What is an employee incentive program?
An employee incentive program is a plan that outlines the privileges and rewards a company intends to give to employees. There are two main types: monetary and nonmonetary. A monetary incentive is money that an employee receives in addition to their base pay, while a nonmonetary incentive is something other than money.
Benefits of employee incentive programs
Offering incentives to your employees can bring the following benefits to your company:
- Lower turnover rates: Offering incentives to employees can help reduce turnover rates within your company.
- Increased motivation: Feeling more appreciated and having a tangible reward to work toward can increase productivity and prevent employees from experiencing burnout.
- Improved culture: Implementing incentives in your workplace helps create a culture of motivation, self-management and responsibility and can boost morale
- Progress toward strategic goals: Incentives can target specific goals, such as sales numbers or retention rates, to support your company’s strategic development.
- Opportunity for increased teamwork and bonding: Department, company-wide or department-wide employee incentive programs can encourage employees to collaborate.
Examples of monetary employee incentives
Here are seven monetary incentives you can consider for your company’s employee incentive program:
1. Spot bonuses
Spot bonuses or spot awards are small cash prizes given to employees in direct response to an achievement. They usually don’t have set criteria other than being a response to exceptional work.
For example, a nurse who covered multiple shifts for other coworkers and delegated workflow during a busy flu season may receive a $100 bonus for going above and beyond.
Read more: Types of Bonuses
2. Project bonuses
Employers can celebrate project completion with project bonuses. Usually, employees receive them if they meet specific criteria, such as completing a project on time and within budget. For example, a manager agrees to give everyone working on a certain marketing account a $500 bonus if they can complete all deliverables and get client approval by the end of the week.
3. Performance bonuses
Performance bonuses are regularly scheduled cash awards that reflect employee success. Companies generally pay performance bonuses when employees contribute directly to their financial success and growth. Annual or quarterly performance bonuses are a popular way to track employee performance goals and reward top performers.
Read more: How to Motivate Your Employees
4. Merit-based raises
Employees become eligible for merit-based pay raises based on performance reviews and meeting certain benchmarks. Unlike performance bonuses, which are paid out as one lump incentive, merit-based raises reward employees with long-term salary growth.
Related: How to Communicate a Pay Raise
Profit-sharing refers to when a profitable company distributes some of its revenue to employees. It helps employees feel more involved with the business’s overall success and understand how their actions impact the bottom line.
6. Referral bonuses
Referral bonuses are payments employees receive for connecting their employer with a candidate for an open position. Employers typically offer rewards if they hire someone an employee recommended and they stay in the position for a minimum amount of time, usually a few months.
7. Gain-sharing plans
A gain-sharing plan is a type of incentive where employees receive cash compensation as a result of increased productivity in one or more areas, such as customer service, content creation or increased production (manufacturing). For example, if your manufacturing plant lost over 600 packaged food products in the month of August due to employee error and only 200 in the month of September, the amount of money you saved would be split among your employees.
Examples of nonmonetary employee incentives
Beyond monetary incentives, there are also creative noncash incentives you can offer employees, including the following:
8. Free vacations
Offer a free trip to a local or destination resort to recognize a major accomplishment. You can also give the recipient extra paid time off for the vacation.
9. Improved equipment
Provide better workplace equipment, such as a nicer desk, computer or chair, to help employees work more comfortably and efficiently.
Read more: How to Improve Office Ergonomics
10. Casual dress days
Put aside your dress code 1 day per week or after the completion of a major project, allowing your team to wear jeans and other comfortable attire.
11. Outside services
Bring in outside services such as a chiropractor, food truck, yoga instructor or another service provider.
12. Gift cards
Give employees a gift card based on their personal preferences. For example, the salesperson with the highest quota each month could receive a $50 gift card to the store of their choice.
13. Company picnics
To improve team-building and motivate employees, organize a picnic or outing to a destination such as an amusement park, a zoo, a vineyard or a brewery.
14. Branded gear
Offer employees free branded swag, such as clothing, coffee mugs or water bottles, that features the company name and logo.
15. Public Recognition
Make employees feel appreciated by touting their achievements on social media, through press releases and at events.
16. Charitable donation
Provide a donation to a charity of the employee’s choice in recognition of their good work.
17. Dogs at the office
Allow an employee to bring in their pet for a day, or contact an animal shelter to bring in dogs for a visit.
18. Handwritten note
Provide employees with a handwritten note that shows them you took the time to appreciate their efforts.
19. Entertainment tickets
Set employees up for a fun evening outside of the workplace with free tickets to a sporting event, concert or theatrical performance.
Provide free memberships to a gym, coffee club, book-of-the-monthclub, warehouse store or other program or service.
21. Dinner on the boss
Consider taking your employees out for a free meal, so they can bond while receiving recognition for their work.
22. End-of-the-year party
Work parties allow employees to have fun and give them something to work toward.
Present employees with a plaque or other physical award they can hold onto as a keepsake.
Give employees a chance to win big with lottery tickets or scratch-offs.
25. House cleaning
Help employees improve their work-life balance with a one-time courtesy cleaning service or provide a top performer with house-cleaning services for a month, quarter or year.
26. Rideshare reimbursement
Ease the cost of getting to work or traveling around a major city by reimbursing employees for rideshare services.
27. Meal delivery
Turn lunchtime into a celebration by ordering in from a catering service or local restaurant.
28. Gift delivery
Surprise employees by having flowers, a fruit arrangement or another gift delivered to their homes.
How to start an employee incentive program
Before introducing an incentive program, consult a lawyer to ensure compliance with labor and tax laws.
Follow these steps to create an employee incentive program:
1. Define clear goals for your incentive program
Get specific about what you want to achieve with your employee incentive program. Do you want to boost sales, improve work quality or cut down on waste? Knowing what you hope to achieve will allow you to develop a program that will suit your business needs.
2. Determine the types of incentives you can afford
Offer incentives that work with your budget. Have an accountant determine how much your business can afford to spend on a new employee incentive program.
3. Get opinions from your employees
Find out what motivates your employees by asking them. You can do so one-on-one, in a group meeting or through an employee survey.
4. Be transparent and track performance
Be clear on goals, criteria and timelines. After you launch your employee incentive program, track performance to see how the program impacts your business. Make adjustments if you find the program doesn’t achieve the anticipated goals.
Employee incentive program FAQs
How is an employee incentive program different from employee benefits?
Employee benefits are a portion of an employee’s overall compensation and include things such as retirement plans, health insurance, sick leave, paid time off and disability leave. Employee incentives are additional rewards and privileges employees receive in addition to their compensation.
What are the different types of incentive pay?
There are several types of incentive pay that can be split into two categories: one-time and ongoing. One-time bonuses are usually discretionary, while ongoing bonuses occur on a regular schedule.