Earlier this year, Jacinda Ardern’s resignation as New Zealand’s Prime Minister made headlines worldwide. That poignant scene of a world leader – exhausted and acknowledging that she didn’t have enough left to continue – certainly struck a chord.
Ardern, like many of us, had faced an extraordinary series of challenges. An unprecedented pandemic, a devastating domestic terror attack, and a catastrophic volcanic eruption, all while experiencing motherhood for the first time. In her goodbye speech, she simply stated, “I no longer have enough in the tank to do it (her job) justice.”
This exhaustion isn’t exclusive to world leaders. Ms. Ardern’s exit echoes a feeling many of us can relate to: the creeping burnout that turns even passion into a burden. Across the globe, in big and small businesses, the specter of disengagement looms, silently gnawing away at productivity, creativity, and the vibrant morale that fuels organizations. According to Aflac’s 2022 WorkForces Report, 59% of American employees at every level are currently grappling with burnout.
Consequently, team leaders, managers, and HR professionals must find new ways to incentivize employees and rekindle their teams’ spark. The question is: “How?”
Money, while important, is no longer sufficient. Traditional employee benefits and perks may not cut it, either. As a result, the challenge lies in unearthing and leveraging motivators that truly resonate with today’s diverse workforce.
When done right, employee incentives can revolutionize your workplace. From professional development opportunities to tuition assistance programs, well-thought-out incentives can supercharge your employees’ engagement and motivation, driving them to bring their best selves to work. Let’s explore some of the most effective employee incentive ideas.
- What are the Types of Employee Incentives?
- Why Are Employee Incentives So Important?
- What are the Most Popular Employee Incentives Today?
- Additional Employee Incentive Ideas to Engage Your Teams
- What Should You Consider When Implementing Employee Incentive Ideas?
- What are Best Practices when Implementing Employee Incentive Ideas?
What are the Types of Employee Incentives?
Employee incentives are extrinsic motivators that reward actions to yield the desired outcome. These motivators can be broadly divided into two broad categories: monetary and non-monetary.
People go to work to earn tangible rewards. Like a salary or a wage. Additionally, most employers offer extra monetary bonuses to employees who meet or exceed specific goals or performance metrics. Examples of monetary employee incentive programs include:
- Cash bonuses – Employees receive a lump sum as a reward for their hard work or attaining specific targets.
- Profit sharing – Involves sharing a portion of the company’s profit with the employees.
- Stock options and equity-based compensation – Allow employees to buy or receive company shares as part of their compensation.
- Performance-based pay – Involves tying the employees’ pay to their performance. The higher the target achieved, the more the financial reward.
- Merit increases – based on employees’ overall performance. Awarded annually or biannually
- Sign-on bonuses – Upfront cash payment to an employee for joining a company.
Non-monetary incentive programs
We know money alone won’t attract or help you retain top performers. In fact, a Harvard Business Review study indicates 9 out of 10 people would pick a lower-paying but more meaningful job. Purpose, well-being, and even engagement cannot be bought. That said, they can be enhanced through a holistic employee experience, and that’s where non-monetary employee incentives come in.
By design, non-monetary employee incentives focus more on improving the work environment and enhancing employee experience. Examples include:
- Professional development and training opportunities – Help employees advance their careers. Incentives can include tuition reimbursement and scholarships for relevant courses.
- Health and wellness incentives – Promote employees’ mental and physical health, increase productivity, and reduce healthcare costs. Can include gym membership, healthy meal options, wellness reimbursement, on-site health screenings, etc.
- Employee recognition programs – these programs reward employees, peer recognition, social media shoutouts, plaques, etc.
- Goal setting and feedback programs – Performance reviews, one-on-one coaching; 360-degree feedback, continuous feedback, individual development goals.
- Work-life balance programs – PTO, family leave programs, employee assistance programs, flexible work schedules, remote work options.
- Personalized incentives programs – Customized rewards based on individual preferences and interests. Recognizes each employee has unique needs and motivations and tailors rewards for meeting those needs. Shows employees their employer values them as individuals, not just as a collective workforce.
Why Are Employee Incentives So Important?
Employee incentive programs are powerful tools in today’s tight labor market, and most employers are embracing them. In 2021, the global incentives and rewards service market was valued at $3.91B, with a projected CAGR of 8.9%. Why are employers embracing employee incentive programs in today’s labor market?
1. Boost employee motivation
Per renowned psychologist Abraham Maslow, humans are motivated by a hierarchy of needs – physiological, safety, social, esteem, and self-actualization. Once we meet the basic needs, we then seek to fulfill higher-level needs related to self-esteem and fulfillment.
In a corporate setting, basic needs – salaries, wages, and monetary rewards – may be the main reason someone accepts a job. However, a 2019 study by Steve Ford concludes that a competitive salary isn’t a good enough motivator for top-tier employees.
Instead, higher-level needs, like appreciation, belonging, and career growth, invariably drive employee engagement and performance. Incentives like recognition, flexible work options, or personalized learning opportunities can help fulfill these needs and fuel motivation.
2. Foster employee loyalty and retention
Losing your best performers is a blow to any business. It affects everything from company culture to employee engagement and profitability. According to Gallup, replacing such employees costs a company between 1.5 and 2x their annual salary. While turnover is unavoidable, meaningful and compelling employee incentive programs can increase employee engagement and reduce the desire to seek opportunities elsewhere.
3. Drive employee productivity
Performance-based incentives can boost employee performance. When people know their hard work and dedication will be rewarded, they’re often more willing to go the extra mile. A study by the International Society of Performance Improvement (ISPI) found these improvements to be between 25 and 44%. Unsurprisingly, the research found that monetary incentives are twice as effective as non-monetary incentives in driving performance.
4. Increase employee satisfaction and morale
A positive work environment increases employee morale and job satisfaction. Efficient management, supportive co-workers, the right software, and resources can all enhance the employee experience and boost engagement. Team-building activities, employee recognition programs, or even a comfortable workspace can create an atmosphere that employees enjoy, leading to higher job satisfaction and overall morale.
5. Encourage skills development
Unprecedented tech advancements have ushered the Fourth Industrial Revolution, forever changing how we work and live. Artificial intelligence, automation, and machine learning are no longer just trendy buzzwords; they are the reality in many industries.
According to the recent Challenger, Gray & Christmas report, artificial intelligence was responsible for 3900 job losses in May alone. By 2030, McKinsey & Company estimates 400-800 million jobs will be lost to automation, forcing between 75 and 375 million people to switch occupations completely and learn new skills.
Consequently, incentivizing continuous learning will benefit the employee and adds value to the organization. For one, it’s easier than hiring an altogether new employee. Secondly, it might take up to 12 months for your new hire to be fully productive, so you’re better off helping your current ones broaden their skill sets and stay up-to-date in their field.
6. Promote healthy competition
Human beings are naturally competitive. It’s an evolutionary trait. In fact, even the most laid-back team member will expend some effort to achieve more if there’s a reward.
Providing great incentives can thus foster healthy competition among teams or individuals, boosting overall productivity and performance. Sales contests, hackathons, or innovation challenges can energize your workforce, stimulate creativity and foster a strong team spirit.
Tip: The most impactful employee incentive programs foster a culture of collaboration and mutual success rather than a cut-throat environment.
What are the Most Popular Employee Incentives Today?
One size doesn’t fit all in the employee incentives space. Different incentive programs are popular across specific industries, locations, demographics, and company cultures. However, some incentive programs have become more popular as the nature of work and employee needs have shifted over the past few years. Here are some of the most popular employee incentive plans today:
1. Flexible working arrangements
According to a 2022 Incentive Research Foundation study, remote work options and flexible scheduling are top incentives for many employees. In fact, 30% of sampled respondents would take a significant pay cut or leave their current employer if denied the opportunity to work remotely. Remote work is strongly preferred by 35% of workers aged 25-44 and 40% of women.
2. Health and wellness programs
COVID-19 made people more health-conscious. People are no longer waiting until they get a chronic disease to act. They are proactively working to prevent them. As a result, programs like gym memberships, mental health support, wellness coaching, and access to virtual healthcare have gained popularity. The key is to offer incentives that motivate positive behaviors even outside work.
3. Professional development
Rapid tech adoption has made reskilling and upskilling more urgent than before. “44% of workers’ skills will be disrupted in the next five years,” reports the World Economic Forum. Future-proof your workforce by giving them professional development opportunities to gain future-ready skills. Scholarships and tuition assistance can help do that.
4. Performance bonuses
With the cost of living still too high, workers want more opportunities to bring in more money. Directly rewarding them for their hard work is a great way to incentivize them to work harder.
5. Stock options or equity
Particularly useful for tech and startup employees. These incentives make employees part owners, giving them a direct stake in the company’s success. The more profitable the company becomes, the wealthier they can expect to be. This can serve as a retirement account as well.
6. Extra time off
Additional paid time off or “mental health days” are increasingly gaining popularity. With 1 in 5 US adults suffering from a mental illness, these are valuable incentives to offer to your team. However, millennial and Gen Z employees are more likely to find these useful than Boomers and Gen Xers.
7. Rewards and recognition
Employee recognition is a powerful self-esteem booster. It makes employees feel seen and heard, contributing to their sense of belonging. If you combine employee recognition with a rewards program, you’re telling your team what they do matters to you.
“Women are 43% less likely to be actively looking or watching for new job opportunities when given the right amount of recognition,” a Gallup-Workhuman study shows. Additionally, workers are 73% less likely to experience burnout.
8. Family-friendly policies
Work-life conflict often leads to poor performance. According to McKinsey & Company, the COVID-19 pandemic drove as many as 2 million women, particularly mothers with young children, out of the workforce. “School closures had a substantial effect on working mothers’ ability to fulfill work obligations,” reported the Kaiser Family Foundation. Furthermore, 3 out of 10 working mothers had to take time off because school or daycare was closed.
Sadly, unpaid caregiving duties in the family continue falling disproportionately on women, forcing most to leave the workforce. Paid parental leave policies can incentivize them to stay on. “Bring your child to work” days, family picnics, childcare, and eldercare assistance can also help with employee retention.
Additional Employee Incentive Ideas to Engage Your Teams
As we stated earlier, what works for one employee might not work for the other. This is particularly true in today’s diverse workforce. With 5 active generations in the workforce, employers must develop out-of-the-box incentive ideas to drive employee engagement. Such ideas include:
9. Social responsibility initiatives
Social responsibility is a big theme for millennials and Gen Z employees. According to Deloitte’s 2023 Gen Z and Millennial Survey, many millennials and Gen Zers remain unimpressed with businesses’ societal impact overall.
In fact, less than 50% believe business is positively impacting society. Offer opportunities for employees to engage in volunteer work, charity drives, and other socially responsible activities. This can satisfy employees and help build a positive company image.
10. Experiential rewards
Instead of traditional gifts and bonuses, offer employees unique experiences. Give tickets to a concert. Sponsor a hot air balloon ride. Pay for a cooking class or an interesting trip. These memorable experiences will have a lasting positive impact.
11. Recognition platform
Implement a digital peer recognition platform where employees can acknowledge each other’s efforts. This will help boost employee morale and foster a culture of appreciation and positivity.
12. Innovation Space
Boost job satisfaction by allowing employees to spend a certain amount of their working time on projects they are passionate about, even if these projects are outside of their regular workload.
“We encourage our employees, in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google,” Google’s founders wrote in their IPO letter. “This empowers them to be more creative and innovative. Many of our significant advances have happened in this manner.”
13. Personal Branding Workshops
In today’s era of LinkedIn and digital portfolios, employees are more than just their job titles. They are brands with a unique blend of skills, experiences, and passions. Offering personal branding workshops provides employees with valuable tools to identify their unique selling proposition, create engaging digital profiles, network effectively, and more. This knowledge will help them navigate their career path within and beyond your company, all while feeling supported and valued by their employer.
Offer long-term employees the chance to take a sabbatical. This extended break can provide an excellent opportunity for employees to pursue personal projects, travel, or simply recharge.
15. Team-Building Activities
Nothing fosters camaraderie and mutual understanding like well-designed team-building activities. Adventure outings, cooking challenges, trivia games, or virtual escape rooms are fun and effective ways to boost team dynamics. They help employees step out of their regular roles, break down silos, and know other team members. In so doing, they discover hidden talents, develop new skills, and gain a deeper appreciation of their colleagues’ strengths.
What Should You Consider When Implementing Employee Incentive Ideas?
There are more employee incentive program ideas than those listed above. However, creating effective employee incentive programs involves careful planning and consideration. Here are several factors you should consider when designing your employee incentive program:
Establish clear objectives
Start with the end in mind. What business result are you trying to drive with your incentives? Is it to boost productivity, increase employee satisfaction, reduce turnover, or foster innovation? Align your incentives with your core business goals and company values. When the connection between their work and the company’s success is evident, employees are more likely to work harder.
Consider your budget
How much can you spare for the employee incentive program? Are your incentives financially sustainable? While generosity is appreciated, breaking the bank isn’t necessary for impactful incentives.
Ensure equity and fairness
Use a dynamic employee incentive model. Ensure the entire team has an equal chance to earn rewards. A dynamic model avoids favoritism and ensures your incentives don’t unintentionally disadvantage any group of employees.
Create measurable outcomes
Combine your key performance indicators into one easy-to-visualize and understand metric. For example, translate main KPIs (key performance indicators) to points (sales + customer reviews). This way, you can gauge their effectiveness and adjust as necessary.
Legal and Ethical Considerations
Ensure your incentives comply with all relevant laws and ethical standards. (Confirm compliance with FLSA, EEOC, and IRS regulations.) This covers non-discrimination laws, wage and hour laws, and tax regulations.
Regularly assess and adjust your incentive programs based on feedback and results. Do the incentives truly motivate your employees? Do they contribute to the attainment of business goals? Also, consider the return on investment. The benefits (increased productivity, engagement, and retention) should justify the costs, including direct expenses and administrative efforts.
Tip: Employee incentives programs generally work best when you can pilot them to determine how well they work before rolling them out broadly.
What are Best Practices when Implementing Employee Incentive Ideas?
Communicate Clearly and Often
Communication is the heartbeat of an effective employee incentive program. Ensure your employees understand the incentives and how they can achieve them.
Involve Employees in the Process
Employee participation is the key to the success of your incentives program. Ask employees what they need when developing and refining your incentive programs. This can enhance buy-in and ensure the incentives are meaningful to them.
Promote Healthy Competition
Incentives should be designed to stimulate a spirit of healthy competition among team members, boosting overall productivity and performance. However, ensure that competition doesn’t devolve into divisiveness. Create transparent, fair systems for measuring and rewarding success.
Recognize Efforts Publicly
Recognize employees who achieve their goals and earn their incentives publicly. This not only rewards the individual but also motivates others.
Provide Regular Feedback
Don’t wait for formal review periods to give feedback. Regular, constructive feedback can help employees understand how they’re progressing and what they can do to improve.
Adapt and Evolve
Review your incentive programs regularly and be willing to make changes as needed. The business environment and employee needs can change, and your incentives should be flexible enough to change with them.
The employee incentive landscape is evolving rapidly to meet the changing needs of the modern workforce. From fostering work-life balance with flexible schedules to promoting purposeful work through social responsibility programs, today’s most popular incentive programs are those that resonate with employees’ values and aspirations.
Respect people for who they are and what they can achieve. Give them autonomy and control. Give them meaningful responsibility, and they will live up to it. Communicate clearly. Frequently survey your demographics and collect employee feedback if you want to retain employees.
To truly make your incentive program stand out, consider setting up a consultation with an employee incentives expert. Incentfit can provide personalized advice to align your incentives with your unique business culture and goals, empowering your team to reach new heights of engagement, satisfaction, and productivity.