Cash may be king, but, as a long-term motivator, it has limited value; employees either get used to the amount that they are paid or resent the amount lost to tax.
In truth, to properly motivate staff, organisations require systems that recognise and reward. The fact that employee recognition is so important should be obvious for all to see. Countless firms have boards in the public domain that detail ‘employee of the month’, and they do this because they have understood that workers want not just money, but recognition among their peers.
The point of a rewards programme
According to Lauren Sweeney, head of people at Virgin Incentives and Virgin Experience Days, happy employees should be the aim of any HR team as ‘high staff turnover not only slows business growth and costs businesses money on recruitment and training, it also stunts company culture due to the continual change of personnel’.
Additionally, Charles Cotton, senior reward and performance adviser at the Chartered Institute of Personnel and Development (CIPD) agrees, adding that a reward policy should be strategic and ‘support an organisation to reach its long-term business goals’. However, he thinks it can do more for ‘an organisation's objectives and legal obligations, as well as the needs of its employees—it can enhance a reputation as an employer of choice and help it communicate better its employee value proposition’.
It is important to get the process right. It is not to team build. Instead, it suits a sales incentive, but it is not about only rewarding the end result. Schemes do not always take into account all of the steps that need to happen to get to the end goal. So, employers should not reward based on sales turnover, because profitability gets missed. Instead, they should reward speed of response, client queries resolved and reduction in complaints.
That aside, Sweeney quotes a Virgin Incentives whitepaper that surveyed 2000 workers across the UK (HR Review, 2021). It ‘found that 22% had never received a reward from their employer. No birthday gifts, no extra days off, no Christmas hampers or boxes of chocolates. Nothing’. For her, that is worrying.
However, what seems to gall her most is that, as she says, ‘rewards do not have to be expensive, challenging or complicated. They just have to be worthwhile, thoughtful and, ultimately, make the workplace as attractive as possible’.
Creating a programme
Setting up a recognition programme from scratch requires planning, and Sweeney says that ‘you need to define your objectives and consider your reasons for starting a reward and recognition scheme, as this will impact what you offer’. This can include a wide range of business goals, such as reducing turnover, driving sales and changing the company culture.
Of course, rewards must be used strategically. Sales will not rise because of a gift on someone's birthday. Similarly, loyalty does not follow because of performance-based rewards.
There is no point in incentivising or recognising the commonality of behaviour across all different functions, as they have different contributions to make. In an ideal world, firms should identify key positive traits of each and reward accordingly. Break it down to an idiot's guide and reward that behaviour, step by step, on a smaller basis, so that people can continually get into the habit of achieving.
The best way to create a well-rounded and engaging reward and recognition scheme is to find out what employees want. The results might be surprising—some might want traditional-style rewards such as long service awards, but others might want in-the-moment recognition to keep them motivated on a day-to-day basis.
Next comes the budget; this determines what is delivered and the partners who are engaged. Sweeney says that the simplest way to do this is to divide the budget by the number of people on staff.
Step three is the actual rewards. Turning to cash bonuses first, Sweeney says that they can sound simple, but quickly become expensive. ‘For example, if you awarded £100 one year as a bonus, then your team is likely to expect the same, or more, next year. This is unlikely to drive the type of long-lasting positive sentiment employers are after’. Further, cash rewards get spent on trivial purchases. The alternative, non-cash rewards, are, she points out, ‘easier to manage’. Vouchers and gift cards offer discounts and give all a great deal of flexibility.
It is important to remember that people become accustomed to rewards, so they need to be shaken up. Many larger organisations pay bonuses based on basic salary, but they are made up of so many different elements that people have no real control over what they actually get. Furthermore, they then want to know why they did not get a bonus or have no idea what, specifically, they did to earn it.
The last step is a rollout, and Sweeney says that ‘it is important to check in with people to get their views of the scheme and how it could be improved—there is no point going to all the effort of setting up a rewards scheme if your people are not going to use it’.
The importance of fairness
Just as well-run firms often seek employee involvement in certain business decisions, they should also involve staff in rewards and recognition schemes and communicate as such.
Cotton tells why: ‘The benefits offered to employees often depend on their grade, location or occupation. However, it is important that benefits are fair and are perceived as such, otherwise, the programme's purpose is undermined. Employers need to explain the different benefits available and be able to justify them’.
He thinks it helpful if firms have a ‘definition of fairness’ used to make decisions. On top of this, there should be checks on whether people doing similar jobs are getting similar rewards and, if not, whether there is an explanation for this.
It is also key to remember that time marches on and employees need change; weekends and parties could be replaced by trips to Legoland, and where it used to be a Louis Vuitton bag, it could be now Marks and Spencer vouchers.
However, there is a different school of thought put forward by Cotton. He says that ‘research shows that non-financial rewards can be just as important as pay’. He offers examples: opportunities for personal and career development, flexible working, being involved in decisions that affect how and when people do their work, recognition, such as an employee of the month award, or team-based events. Improving work–life balance is another option.
» … ‘research shows that non-financial rewards can be just as important as pay’. He offers examples: opportunities for personal and career development, flexible working, being involved in decisions that affect how and when people do their work, recognition, such as an employee of the month award, or team-based events «
Recent trends
Coronavirus has much to answer for, including changes to rewards schemes. Understandably, considering the nature of the business, Virgin is seeing a number of employers exploring virtual experiences and gift cards, rather than cash bonuses. Sweeney refers back to the whitepaper that, she says, found that 75% of respondents felt that gift cards and vouchers made them feel valued or very valued. This was followed by own-choice rewards (71%) and team treats (64%) (HR Review, 2021).
Additionally, this line is taken up by Cotton when he points out that ‘employers have become increasingly aware of the importance of supporting the wellbeing of their staff, particularly since the pandemic’. PricewaterhouseCoopers (PwC), he says, gave staff a year's subscription to the Headspace app. Allied to this, employers should ‘give thought to a ‘tidy up’ of their benefits package to better reflect the world in which we now live’. A public transport season ticket loan may not be coveted in the current climate, but a cycle loan or car plan might.
However, the most important thing about a reward is not the cost, it is the choice of rewards on offer. Most would rather receive a £10 e-card for a retailer they have chosen than a £50 voucher for a retailer they do not use.
To show that rewards do not need to cost anything is the example of a packaging site in Ireland. It has a reward programme that is the most hotly contested operational rewards programme in the whole business: parking outside the front door for the employee of the month. The appeal of the reward is that it changes every month depending on what the company is pushing for.
Communicating with employees
Employers need to engage with staff over rewards schemes or they will not be used. This is why Sweeney says it is ‘important to clearly communicate the rewards and make the options and points earned visible on a smartphone or via a portal’. Both, she thinks, give employees a personal account where they can redeem their rewards instantly. Yet, despite the positives, there are a number of other considerations for employers, says Cotton. In particular, he says that, when creating a reward package, ‘organisations should make sure the different components support, rather than contradict, one another. For example, if you are going to introduce performance-related pay, give line managers the skills to assess performance’.
Also, he alerts employers to the possibility that ‘some employees can be cynical about benefits, viewing it as no more than camouflage for cost-cutting’. So, he, too, sees value in good communications as this can counter this perception alongside regular feedback from staff on what works and what does not.
It is about the people
In summary, organisations are based on people, and, with the right programme, employers can both please staff with incentives and improve business performance. However, putting in place a rewards programme is not simple and takes thought, and sight should not be lost that rewards may have tax consequences. Good advice is essential.