As employers look for ever more effective ways to motivate their workforces, the distinction between incentives and rewards can sometimes become a little blurred. Some observers may even believe the two terms to be indistinguishable. However, there are distinct differences between them. Understanding the differences can help organisations design more effective employee motivation programs.
Here at Ovation Incentives, we are industry experts with over 20 years of experience helping global brands recognise and motivate their employees with rewards and incentives. This article will explore the differences between these terms and discuss their benefits, along with some best practices and provide some employee incentive ideas.
What are Rewards?
Rewards are something given to employees in recognition of their service, performance, effort, achievement or behaviour. Rewards are the items and experiences that employees earn for meeting goals, turning in exceptional work, being team players or any other recognition parameters that a manager puts in place. Rewards are a way to acknowledge and celebrate employees’ hard work and dedication and are given after something has been achieved.
They can be monetary or non-monetary rewards. A monetary reward is something with tangible financial value, aka. financial rewards. Some examples include the following.
- Digital or physical gift cards
- Pay and allowances
- Merit pay
- Profit sharing plan
- Company stock options
- Professional development opportunities
Rewards are often seen as more long-term motivators. They can help to build commitment and company loyalty by showing employees that their contributions are valued and appreciated. Rewards can also help to motivate employees by creating a sense of healthy competition, encouraging them to work harder and perform better.
What are Incentives?
Incentives are a type of motivation used to encourage employees to achieve specific goals or objectives. Incentives are typically offered before an employee has achieved the desired outcome and are used to create motivation and focus. They frequently have a time period associated with them. For example, the employee must achieve an action or goal by the end of the third quarter of the year to be eligible for the incentive. Incentives are goal-oriented and are usually combined with a reward. Typically they are monetary incentives, but they can also come in other forms, such as bonuses, commissions, prizes, or recognition. Incentives can also be those items that come as job perks, like healthcare or wellness incentives. For example, here at Ovation, we use Vitality wellness incentives. So when employees hit wellness milestones, they receive a number of discounts and perks.
Employee incentives are often seen as short-term motivators. They are used to create urgency and focus around a specific goal or outcome, which can be a particularly effective technique to motivate employees and help them stay motivated when used consistently.
The difference between rewards and incentives for employees
The fundamental difference is that a reward is something which is actually given to an employee, whereas an incentive is a motivating factor. For example, if you give an employee a gift for their hard work, that is a tangible reward. However, if that same employee works hard and exceeds your expectations because of the thought of receiving a reward, that is an incentive.
What are the benefits of incentives and rewards?
When employees do great work, or you want them to achieve their goals that contribute to the company's growth, you should incentivise, recognise or reward employees. This can help motivate employees, boost morale, employee satisfaction and employee engagement, increase performance and help you retain your top talent.
Your employees are vital to the success of your business. However, more than 50% of organisations globally have trouble retaining their best employees. Employee churn is not only time-consuming but can be incredibly expensive. Glassdoor calculates the average employer spends approximately £3000 and 27.5 days to hire a new employee. To avoid losing your top talent, you'll need to make sure your team members feel valued, happy and engaged. Rewards and incentives can motivate and inspire employees whilst helping to promote positive behaviours in the workplace.
Improve employee performance
Productivity is what drives your business. But if your employees are unmotivated, then you won't get the most from them. Research from the University of Oxford revealed that happy workers are 13% more productive. When you incentivise, reward and recognise employees for their efforts, they are far more likely to feel valued, appreciated and happier at work and are more likely to go that extra mile.
Increase employee engagement
Employee engagement is when employees are emotionally committed to your organisation and give their best every day, and have high levels of job satisfaction. It happens when there is good communication, commitment, work life balance and mutual trust between employees and management. Employee recognition can help facilitate the process of having employees engaged, as it builds trust and appreciation for one another. This can be a simple gesture such as a handwritten note. When you reward employees with meaningful rewards and celebrate personal milestones, it creates memories and can boost employee engagement, where employees go that extra mile for you.
Strengthen company culture
When rewarding employees or providing employee incentives, you are choosing to celebrate success in your organisation which can improve the company's culture. Employee rewards and employee incentive programs are more successful when intrinsically linked to your company values. Celebrating the positive behaviours displayed by your employees helps add merit to the core values, creating a positive work environment, boosting employee morale and strengthening company culture.
How to build an effective employee incentive or rewards program
Once you decide on the right program for your business, you'll need to put it into practice. Here are some best practices to help you implement a successful employee rewards, recognition or incentive program.
Create an inclusive work environment
To make everyone feel valued and included, make sure your rewards or employee incentive program is open to all team members. You can customise the program for different departments to make sure employees get the acknowledgement and motivation they need. Just ensure the platform is engaging, user-friendly where all employees can participate. You can even use a peer-to-peer reward and recognition platform where employees can reward other team members. By following these practices, you can promote inclusivity and foster a sense of involvement among employees in the workplace.
Promote your incentive programs
To grow awareness and encourage employee involvement, you'll need to ensure everyone knows about it. Get your HR department to create a promotion and communications plan to help spread the word. To keep it successful, HR can follow this up by working with management and run ongoing campaigns that keep employees engaged and participating. Marketing can help out too, by creating infographics, posters, a wall of fame in the conference room or boss's office and fun messages using Slack, Teams or the intranet that tie into your company culture and the incentives. You can also promote it when posting job adverts and introduce it in your employee onboarding task list so new employees are involved from day one.
Set an example
Your leadership team must set an example. Team leaders need to show other employees they are advocates for the employee incentive programs, believe in the vision and are actively participating in them. The success of the rewards and employee incentive programs are relying on leaders promoting and building awareness of them within their teams. HR should train leaders on how the incentive programs work and the value the incentive programs can bring.
Personalise employee incentives
Personalised and custom rewards or incentives for employees can be incredibly effective in showing you understand and value them. If the incentives aren't meaningful to your employees, then they will be less motivated to work towards the goals set to achieve receive them. To better understand employees' needs, you can adopt employee journey mapping or the design thinking method typically used to better understand customers in the user experience design process.
Get employee feedback
Perhaps the best way to understand your employee's needs and what they would like to see from your employee incentive programs is to simply ask them for their feedback. Create surveys to gather accurate data on how well your current employee incentive program is being received and get suggestions you may not have thought about. Getting feedback and iterating your program based on employee feedback will demonstrate that you value their opinions and are dedicated to having a program that works for them.
What are the best rewards and employee incentives?
Not sure what employee rewards or incentives are right for you? Here are some rewards and employee incentive ideas that can make impactful employee incentive programs.
Sometimes the best things in life are free, such as a thank you. With a recognition program, you can make your employees feel valued and appreciated with kind words and celebrate personal milestones such as birthdays or work anniversaries. They are more effective when combined with tangible rewards or employee incentives. However, you don't have to include monetary incentives. We recommend a social recognition platform where you can create a sense of community within the workplace or even with a remote workforce.
Giving employees reward codes allows them to choose from their favourite brands worldwide. With over 900 brands to choose from across 120+ countries and 80+ currencies, there really is something for everyone. These include high-street staples, travel, dining, fashion, technology and experiences. Not only that, when an employee receives their reward code, they'll be able to shop in your company-branded online shop and can you can even add personalised messages to make their reward or incentive feel extra special.
Rewards and Incentives for Employees
Employee incentives and rewards can both be very effective motivators when used appropriately for your team members. Indeed, even though they are very separate components, effective employee incentives and rewards can help your business to maximize its performance and realise its full potential. Therefore, if you want to motivate your employees more effectively, you may well find knowing the difference between them to be of great benefit. By using a combination of rewards and incentives for employees, businesses can create a comprehensive motivation program that addresses both short-term and long-term motivators.
Ready to motivate your team? To find out how Ovation Incentives can help you with a recognition, reward or incentive program, contact us or book a demo of one of our amazing employee motivation platforms.