Is the line between “employee appreciation” and “employee incentive” a little blurry to you? It is for me. Even as an HR expert, I find these two terms are intertwined—and in many cases, used interchangeably. However, I think it’s important that we do attempt to clarify the differences, because effective employee incentive programs serve a different purpose than employee appreciation programs. In this article, I’ll describe the difference between the two, and then suggest four tips for implementing the best employee incentive program for your organization.

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Employee Incentive Programs vs. Employee Appreciation: What’s the difference?

Employee appreciation means recognizing your employees. Typically, employee appreciation is for all employees—not just a specific group. Tokens of employee appreciation are given for nonspecific reasons, i.e., hard work over a quarter. In our article 5 easy, affordable & effective employee appreciation ideas, we suggested several basic ways employers and leaders can show appreciation to their team, including celebrating Employee Appreciation Day (yes, there is a day set aside to honor your employees!), offering career development paths, and building a culture of recognition. The purpose of employee recognition is to make everyone within the organization feel they are appreciated, which builds a deeper level of engagement.

Employee incentive programs, on the other hand, are awards or prizes tied to achievements, such as reaching a stated goal. Unlike employee appreciation, employee incentive programs that work are typically those that are for identified groups within your organization in connection with having accomplished something specific—for example, the sales team hitting a financial goal or the customer service team receiving a certain satisfaction score in customer surveys. The purpose of incentives is to drive a group to higher achievement. Incentives can look like many things, including monetary compensation, paid time off, gifts, etc.

So how do you build employee incentive programs that work? Here are four suggestions.

4 Tips For Building The Best Employee Incentive Programs

Tip #1: Don’t default to giving money as an incentive.

Ask almost anyone—employee or employer—what would make them happiest at work, and I’ll bet almost every person’s answer would involve money. And if you were to ask specifically what might incentivize employees to work harder or get better results, I’m sure you’d find the same answer. The problem is, actual science shows us that money is a short-term motivator at best—employees won’t necessarily be more satisfied with their jobs in the long term. It’s a classic situation of humans not really knowing what they want!

Take, for example, a robust annual bonus program. Initially, it might spark a huge boost in morale and productivity. However, by year five, employees will see the bonus not as an incentive, but instead expect it as part of their compensation. In this situation, employees are no longer satisfied by earning what is incentivized (the bonus), but are instead unhappy if they don’t get the incentive. Our incentive plan backfired!

That’s not to say monetary bonuses aren’t worthwhile—they absolutely can be. However, they are more appropriately placed within a total compensation plan, and not in an incentive program.

Tip #2: Incentive programs should revolve around employee satisfaction.

In lieu of money, we should instead find out what does make our employees happier. This is difficult because there’s no blanket answer for all workforces—it will take some digging for you to assess what increased satisfaction (and the means to it) looks like for your organization.

To start, if you aren’t currently asking your employees about their satisfaction and engagement with your company, do this first. Then, based on their responses, you can begin to identify patterns which you can use as part of your strategic human resource planning process. Is there something you could add or change to your current processes that would improve the satisfaction of most of your employees? Make a note of it! The beauty of taking employee satisfaction into consideration in your planning process is that you will have a system in place to continually monitor what is going well, what should be tweaked, and your employees’ outlook.

Tip #3: Be thoughtful in choosing incentives.

This article offers a window into the things a good employee incentive program might focus on. “To increase employee satisfaction,” it states, “a workplace needs to address higher concerns like work-life balance, challenging and purposeful work, and coworker relationships.”

Though the options for employee incentives are virtually limitless, the most effective offerings are meaningful to the recipients and something they’re willing to work hard to achieve. Click To Tweet

Though the options for employee incentives are virtually limitless, the most effective offerings are meaningful to the recipient(s) and something they’re willing to work hard to achieve. Some effective incentives for employees I’ve seen companies use include:

  • Additional paid time off
  • Early release from work
  • Flexible remote work arrangement
  • Profit sharing
  • Retention/anniversary bonuses
  • Career development
  • Meals
  • Special events/parties
  • Non-cash prizes
  • Subscriptions to Netflix, Spotify, etc.
  • Company swag
  • Fitness-based gear (Fitbits, gym memberships, Apple watches, etc.)
  • An afternoon of team bonding outside the office

Tip #4: Make incentive programs sustainable.

Whatever type of employee incentive program you choose, it should be a sustainable offering from your company. Don’t consider incentives that are unrealistic for your organization (like a day off work that halts production for your factory). Or, if you’re considering implementing a financial incentive program, ensure you can offer it long term—don’t offer an incentive for one year and then take it away because you didn’t count the cost beforehand. Instead, start small and build your incentive program as you’re able. A little bit can go a long way!

Find an incentive approach that fits your company goals.

If you’ve read this far, you’re probably interested in learning how you can make sure your highly talented employees stick around. While employee incentive programs and employee appreciation are key components to building a culture of engagement in your workplace, there’s a lot more you can do for new hires and existing employees alike. Learn more in our free guide, The Employee Lifecycle Roadmap. Just click the picture below to download it!

Download The Employee Lifecycle Roadmap