Employee Incentives are a useful tool to engage and motivate employees

For employee incentives to be truly beneficial for your organisation, they must encourage specific actions or performance by a targeted group of employees to produce measurable outcomes.

This is normally achieved through an organisation’s motivational strategies, over a specified period of time.

Employee Incentives Can Be Divided Into Four Main Categories:

1) Compensation Incentives

This normally concerns awards of monetary value, such as bonuses, raises, profit sharing and stock options.

2) Recognition Incentives

This embraces praising employees for their achievements and thanking them for their hard work.

Recognition incentives may seem insignificant but cannot be overlooked.

Many employees value the fact that their hard work has been appreciated, over a gift or bonus of some kind.

3) Reward Incentives

Giving employees gifts, monetary rewards or something such as a gift voucher.

This can include employee referral awards, where employees receive a benefit of some kind for referring job candidates to the company.

This is often given in conjunction with recognition incentives to reinforce to employees the sort of behaviour and performance that management expects from them.

4) Appreciation Incentives

Appreciation incentives encompasses social events, such as company parties and celebrations, sporting events and paid group lunches.

Employee incentives have many benefits to a Company

They can increase employee’s productivity and retention rate, as well as encourage teamwork. 

When developing an employee incentive scheme, organisations should be aware that they only rewarding the specific behaviours they want to see improved.

Many organisations unknowingly place too much emphasis on the wrong behaviours, therefore not always giving them the desired outcome.

Being transparent about the incentive process is crucial to building trust with employees.

If employees do not know the criteria to achieve or the incentives appear to favour certain employees, then there is the risk that employees may become demotivated and feel alienated.

For incentives to be used successfully, organisations must:

  • Ensure that employees know and understand the employer’s objectives in offering incentives;
  • Make sure that the incentive criteria is unambiguous and communicated to all employees;
  • Give a timeline of when you would like employees to accomplish the actions set out in the criteria;
  • Explain to employees why their contribution has made them eligible to receive a reward.

Everyday Employee Incentives

Thanking an employee for their hard work or asking about their family, or how they spent their weekend can go a long way in achieving positive workplace morale.

This is something that can be done during employees daily interactions with their line managers.

Organisations should vary the incentives to avoid employees believing there are entitled to them.

If employees believe they are entitled to incentives, it may become difficult to reinforce the behaviours that the employer wishes to encourage.


When used to the full advantage, incentives can improve employee morale, ensuring that that employees’ contributions are valued and appreciated.

When distributed appropriately in a way that that employees understand, incentives can be a powerful tool for recognition.

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About the author 

James Rowland

James is the Commercial Director at Neathouse Partners and regularly writes articles surrounding issues in HR & Employment Law. Outside of the office, James is a keen Cricketer, playing in the Cheshire League for Nantwich CC. He also loves going to watch his football team, Crewe Alexandra. Feel free to connect with James on LinkedIn.