The Differences Between Rewards and Benefits

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What's the difference between rewards and benefits? The terms are often used interchangeably in conversation as if they're the same thing — spoiler alert; they're not!

Benefits are a form of non-cash compensation, which your employer usually states in your contract. Benefits aren't linked to employee performance, unlike Rewards. Rewards are a motivational tool used to get the best from your employees. Benefits and rewards both have very different traits, but more on that later. 

This article will look at the main differences between the two and how both can positively impact your business and its employees. 

Here at Ovation Incentives, we've been helping some of the world's top global organisations in this space for over 20 years. Read on to understand the difference between rewards and benefits for employees.

What are Rewards?

Staff rewards are inextricably linked to the performance of your employees. When an employee performs well, you should reward them. Issuing rewards can help ingrain a positive company culture by reinforcing your organisation's values by rewarding the behaviours you wish to see from your staff. Rewards act as a motivational tool to inspire your employees and raise their performances to the next level. Even a small amount of recognition can go a long way with your employees. 

If they know that hitting a specific target or performing a particular duty will be rewarded, they are far more likely to hit or even exceed that target. If employees know their efforts are appreciated and rewarded, they will be more motivated to complete the task.

Examples of Employee Rewards

Next, let's take a look at some examples of employee rewards. These can come in many different formats:

📈 Performance-based bonuses

Reward your employees for meeting targets and encourage friendly competition.

🎁 Gift Cards / Vouchers

Let your team know that you recognise what they are doing and reward them for it.

🗣 Verbal recognition

Sometimes just telling your employees that they are doing a good job can be a huge lift.

✍ Written recognition

Written recognition could be as simple as a handwritten letter, post-it note or even an official letter from senior management.

🏆 Trophies / Awards

A trophy can be a great way for teams to celebrate their achievement together and boost morale. You could also hand out certificates at an award ceremony for your employees to also celebrate individual achievements.

What are Benefits?

The US Department of Labour states, "Benefits are non-wage compensation offered to employees". There are two types of benefits; voluntary and legally required benefits. For example, in the UK, employees are entitled to a certain number of days of paid annual leave, but employers can choose to provide them with additional paid time off.

Benefits often include healthcare, pensions and paid leave, which some may take for granted. 

However, us lucky Brits receive double the annual holiday of our American counterparts. US workers receive ten days of paid holiday each year compared to twenty days in the UK on average (not including bank / public holidays).

One key difference between rewards and benefits is that employers usually state the benefits in your employment contract. So when you sign your contract, this is something you become entitled to, unlike a reward which employers are not obliged to give.

Why employee benefits are important

Offering benefits to your employees is important because it shows you care about your employees' health and futures. A good employee benefits package can help attract and retain staff and distinguish your business from competitors.

Examples of Staff Benefits

Above, we listed a couple of examples of benefits. Here, we will look at a couple more and the positive impact they can have in the workplace.


Offering private health insurance can be a great way to look after your employees. In some countries like the US, this can be a massive expense for individuals and be an attractive benefit. Even in countries like the UK, which offer free healthcare, private healthcare can offer shorter wait times and higher quality care. If your employees fall ill, you'll want to make sure they're looked after and can make it back to work as soon as possible.

Paid leave

Offering paid leave benefits can seem counterintuitive on the surface. However, many studies show links between paid leave and greater productivity, morale and employee retention. Some companies have even started trialling a four day work week that has shown a productivity boost of 40%. Whilst this may not work for many businesses, you could also consider adding an extra day's leave per year or giving them their birthday off.

Pension plans

Like healthcare, a good pension plan can give employees peace of mind. Many employers are offering more to match their employee's pension contributions. Pension plans have excellent tax benefits for employees, and they can rest assured this will go a long way to financial security when they come to retirement.

Company stocks / shares

If you are a publicly-traded company, offering your employees stocks as a benefit can be hugely attractive. Not only do you pay less tax on stocks than you can do on higher incomes, but if the company does well financially, your shareholding employees are likely to be rewarded. An employee who is financially invested in the company will be motivated to make the company successful.

Perks, Rewards and Benefits - Key Differences

So we've learnt rewards are performance led, and benefits are a form of compensation included in the employment contract. So what about perks?

A perk is something that employers offer that goes above and beyond the regular salary and benefits package. For example, free gym membership, discounted meals at the company canteen, flexible working hours or even helping to subsidise travel costs to the workplace. Perks differ from rewards and benefits as they are not usually part of the employment contract, nor are they based on performance.

We recommend a mix of all three to get the most out of your employees. Keep in mind the candidates you want to attract to work for you. Keep an eye on what your competitors offer and listen to feedback from your employees to ensure that everyone feels motivated, empowered, challenged and valued.

Getting the balance

Rewards, benefits and perks all have their uses. An excellent benefits package can help you attract top talent, rewards can help motivate your employees, and perks can make working for your company a delight. The tricky part can be getting the balance right for your employees. Using a mix of all three can make you an attractive company to work for and create a positive company culture that will help you retain staff and boost productivity and collaboration.
At Ovation Incentives, we have many solutions and can offer expert advice on designing your reward campaign for your employees. Please book a demo or get in touch on how our services can help you.