Your Quick-Fire Guide to Employee Incentive Schemes


HR Insights for ProfessionalsThe latest thought leadership for HR pros

Monday, August 14, 2017

Employee incentive schemes are a great way to motivate and reward staff for their hard work, whilst also boosting productivity and raising morale.

Article 5 Minutes
Employee Incentive Schemes: What are they and are

Incentive schemes for employees can vary from business to business and can include both monetary and non-monetary rewards. They are usually implemented within a specific time frame and encourage staff to work towards specific targets.

This article is going to look at:

  • How to set up your own employee incentive scheme
  • What you need to know
  • Whether or not it is worth it for your organization
  • The benefits of such a scheme

In Globoforce’s 2016 survey ‘Employee Experience as a Business Driver, 46% 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.

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:

Set 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.

Set 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.

Set a time frame

Creating a clear 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 will be able to better manage the progress towards your long-term goals, without your employees losing focus.

Define rewards

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. Examples include;

  • Giving praise
  • Increasing the number of paid holiday days
  • Giving more autonomy in their current role

Measure success

In order to know how well your reward scheme is working, you need to measure its success. You need to make sure that your method of measuring is specifically tailored to your business and your schemes in order to accurately establish whether or not it was worth it.

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 ‘2015 Employee Recognition Report from Globoforce stated that 90% of HR leaders found engagement was positively impacted in light of a values-based recognition program, compared to just a 73% positive impact with those implementing a non-values-based recognition program.

There was also an impact in retention with 71% of values-based programs seeing a positive impact compared to only 54% of non-values-based programs.

‘Companies that scored in the top 20% for building a ‘recognition-rich culture’ actually had 31% lower voluntary turnover rates.’Forbes


The ‘Trends in Employee Recognition’ report by WorldatWork found that; ‘46% of respondents believe senior managers view recognition programs as an investment rather than an expense’. This highlights the importance of viewing any incentive scheme as a long-term investment.

Viewing reward schemes for employees in such a way 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 created tailored programs for your business is incredibly important and will go a long way to ensuring they’re a success.

‘Organizations with the most sophisticated recognition practices are 12 times more likely to have strong business outcomes.’ – Bersin & Associates


Essentially, when it comes to setting up a scheme, or thinking about implementing one, 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.

Access the latest business knowledge in HR

Get Access

HR Insights for Professionals

The latest thought leadership for HR pros

Insights for Professionals provide free access to the latest thought leadership from global brands. We deliver subscriber value by creating and gathering specialist content for senior professionals.


Join the conversation...