer a much sought-after reward that costs nothing – a free parking space outside the shop, for example. Further, qualifying criteria can change each month to support a desired business goal. 

Lastly, any scheme must be properly communicated to staff – what’s on offer and what they need to do to be rewarded. Ms Sweeney says it helps to “give employees a personal account where they can redeem their rewards instantly.” 

For those who want a helping hand, there are a multitude of third-party providers as an internet search for ‘employee rewards’ demonstrates. Their online portals allow employees to choose rewards themselves.

All about people

With the right programme, employers can please staff with incentives and improve business performance. But don’t lose sight of the fact that rewards may have tax consequences; good advice is essential.