Employee Reward System: 5 Factors for Deployment in 2024

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Employee Reward Systems
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Employee recognition and rewards are essential factors in assuring the success of a company. By implementing a reward system for employees, the company can ensure improved productivity and increased job satisfaction. Hence, it is essential to implement employee reward and recognition systems in organizations, irrespective of their size or complexity.


With the help of dedicated reward and recognition platforms, the company can also gather insights regarding the best performers and provide them with better value for helping them stay longer with the organization.


In this blog, we will be discussing the employee reward and recognition platform system, its types, components, and benefits, as well as understanding the various factors to consider while deploying it.


What is an Employee Reward System?

An employee reward system is a process deployed in organizations to motivate the staff to undertake their tasks better by recognizing their efforts and rewarding employees for their work.


A robust employee reward system provides multiple benefits for the company such as enhanced job satisfaction, improved retention, increased productivity, and profitability. However, employee reward systems are different from an incentive systems as incentives are usually provided for achieving a specific target and the associated reward is pre-set by the company.


Incentives are a part of the employee’s salary package, while rewards are presented to them for their excellent work. They are provided as extra motivation for them to perform their jobs well.


Rewards can be either of monetary value or non-monetary, with recognition being the most impactful form of non-monetary benefit. With the help of a robust employee reward system, companies can also understand their top performers and take additional efforts to ensure they are retained with the company for longer.


Reward systems can also provide HR and administration with additional information about the overall productivity of the company staff. It helps them plan for future job positions and make informed decisions related to staffing.


Reward systems also provide an overview of employee productivity and help them understand whether extra employee motivation is required in the form of team rewards such as team outings or team lunches.


Also Read: Why Employee Recognition And Rewards Are Needed Now More Than Ever?


Types of Employee Reward Systems

A major hurdle for companies in deploying a dedicated employee reward system is the initial cost of implementing it. However, the benefits associated with it can be minimised by providing the staff with non-monetary benefits. While it may seem counter-intuitive to the employee, non-monetary benefits such as public recognition, far outweigh the monetary value ones.


Based on the type of monetary reward the employee is presented with, we can categorize the employee reward system into monetary rewards, recognition, and additional benefits that cost money to the money, while not being direct monetary benefits for the employee:


1. Monetary

Monetary rewards are the rewards which provide the employee with direct financial benefits such as bonuses, incentives, reimbursements, etc. Since salary is often the primary motivation to work in a company, providing monetary benefits such as additional bonuses proves to be quite effective in encouraging the staff to give their best to their service.


There are various options for the companies, when it comes to providing monetary benefits, such as:


▸ Bonus

Bonuses are direct financial benefits provided to the employee in the form of cash for outperforming their team or accomplishing a specific goal.


They are often used as ‘incentives’ for specific roles such as sales and marketing, as their efforts have a direct impact on the business.


▸ Variable Pay

Variable pay refers to the variable component in the salary package of an employee that enables the company to pay them according to their performance.


It can be awarded to an employee for their efforts in accomplishing a specific task or undertaking their duties methodically.


▸ Profit-sharing

Profit-sharing refers to the practice of sharing a predetermined percentage of the profits generated by the company in a specific duration such as a fiscal year.


Profit-sharing is used as a long-term reward as it requires a combined effort from different departments.


▸ Stock Options

Providing company stocks as a part of employee rewards is another excellent long-term strategy to ensure profitability.


Stock options are generally bestowed on upper and middle management to ensure they motivate the staff to work well.


2. Recognition

Using the recognition system, an employee’s accomplishments can be shared with the company. It is a well-established fact that employees who are recognized for their work are more satisfied with their company and hence, stay longer with the organization.


While not necessary, you can present your employees with different kinds of accolades and awards to ensure that it makes an impact on their morale.


Employee reward and recognition at work is best given impromptu, and hence, you may even casually reward employees with verbal praise. You can also create an environment of mutual appreciation to enable the employees to appreciate each other for a job well done.


Also Read: Employee Appreciation: Here are 6 Definite ways an HR can show!


3. Benefits

The additional benefits and perks provided by the company can also act as rewards to reward the outstanding performance, as the performers can be provided with an extra quota. Such rewards may not provide the employee with direct monetary benefits; however, it would provide them with a reward that they would appreciate. Some of the common examples include:

  • Office lunch party for the performing team
  • Option to leave work early for a specific period
  • Remote and flexible work options
  • Extra paid time off
  • Vouchers of famous brands


Components of Employee Reward Systems

There are numerous components of a successful employee rewards system. These components ensure that the system runs smoothly and becomes effective in retaining employees.


Although it is not necessary to include all these components in the reward system, including them would ensure the maximum effectiveness of the system.


The major components of this system are:


1. Peer-to-peer Recognition

Peer-to-peer employee recognition programs are an extremely effective way of rewarding employees since they seek approval from their peers. Employees feel motivated when their efforts are appreciated by their peers.


Additionally, since recognition of employees requires correct timing to be effective, peer-to-peer recognition proves to be ideal as the peers share them once the job is done.


2. Performance Management

Performance management refers to the various tools used by HR and management to measure employee performance. However, to ensure that the performance management system is successful, one needs to define the KPIs for each employee and measure them against a pre-defined set of targets. Hence, companies usually deploy dedicated software to undertake this task.


3. Rewards Distribution

The next major component of an employee reward system is the reward itself. Employees should be provided with a points-based system that can be encashed for rewards of their choice.


Such flexibility also ensures that the rewards become more relevant for the staff and they can actively strive towards earning the points.


4. Public Recognition

Social recognition acts like peer-to-peer recognition, with the major difference being that the recognition is shared in front of the entire office instead of a few team members only.


Social recognition provides the employees with a sense of achievement as they are being appreciated before a crowd of people whom they have seen in the office.


5. Gathering Feedback

As with any process involving the employees of a company, gathering feedback is essential to ensure the success of the program. Hence, checking with your staff for their feedback regarding the rewards program is essential.


Collecting feedback will help you understand whether you are making an impact on the employees with the reward program.


Also Read: HR Workflow Automation: 15 Advantages to HR Department


Benefits of an Employee Reward System

There are multiple benefits of deploying an employee reward system, with the major impact being the improvement in employee behaviours and the job satisfaction rate, making the staff an asset for the company.


The multiple advantages of the reward system become evident with the improved retention rate, attendance, and the associated increase in employee productivity. Let us discuss a few more:


1. Better Work Culture

A major advantage of the employee reward system is the steady improvement in the overall work culture of the organization.


Having an effective rewarding system will help the company associate with the company values and motivate employees to work towards fulfilling the company mission.


2. Enhanced Job Satisfaction

As mentioned above, the most important benefit of implementing an employee reward system is the improvement in the staff member’s job satisfaction rate.


The latter encourages employees to feel special and valued for their contributions towards their company, which motivates them to work better.


3. Improved Attendance

An effective reward system motivates the staff to show up and contribute towards fulfilling the company’s vision. It converts them into active promoters of the brand and gets them motivated to undertake their duties actively. As a result, they remain engaged with their organization, improving their attendance in the process.


4. Increased Productivity

An effective reward system provides the staff with the incentive to undertake their tasks well. It motivates them to work for something more than their salaries.


As a result, one can observe an increase in the productivity of the staff with the deployment of employee reward programs and recognition systems.


5. Better Retention

When the staff realizes their value to the company, which becomes evident with the rewards and recognition, they are less likely to leave their workplace.


Additionally, as they are satisfied in their current position, they would want to remain in their current position. All these factors result in lowered employee turnover rate.


6. Improved Team Bonding

The rise of knowledge-sharing work culture and peer-to-peer recognition results in improved team bonding. As a result, collaboration becomes more effective within the organization, leading to increased efficiency and productivity, leading to the company’s overall success.


7. Reduced Supervision

With the improved employee satisfaction rate, employees become self-motivated to undertake their work responsibly. As a result, there is a reduced requirement of supervising them, leaving the manager or supervisor with more time to undertake their tasks. Reduced monitoring also reinforces the fact that their company trusts them to complete their tasks, which makes them work better.


Also Read: Do’s and Dont’s Of Employee Recognition


Factors to consider while deploying a Reward System for Employees

Various factors need to be considered while deploying a reward system for employees, as their requirements and needs vary from company to company. Some of the most relevant ones are:


1. Check with your Employees

Since the reward system is meant to encourage your staff to undertake their duties well, the most essential factor is to check with them while the system is being developed.


Taking their input will help in customizing it to their requirements, which ensures their active participation once the global rewards system is in place. It also keeps them motivated with the company as they realize their opinions are valued in their workplace.


2. Measurable KPIs

Another major factor to consider is that the system should have measurable Key Process Indicators (KPIs) to ensure that the staff can be measured against pre-set threshold values.


One should allocate points for each KPI, based on their Key Responsibility Areas (KRAs). It will enhance the transparency of the system and enable the employees to keep a track of their score, essentially gamifying the process.


3. Provide Relevant Rewards

The rewards that are awarded to the staff should be relevant to them. Hence, many companies provide customizable plans to reward employees and let them choose the reward they wish. Having a points-based system can also help in this case as the points can be redeemed for a reward of their choice, providing the employee with additional incentive to work towards achieving their targets.


4. Gather Frequent Feedback

Once you deploy the employee reward system, it is essential to gather further feedback to understand whether it fulfils their requirements. You should also tweak the system based on their feedback to ensure that the system fulfils its purpose effectively. You can conduct surveys to collect feedback from your staff and work on improving the rewards system in organization to keep them motivated.


5. Remote Accessibility

In the modern connected digital corporate world ruled by HRMS solutions, it makes sense to deploy the reward system with remote accessibility. One can even integrate their own rewards and recognition system with the HRMS for maximum effectiveness as the staff can check their reward points whenever required.



Employee reward systems are an effective technique to ensure that your staff stays motivated in undertaking their daily work. Having a robust employee recognition system in place results in improved productivity, increased job satisfaction, and enhanced team bonding.


These factors contribute towards an improved retention rate and better work culture, leading to the overall success of the company. Hence, one should consider the five factors we discussed in this blog while deploying an employee reward system for maximum effectiveness.

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