The rewards of employee incentive programs were once reserved for sales professionals, piece workers and top executives. However, things have changed in recent years. Today, larger corporations and smaller companies with available resources are offering incentive programs to reward their employees.
These programs show appreciation for employees’ diligent efforts and establish a sense of participation in the well-being of the company that a paycheck cannot convey. In addition, a successful incentive program has the ability to point employees in the direction the employer wants them to go and gives them the extra motivation they need to achieve phenomenal results. According to an article in Harvard Business Review, a rewards program is the single highest predictor of an “organizational climate” that directly relates to positive financial results.
There are many variations in incentive programs available for employers to choose from. According to a study in the Journal of Organizational Behavior Management, slight differences tend to make no change in the outcome of a solid program. In fact, a plan offering a 3 percent bonus as opposed to 100 percent bonus of total pay did not affect employee output. However, what did affect employee morale was not having a program in place at all. In addition, the study indicated that tracking employee results and efforts made the most difference in the plan’s success.
There are several things to consider before determining which, if any, incentive plan is right for your business:
Profit sharing and individual bonuses are the two most common incentive plans that offer motivation to employees to achieve goals.
Below are some general characteristics of profit sharing:
Advantages: The entire staff is united, as everyone is working towards a common goal and is on the same plan. Also, the cost to implement profit sharing fluctuates with pretax earnings.
Disadvantages: These plans reward based on the individual’s base salary without taking performance into account. Companies with erratic earnings cannot deliver as much as what was promised to employees.
Individual bonuses are monthly or annual payouts that are determined by a subjective evaluation of each employee.
Advantages: Employees who work extremely hard reap the benefits and the company’s overall performance has no bearing on the individual’s payout. Also, this plan allows the company to pay out for a particularly monumental accomplishment on a one-time basis.
Disadvantages: Since the payout is subjective, employees may feel that they deserved more than others who received larger rewards. The program may cause animosity in the office.
There are various other options to reward employees:
Employee incentive programs are one piece of the employee benefits puzzle. Our team of employee benefits consultants can advise you and provide the help you need to create a workplace that attracts and retains great talent. For more information and any questions, contact us today!
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