HR Guide: 3 Key Types of Employee Rewards

When it comes to rewards, we analyse the various ways to appreciate your employees better. Usually, rewards can be divided into three main categories:

1. Intrinsic vs extrinsic rewards, 
2. Non-financial vs financial rewards, 
3. Membership vs performance-based rewards.

You can actually reward employees without spending too much. Monetary rewards are not the entire reward system but just a tiny part of it. Nowadays, even SMEs can afford to appreciate their employees through affordable gift cards.

For the past twenty years, we have seen an increase in organisations investing in an employee reward system.The reason why is because it works. When people feel appreciated, they:

1. Feel accomplished, which results in greater job satisfaction and productivity.

2. Are more likely to improve performance and organisational results.

3. Feel better about their employee experience and are encouraged to be loyal to their employer.

A reward and recognition program is helpful not only for the employees but also for the organisation.

Check out the three different types of rewards and what each of them means.

Make sure you understand your employees well before rewarding them.

The 3 Key Types Of Rewards

Intrinsic vs Extrinsic Rewards

Intrinsic rewards: Rewards that are non-tangible but results in higher levels of job satisfaction. Intrinsic rewards make employees feel valued in an organisation — for instance, impressive job titles, personal achievements, career growth, and praise.

Extrinsic rewards: Tangible rewards that staff receive upon doing a good job. Extrinsic rewards is about improving employees' performance through appreciation — for example, bonuses, raises, and gifts.

We need to find a balance between extrinsic (performance) and intrinsic (motivation).

Non-financial vs Financial Rewards

Financial rewards: Positively adding to the overall employees' financial status. For instance, bonus and salary raise.

Non-financial rewards: Does not provide any financial gain to the employee. It focuses on recognising employees through employee benefits such as gym memberships, parking space, gift cards. 

Non-financial rewards are more reasonable for companies to reward employees because:

• Long term effects as opposed to financial rewards. Employees are more likely to continue enjoying the benefits. Financial rewards only give one-time satisfaction.

• The staff feel more comfortable about discussing their rewards with their colleagues.

• For the same performance, financial rewards need higher investment.

• A more reasonable choice for SMEs.

Membership versus Performance-based Rewards

Performance-based rewards: They are allocated based on the employee's performance. The compensation is given in incentive systems, group bonuses, or commissions.

Membership-based rewards: They are given in the form of benefits and services provided to employees, in the form of the annual bonus, company vacation, and upgraded office furnishing.

How To Reward Employees More Effectively?

1. Installing a reward system that fits your company needs will make recognising employees much more effective. 

2. Ensure the type of reward fits the employee you're rewarding. Performance-based bonuses would more benefit a sales associate. Likewise, a new employee will be more motivated by intrinsic rewards such as praises and career advancement.

3. Recognition from a colleague is a strong motivator for any employee. No matter the type of rewards, be sure to acknowledge the employee. If the employee agrees, you can also post the acknowledgement on social media.

4. Frequent and timely recognition is crucial. Do not procrastinate on rewarding an employee.

5. It's necessary to measure the effectiveness of your reward system. One way to do so is to take essential feedback from your employees.

What types of rewards do your employees prefer? Are the rewards motivating? Do your employees feel that that there's something that can be improved?

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Source: Vantage Circles

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