Every company will have a different approach to rewarding their employees for the good work they do.

It is in an employer’s interests to let their employees know that they are valued. Business productivity increases along with staff retention and wellbeing when employees are recognised for their efforts.

Beyond praising their staff with heartfelt words, there are various employee reward systems that businesses can put in place.

employee reward system

What is an Employee Reward System?

An employee reward system generally refers to the ways in which a company chooses to reward their employees for their performance and dedication.

An employee reward system could be something as simple as:

  • Public thank yous or awards e.g. ‘Employee of the Month’
  • Handwritten notes or small gifts of thanks
  • The offer of more time off
  • Celebrating occasions e.g. birthdays, project completion, or anniversaries

Employee reward systems act as an incentive for employees to be more productive, but they also increase staff wellbeing and satisfaction. They reduce absences, attract new hires and increase the number of staff who stay with the company long-term, because they feel valued for the work they do.

Employee reward systems recognise the work of both individual employees and groups. Often, peer-to-peer recognition is encouraged to strengthen teamwork and cultivate a positive working environment.




The 3 Categories of Employee Reward System

Intrinsic vs. Extrinsic Rewards

Intrinsic rewards are designed to make employees feel more valuable to an organisation and essential to its running. They are intangible, but result in more job satisfaction.

Meanwhile, extrinsic rewards are tangible and motivational. They are about encouraging a better overall performance by giving gifts of appreciation.

e.g. career growth vs. bonuses, or a more prominent job title vs. gift cards


Financial vs. Non-Financial Rewards

Financial rewards are pretty straight forward: they are rewards that improve an employee’s financial status, leaving them with more money in the bank.

Non-financial rewards are essentially employee benefits; they are non-cash rewards that are often given in exchange for earning a lower monthly wage.

e.g. bonuses vs. company car, or salary raise vs. gym membership


Membership vs. Performance-Based Rewards

Membership-based rewards are given to employees as a benefit of being a member of the company. They are treated almost like a service the company provides for being part of the ‘club’.

Performance-based rewards are, again, motivational. They reward employees’ performance by giving incentives for them the do well at a particular project and meet assigned objectives.

e.g. company vacation vs. a commission, or upgraded office furnishing vs. group bonus 


Side Note: Point-based rewards system

In this system, employees earn points when they achieve certain goals or complete certain tasks. The points build up over time and can be traded in for another benefit, such as an extra day off or a gift.


What is Peer-to-Peer Recognition?

Peer-to-peer recognition is about fostering a good working relationship between colleagues.

It is the organic demonstration of appreciation between equals.

Employee reward systems nourish the human connection that can often get lost in large corporate environments, and nowhere is this nourishment seen better than through peer-to-peer recognition.

Usually corporate environments have strong hierarchies, and there is competition to get noticed by higher-ups. When an employee recognises the work of their peer, they do so selflessly, with no ulterior motive other than to make their team mate feel seen.

Incorporating peer-to-peer recognition into an employee reward strategy, and making it visible beyond the parties involved, is a great way to boost motivation around the workplace.



employee reward system



The 5 Pillars of a Successful Employee Reward System

A business’s employee reward system – that is all the ways in which the business rewards its employees – should generally take into account the following five aspects:

  • Compensation
  • Benefits
  • Flexibility/work-life balance
  • Performance recognition
  • Career development

Reward systems should include a combination of different rewards: financial and non-financial, social recognition and career advancement etc.

Different rewards are suited to different employees. For example, a new hire might be more motivated by intrinsic rewards (like career advancement), where as a sales associate might be motivated by performance-based bonuses.

It is important to monitor the effectiveness of the reward system, taking feedback from employees to see how you can strengthen your strategy.

Explore more about employee reward systems and employee benefits by visiting our website or calling 0800 088 7315.