Think You’re Losing Money with Employee Incentives? Think Again!

Today’s human resources (HR) managers are faced with more employee compensation challenges than ever before—and the reason is relatively clear: employees are no longer happy with simply getting a decent day’s wage for a decent day’s work. They want more! As the competition for skilled talent increases, companies must find better and more interesting ways to retain their employees. And as the old saying goes “money talks.” An offer of money is often the most persuasive argument in getting someone to do what you want. It’ll also give them a reason to stay with your company.

Some of the top complaints that employees make about their jobs or workplaces are related to wanting more, or feeling underappreciated.

  • salary/remuneration (bonuses, incentives, commissions)

  • pay equity (among internal employees and based on marked pay scale)

  • benefits (health, dental, vacation, sick time)

  • workload too high (understaffing)

A corporate incentive program can go a long way in helping employees feel valued. On the other hand, corporations can use incentive programs to instill positive attitude and behavior. As more companies adopt a pay-for-performance type of philosophy, the more likely they are to retain their much-needed talent to help meet their business goals.

The Diverse Workforce: An Incentive Program for Everyone!

Today’s diverse workforce is composed of individuals young and old, with different lifestyles, work ethics, and levels of education, etc. Individual employees may prefer different types of compensation packages. So how does an organization create a program that works for everyone?

The first step that a company needs to do is determine the needs of its workforce—by having the employees complete a survey. And by analyzing the survey results, they may start to see a pattern emerging. The most likely pattern is that employees want positive recognition for their efforts. They often want this recognition in one of three ways:

  1. monetary rewards (cash, commissions, bonuses, etc.)

  2. time (extra days off)

  3. recognition (certificates, awards, etc.)

Other common incentives include travel, merchandise, or special privileges (e.g., parking spot).

Considering the needs of all your employees is essential in keeping them happy, motivated, and loyal. Most importantly, whatever your incentive program is, be sure that your employees are well informed of what they will be receiving and why.

Creating an Incentive Program

It’s simply unheard of today for medium to large companies not to have some kind of employee incentive program. Whether it’s year-end bonuses, performance incentives, or simply a certificate for outstanding performance, some type of incentive is better than none. If you’re a company that has thought about creating an incentive program but just hasn’t moved forward into the planning or implementation stages, you’ll want to continue reading.

First and foremost, it’s important to understand why you’re giving incentives in the first place. Do you need to motivate unmotivated workers? Do you want your employees to have a better reason to stay than just “it’s a fun place to work”? Remember, your program should be tailored to the mutual interests of both the company—and its employees.

Motivation drives performance. Adopting a pay-for-performance type of incentive plan can be very successful and rewarding to both the employee and the company. To create real incentive, the rewards must be perceived as a significant addition to the employee’s income—and not just a deserved supplement to their income or a mere benefit.

An incentive program doesn’t have to be elaborate or expensive to achieve positive results. In fact, simpler is sometimes better. To start your incentive program planning off on the right foot, you must:

STEP 1: Define Your Objectives (Goals)—What do you hope to accomplish with your incentive program? The goals you define should be very specific, relative, and attainable (e.g., increase sales by 10% by April 30th). You also need to ensure these goals can be easily measured—which is not an easy task.

STEP 2: Create a Budget—How much of the company’s dollars are you willing to spend on your incentive program? If your rewards are non-cash rewards, ensure you determine the cost for those items (e.g., trip to Paris) and include that in your budget.

STEP 3: Develop Program Guidelines—Provide these guidelines so that all participants (employees) understand the parameters of the program, its purpose, timeline, and available rewards.

STEP 4: Objectively Measure and Report on the Results—Measure employee performance against company-set as well as employee-set goals, typically through an employee performance assessment or evaluation.

STEP 5: Reward—Offer various types of rewards (e.g., cash prizes, trips, merchandise, or awards [certificates]) as incentives for good performance in relation to the original goals outlined in the program guidelines.

Evaluating the Success of the Program

So you’ve created an employee incentive program and implemented it throughout your department or organization. Now what? Once your plan has been in effect for a while, it’s important to periodically examine how it’s working. Here are some questions you should attempt to address.

  • What was the quantifiable effect (return on investment [ROI]) of the incentive program?

  • Did the program and its rewards meet or exceed the participants’ expectations? If not, why did it fall short?

  • Did the company meet its intangible goals (e.g., improving morale or fostering loyalty)? Follow up with your employees regarding the incentive program through a simple survey—or better yet, talk to them directly to get their feedback.

  • Did the program create any unexpected benefits, such as a new sense of enthusiasm?


With fervent competition for skilled and talented employees, rewarding your employees is crucial and makes business sense. Employee incentive programs are a huge part of what makes a business successful and enable better rapport among employees and managers. Coming to realize this, many organizations are now adopting new pay and reward strategies.

Don’t be one of those companies that loses their talent to competitors. Invest in your employees today through a simple employee incentive program, and reap the benefits of those investments for a long time to come.
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