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How to Make Employee Incentive Programs Work for Your Company

Written by
Kathleen O'Donnell
Kathleen O'Donnell

Regular paychecks, a comfortable office space, and a few choice office snacks are important motivators for your employees to show up to work every day and do their jobs. (And free coffee never hurts, either!)

But what about when you want to encourage your employees to go above and beyond, and reward those who choose to do just that?

This is where a well-designed employee incentive program comes in. When you set up one (or a few) programs the right way, you’ll see an increase in productivity, engagement, and overall satisfaction with work, especially for your high performers.

How can you get your employee incentive program rolling? Find out in this guide.

What is an employee incentive program?

There are a few different ways to define an employee incentive program—which can get pretty confusing. How can you differentiate incentives from perks and benefits?

Employee incentive programs are designed to reward employees for going above and beyond in their performance with bonuses, prizes, or other incentives. Incentive programs can reward individual employees, a team, or department for their performance. These programs can reward employees on a regularly scheduled basis, like a year-end bonus, or be given on an ad-hoc basis when needed... or both! 

And they’re not limited to encouraging productivity—incentive programs can be used to increase recruitment efforts, raise employee engagement rates, boost retention, promote company branding, and more. We’ve got plenty of employee incentive program examples coming up below, so check those out for more details.

It’s easy to confuse perks with incentives, because they both provide rewards to employees on the job. However, the big difference between the two is that perks go to every employee—there’s no performance requirement for the free coffee or the on-site wellness center.

But incentive programs are meant to reward performance, and so by definition they go only to a select group of high performers. Perks are certainly valuable in the workplace—they can help with recruitment and the overall employee experience. However, they’re not an incentive for performance.  

How does an employee incentive program provide value?

Employee incentive programs are valuable for businesses large and small. They provide recognition and rewards for your employees who choose to excel in their work on an occasional or regular basis.

Things like paychecks and basic benefits are designed to compensate your employees for their regular work efforts, but they typically don’t create an incentive for excellent performance. And if your most valuable employees don’t feel that they’re being rewarded for their top-notch performance, or that they’re being rewarded the same way as someone putting in the bare minimum, they’re likely to put in less effort and become increasingly disengaged.

Best practices for creating a good program 

Employee incentive programs can provide a lot of value for your business if you set them up correctly. That means sticking to a few key principles:

Begin with business goals

Your incentive program design should begin not by picking a type of program, but with some strategic thinking about what business goals you’re looking to achieve first with incentives. Do you want to increase engagement, raise retention rates, build your brand, or another goal? Your incentive program will be most effective if you align it clearly to the goals of your business.

Keep it simple, but challenging

Your incentive programs should not require a PhD in math for employees to determine what rewards they’re eligible to receive if you want them to be effective. However, that doesn’t mean you should lower the performance bar. Incentive goals should challenge employees in order to see real gains for your business and keep the program competitive.

Link pay to performance, not profit

Many organizations link employee pay and rewards to company profits. This might make sense on the surface—shouldn’t it encourage employees to contribute to the success of the company? But research shows that pay for performance is actually more effective at motivating employees because it’s much more within their control.

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Keep it fair

Incentive programs and other rewards aren’t always a completely positive experience. If your employees sense that rewards and incentives are often going to those who don’t deserve them, or they’re being distributed unfairly, that can be actively demotivating.

Ensure you build in objective guidelines for reward frequency and amounts to avoid favoritism and unfairness as much as possible.

Reward employees with what they truly want

Incentives aren’t motivating if they’re not desirable. This might seem like an obvious point, but you’d be surprised how many companies miss the mark.

For example, in a previous role, one of my retention incentives was a giant frog-shaped lamp. It was... not very incentivizing. 🐸

Ensure your incentive program focuses on rewards employees really want, whether that’s a bonus, a flexible catalog of rewards, or time off.

Build in flexibility

As the last two decades have made very clear, sometimes tough economic times hit even when your employees are performing at their best. It’s important to create a program that allows for flexibility in rewards when times are temporarily tough, but you also don’t want to stop rewarding high performers entirely—or you might see productivity and engagement suffer, too.

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10 examples of employee incentive programs

Incentive programs can take so many different forms—and that flexibility is what makes them so useful for every type of business. But with so many options, how do you know where to start?

These examples should give you some inspiration for starting your own programs.

Rewards and recognition

Having a strong rewards and recognition program in your workplace is absolutely vital for employee engagement and motivation. Programs that reward employees frequently and effectively for doing well on tasks small and large help employees feel seen and recognized for their hard work.

Bonusly is all about enabling frequent, real-time, 360-peer recognition and the results are amazing. Companies that use Bonusly see improvements to company culture, employee engagement, and even morale.

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Profit-sharing

Allowing your employees to share in the good times when profits are high helps them feel connected to the success of the company, which is important for employee engagement. You can choose to disburse profit-sharing rewards in retirement plan contributions, and these contributions can be lowered when the economy or your business is having a lean year.

Professional development reimbursement

Encouraging and rewarding your employees for learning and growing in their careers can increase retention rates and help your employee grow professionally. Partial or full tuition reimbursement or a budget for professional development activities is a popular incentive program at many companies.

Recruitment and referrals

If you’re struggling to find and hire great candidates, you’re not alone right in this competitive labor market! Why not reward employees for referring strong candidates to boost your recruitment efforts? You can offer an incentive program that provides a bonus for successful referrals.

Retention

Encouraging your employees to stick around for years to come is a great idea—turnover is very expensive, as is losing your top performers. You can use Bonusly to set up automated anniversary awards for employees to thank them for another successful year with your business.

Annual incentives

Popular mostly among large corporations (but small businesses can make it happen too!), annual incentives typically refer to bonus opportunities and merit raises tied to performance.

Bonuses are more effective when they’re tied to performance, so this is a great chance to reward employees at the end of the year for their hard work.

Extra time off

Your highest performers are likely working very hard every day—why not incentivize them with some extra time off where possible? This could be in the form of flexible scheduling for your top team members, some extra PTO after completing a project where long hours were required, or a summer Friday off at the end of a busy summer.

Project bonus

When a group of your employees spends weeks or months working hard on a big project, they can feel exhausted by the end. Rewarding their hard work with an incentive like a one-time bonus or thoughtful gift makes them feel appreciated, and encourages them to work just as hard on the next big project that comes their way.

Charitable contributions

This is an especially compelling incentive for younger, socially-conscious employees—offering a contribution to the charity of their choice as an incentive for a job well done. For example, Bonusly allows users to donate to a charity of their choice through our app! 

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Employer branding

You don’t always need to incentivize employees with cash and bonuses—you can also incentivize them with some cool company swag. Not only will they feel appreciated, but when they wear their gear around town or post it on social media, you’ll also increase your brand awareness. Two benefits from one incentive!

Ready to start building your own employee incentive program? There’s a great toolkit from SHRM that can get you started on the right path.

Key Takeaways

Creating an employee incentive program has significant benefits, for both your business and your employees. Your company gets to reap the rewards of increased engagement and productivity, while your employees feel recognized and rewarded for the hard work they put in and the excellent results they achieve.

Looking for a recognition and rewards platform that offers fun, personal, effective rewards that employees actually want for your incentive program? Check out Bonusly today!

Meet our fun and intuitive recognition program. Click to take a tour of Bonusly.

Originally published on June 15, 2021 → Last updated June 16, 2021

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Kathleen O'Donnell

Kathleen is a freelance writer and employee communications specialist, with 6+ years of experience in corporate internal communications. She’s also a full-time traveler who loves spending her time writing in little Greek cafes about life as a digital nomad.

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