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.
In SHRM/Globoforce’s 2018 survey ‘Using Recognition and Other Workplace Efforts to Engage Employees’, 47% of HR professionals claimed retention and turnover as one of the major issues within their business. By using an employee incentive scheme, many businesses can combat this issue by improving morale, keeping productivity high and retaining employees.
But the true question is whether or not it’s worth it for you and your business.
- Why incentive schemes matter
- How to set up an employee incentive scheme
- Are incentive schemes worth it?
- What incentive schemes you should consider?
Why incentive schemes matter
One of the clearest reasons why employee incentive schemes are important is because they give your staff extra motivation to work hard and deliver the best possible results for the company. Offering more than basic pay and benefits will encourage people 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 make a real investment in its people. By offering them, you're recognizing that the success of the business depends on its employees, and you're prepared to take action and put tangible measures in place to reward those who excel.
Showing appreciation for your people and recognizing high standards is one of the best ways to keep your staff happy, which is directly linked to productivity. Research has shown that employees who feel positive about their jobs work harder and are 12% more productive, on average.
Over the long term, incentive schemes could lead to other benefits including reduced turnover and a stronger team culture, as well as putting you in a better position to attract high-quality talent.
How to set up an employee incentive scheme
Setting up your own employee reward scheme will allow you to be as creative as possible with your employee benefits, as well as specifically tailoring them to the needs of your business. In order to create a successful incentive scheme for employees, there are a few things you need to consider:
1. Decide on your objectives
First, decide what it is that you want to gain from the scheme. Whether you want to improve staff skills, increase your margins or lower your employee turnover, be sure to know what it is you want to gain from the incentive scheme. By knowing this at the beginning, you will be in a better position to measure its success.
2. Set unique targets
You need to set targets that will be specific to each team and/or individual. It’s important that everyone feels involved but make sure that you create different schemes tailored to different people or teams. This will ensure no one is left feeling alienated, and that everyone can get the most out of their scheme. A poorly tailored employee reward scheme could lead to employees feeling cheated and dissatisfied, thus not solving the issue.
When you set targets, be sure to communicate them clearly to all employees so they know what they can get from the scheme. Also, be aware of the difference between ambitious and achievable targets.
3. Create a clear time frame
Setting a time frame not only keeps everyone in the loop but also allows individuals to assess the amount of work that needs to be done. This also means that you can resist the urge to micromanage employees and split long-term goals into shorter ones. By providing short-term goals in this manner, you’ll be able to better manage the progress towards your long-term goals, without your employees losing focus.
4. Define rewards for success
When it comes to showing your appreciation, be creative with your rewards. Monetary rewards are an easy incentive, but it’s still important to ask your employees what they would want. Perhaps give them a few options and let them choose which incentive they would prefer. By selecting an incentive they actually want, they’ll be much more motivated to work towards their targets.
Non-monetary rewards are sometimes a better option as they can promote a better work ethic. Some examples include:
- Giving praise
- Increasing the number of paid holiday days
- Giving more autonomy in their current role
5. Measure success
In order to know how well your reward scheme is working, you need to measure its success. When selecting a method of measurement, make sure it’s specifically tailored to your business and your schemes in order to accurately establish whether it has been a success.
You can also engage with those involved in the scheme to find out what they thought about it, as well as monitoring the numerical side of things (profits/margins).
Are incentive schemes worth it?
Pavlov and his behavioral experiments showed us that behavior can be altered on the basis of providing a reward. This ‘carrot and stick’ model is viable for short-term goals, but may not inspire any real investment in the company.
In order to avoid this issue, the solution is to create an incentive scheme where rewards are based on company values. Values-based recognition has been found to be much more successful compared to non-values-based recognition.
The 2018 SHRM/Globoforce Employee Recognition report found that HR leaders professionals are 1.5x more likely to rate their recognition program as “good” if it was values-based. In the same survey, respondents only rated their programs as “excellent” if it was tied to values.
Viewing reward schemes for employees as an investment rather than an expense means there is more chance of it becoming successful. Although it may take a while for the scheme to start showing positive results, it will begin to encourage a positive workplace culture where employees become invested in the program and the business, and are therefore more likely to stay with the company.
As well as building morale, correctly implemented incentive schemes can help employees improve their skills and in turn help your business to thrive. Taking the time and effort to create tailored programs for your business is incredibly important and will go a long way to ensuring they’re a success.
Essentially, when it comes to setting up or implementing a scheme, it’s important to remember that they can be extremely successful but can never be a replacement for a productive employee or a workplace with good morale.
Instead, use your employee incentive schemes to improve your workplace, build its strengths and create a great work ethic.
What incentive schemes should you consider?
Employee incentive schemes can be broadly divided into two categories: financial and non-financial. There are benefits and drawbacks to each option, and the choice you make will depend on the needs and capabilities of your business.
Financial incentive schemes
If your budget allows, financial incentive schemes can be a powerful way to motivate people and provide the impetus they need to raise their performance to the next level.
Common types include:
- Pay increases and bonuses: Some companies directly link pay increases to performance, so employees know if they deliver specific results for the business, their wages will go up as a result. Similarly, bonuses can be a strong motivator for people to hit particular targets.
- Profit sharing: Giving employees the opportunity to receive a portion of any profit the business makes can lead to a range of benefits, including a stronger sense of loyalty and investment in the company's performance.
- Retirement benefits: Specific provisions such as employer-sponsored pensions and 401(k) plans (in the US) can be particularly attractive to workers who are looking for long-term stability and financial security.
If your budget won't stretch to financial incentive schemes, there are various non-financial alternatives to consider, such as:
- Career progression opportunities: Making a direct link between employee performance and opportunities for people to progress in their careers and secure promotions could drive an increase in long-term engagement, loyalty and productivity.
- More job control: You can reward staff who have shown dedication and excelled in a particular role by giving them more control over their work. This might include letting them decide when they want to work remotely and when they come into the office.
- Extra days off: Paid time off is a crucial benefit for most workers, so you could consider offering extra days for people who have earned it through consistently high performance or long-term service.
Whether it's financial or non-financial, finding an incentive scheme that makes sense for your business and motivates your people could be a vital step on your way to future growth and lasting success.
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