In the modern workplace, keeping employees motivated is essential to maintaining and growing organizational performance.
As a manager, what are your options to keep employee morale and motivation high? What steps can you take to ensure your team members have long-term goals aligned with the company’s success? What encourages your workforce to be creative, innovative, and engaged every day?
The answer lies in employee incentive programs. According to a study by the Incentive Research Foundation, employee incentive programs can boost performance by up to 44%!
In this article, we take a look at some of the most effective ways to motivate your workforce. We explore various employee incentive and reward programs for conventional as well as remote teams. Furthermore, we’ve also included some free and budget-friendly ideas for small businesses.
The 9 Best Employee Incentive Ideas
1. Performance Bonuses
Performance bonuses are typically monetary incentives awarded over and above an employee’s regular pay. Like merit increases, these bonuses are tied to an employee’s performance, as well as the performance of the organization. For a monetary performance incentive to be awarded fairly, an employee must be well aware of what is required of them to earn it, and the means to do so must be within their control. In other words, it must be tied to their personal goals and KPIs.
Cost to Company: According to a survey by WorldatWork, the average percentage of payroll spent on bonuses and incentives was 12.5% in 2020. This percentage may be higher in certain industries, such as financial services, and can depend on an employee's level of responsibility.
Why it Works: Performance bonuses are powerful and tangible motivators for employees to hit their targets and exceed their defined KPIs. For best efficacy, give your employees a clear and attainable target to aim at. If the minimum requirement for earning an incentive isn’t realistic, it can have the opposite effect of what you’re aiming for.
2. Employee Rewards and Recognition Programs
Formalized rewards and recognition is a powerful way to motivate your team members for their contributions to the company's growth. Employee rewards programs serve to foster a positive work environment and a company culture of appreciation.
Recognition in itself is a great incentive for an employee to give their best at work. After all, who doesn't like being told they've done a good job?
There are three types of employee recognition that must be present for your whole team to feel valued:
- Bottom-Up: Employees at all levels get the opportunity to recognize their senior colleagues and leaders.
- Top-Down: Given by management to recognize employee achievements.
- Peer-to-Peer: Employees can acknowledge the efforts and milestones of their team members.
Employee recognition program ideas are often tied with rewards. For example, employees can be allotted vouchers or special accolades along with an award title to recognize exceptional work. This provides tangible evidence of the recognition and a powerful reminder that hard work pays off.
Cost to Company: The cost of an employee recognition program may vary widely depending on the kind of initiative you’re willing to take. For example, an employee recognition bulletin board may cost as little as $100 including the cost of stationery.
On the other hand, organizations may look to deploy employee recognition software that could cost a few thousand dollars a year.
Why it Works: Employee recognition programs work because they boost morale and motivation, which incentivizes higher productivity and lower employee turnover. According to a survey by SHRM, 68% of HR professionals feel employee recognition has a positive impact on retention.
3. Flexible Work Arrangements
Flexibility in where and when they work allows employees to achieve the work-life balance they want. Some of the ways work-from-home arrangements can be offered are:
- Telecommuting (Remote work) or working from home
- Flexible hours
- Part-time schedules and/or flexibility in how many hours they must work
- Compressed workweeks (4-day weeks)
Although a company can choose any of these arrangements as a standard model, flexibility is also a great employee incentive. Freedom in an employee’s location and working hours can be used as performance-based allowances awarded at the discretion of leadership, based on their output or results. Naturally then, to maintain the freedom of movement they enjoy, an employee would be motivated to do great work.
Cost to Company: Flexible work arrangements can result in substantially lower costs compared to having an on-site team. Based on their location, organizations can expect to save (per annum) on:
Office space: $15 to $50 per square foot.
Utilities: $3 to $5 per square foot.
On the other hand, managing a remote team has its own financial outlay. Remote team management software can run between $60 and $300 per user. Technology infrastructure (laptops, internet, office equipment) for a remote employee can easily amount to $3000. Still, there is evidence that organizations benefit from remote work expenses in the long run.
The effects of remote work on the United States Patent and Trademark Office is an interesting case study. The organization saved over $18,000 per employee over 12 months!
Why it Works: Flexibility offers employees more control over their personal and professional lives. According to a study by the International Journal of Human Resource Studies, these perks result in improved job satisfaction, higher motivation, and a more engaged workforce.
Research indicated that people who feel in control of their lives report higher levels of happiness on average.
4. Professional Development Opportunities
Offering opportunities to learn new skills and build on existing ones is an excellent way to motivate employees, earn their loyalty, and increase engagement. Offering development as an incentive creates a positive loop in that your top-performing employees will also be the ones who get singled out for opportunities to further their careers.
Examples of incentives that can support employee career development are:
- Access to coaching and mentoring
- Attending conferences and industry events
- Sponsoring certification programs or further learning
- Signing them up for training workshops and seminars
Cost to Company: Moderate to high, depending on the career development opportunity.
Why it Works: According to Linkedin’s 2023 Workplace Learning Report, the youngest people in the workforce, aged 18 to 34, prioritize professional development more than other age groups. Since these are leaders of tomorrow, professional development is likely to remain a critical factor in improving employee engagement and motivation.
5. Wellness Programs
Employee wellness programs are designed to improve the physical and mental well-being of your workforce. While a wellness program may not be a conventional performance incentive awarded for hard work, it serves an important purpose— incentivizing retention.
Typically, employee incentive programs may include one or more of the following:
- Stress management training
- Fitness programs
- Health screening
- Mental health support
Because employees benefit from these efforts, they are less likely to be dissatisfied in their working environment compared to a workplace that offers no such support. In turn, they may be less likely to look for alternative employment.
Cost to Company: Depending on budget approvals at your company, wellness programs can cost anywhere between zero to thousands of dollars. For example, a company-wide challenge to increase step counts would be free. Subscribing to a premium wellness program, such as Vitality at Work, would be costly but likely more effective.
Why it Works: By making employee well-being a priority, organizations can foster a people-centric culture and show their team members that they truly care about them. This commitment to employee well-being incentivizes the workforce to remain at the company and perform well in their daily duties.
In fact, wellness programs are known to improve employee productivity. This is why 72% of the organizations surveyed by SHRM in 2022 want to increase their budgets for mental health and well-being training.
6. Paid Time Off
Paid time off (PTO) allows employees to take time off work without compromising their job security or financial stability. Depending on the company’s size, industry, and culture, paid time off may include:
- Vacation time
- Personal days
- Sick leave
- Mental health days
- Parental leave
As an incentive, PTO can not only be awarded for exceptional efforts or outcomes, it can also be used as a means of attracting top talent and keeping these people at your company. In a scenario where a job seeker must choose between limited PTO, or an incentive program where they can earn more time for themselves through effort and innovation, the promise of more PTO is sure to be an attractive prospect.
Cost to Company: Technically, the cost of offering PTO is what you pay employees while they’re away from work. But this cost only makes sense when it’s juxtaposed with the cost of not offering PTO. The latter comes in the form of burnout, sick leaves, and high employee turnover.
According to a fact sheet by the National Partnership for Women and Families, PTO helps organizations improve retention, reducing the costs of advertising, hiring, and training new hires. The same source also highlights the annual cost of low productivity due to a lack of PTO— which comes down to around $234 billion annually.
Why it Works: Research suggests that organizations encouraging employees to take Paid time off have a happier workforce— a necessity for retention. A study by Oxford University also demonstrates that happier employees are more productive.
7. Personalized Rewards
Personalized rewards are incentives that are customized and tailored to match an employee’s preferences. Instead of offering generic rewards, organizations can give employees more control over the kinds of rewards or experiences they’d like, such as:
- Gift cards
- Concert tickets
- Spa days
- Travel vouchers
- Special projects
- Flexible hours
- Professional development opportunities
If employee reward systems are connected to a personalized definition of success, such as career goals or employee-specific OKRs, you can create powerful incentives unique to each member of your team.
Cost to Company: Low to moderate, depending on the nature of the reward.
Why it Works: Personalized rewards work as employee incentives because they demonstrate an organization’s commitment to recognizing employees' unique skills and contributions.
8. Incentive Trips
All-expenses-paid trips to popular travel destinations are an effective way of motivating your top performers to go above and beyond. These trips serve as an incentive for employees to achieve specific predefined targets, such as closing a big client or meeting an important deadline.
Cost to Company: Generally high, especially if you have a large team.
Why it Works: Well-designed incentive trips are potent motivators. They encourage employees to achieve a target in exchange for a tangible reward. According to a report by The Incentive Research Foundation, 91% of the surveyed professionals believed incentive travel to be “extremely” or “very motivating.”
As an added bonus, incentive travel allows teams to interact outside of a formal workplace setting, helping them improve team dynamics and build a culture of teamwork and collaboration.
9. Employee Stock Options
Stock options are often offered to high-performing employees as part of an incentive program that allows them to purchase company stock at a discounted price. The main motivator here is the prospect of selling the stocks at a higher price point in the future, even though this price appreciation isn’t guaranteed.
Cost to Company: High. The cost to the company is hidden in the discount offered to the employees. In other words, the cost to the company is equal to the regular price of the stock less the employee discount.
Why it Works: Stock options are a great way to align employee interests with the long-term success of the company. As a result, stock options improve employee retention and loyalty.
According to The State of Equity Plan Management 2022 Report from Morgan Stanley at Work, equity compensation programs are the second-most popular ways for companies to minimize employee turnover and attract top talent.
4 Employee Incentive Ideas For Remote Companies
In the last few years, remote work has gone mainstream. Accordingly, the most innovative organizations have devised creative ways to keep employees engaged and motivated. Here are some incentive ideas you can try to motivate your remote teams.
1. Home Office Perks
Remote work can be expensive for employees. Providing a home office stipend for remote workers to buy appropriate furniture and equipment is essential for them to stay productive. Additional perks to make their working environment more conformate are also highly appreciated.
An allowance for home office extras can be performance-based, or a reward for a work anniversary, thereby incentivizing retention.
Cost to Company: Here’s what a budget for a typical home office could look like:
- Desk and chair: $500
- Computer and monitor: $1,500
- Printer: $200
- Office supplies (pens, paper, notebooks, etc.): $100
- Internet service: $50/month
- Utilities (electricity, heating, cooling, etc.): $150/month
- Home office insurance: $500/year
Total estimated cost: $3,800 (one-time expense) + $200/month (ongoing expense)
A great incentive is to give an allowance over and above this that the employee may use to decorate their space, or purchase comforts unique to their taste.
Why it Works: Home office perks indicate a company’s commitment to employee well-being. Organizations that are willing to invest in their employees’ comfort are also investing in employee morale and productivity.
2. Health and Wellness Allowances
A people-centric workplace culture prioritizes employee wellbeing. Accordingly, such organizations offer health and wellness allowances that employees can use to get gym memberships, invest in fitness equipment, enroll in wellness programs, and more.
Cost to Company: Depending on budget allocations, the following items can be considered when formulating a Health and Wellness Allowance:
- Gym membership or exercise classes: $50-$150/month
- Fitness equipment: $500-$1,000
- Nutritional supplements or meal delivery service: $50-$200/month
- Yoga or meditation classes: $50-$150/month
- Massages or other bodywork: $50-$150/session
- Sports equipment, such as a bicycle or hiking gear: $200-$500
Why it Works: Research suggests 91% of employees in organizations that support wellbeing initiatives feel motivated to put in the hard work required to be at their best. Health and wellness allowances also improve job satisfaction and retention rates by demonstrating an organization’s commitment to employee well-being.
In addition, health allowances improve organizational productivity by giving employees an opportunity to invest in activities that would keep them energized and fit.
3. Online Learning Opportunities
Similar to professional development perks, online learning opportunities offer a pathway for remote employees to acquire new skills and knowledge. When used as an incentive, such programs can boost motivation and engagement in ambitious employees who are interested in a career boost.
Cost to Company: Low to medium, depending on the cost of the course or accreditation.
Why it Works: It’s easy for remote employees to feel stagnant, disengaged, or bored, which can dent motivation. Online learning opportunities as an incentive provide a positive loop where high performance is rewarded with an opportunity for growth.
Employees who believe they’re growing are also more likely to stay with a company longer. According to LinkedIn Research, employees who make internal moves are 75% more likely to stay with an organization. Therefore, the positive effects of investing in your employees’ knowledge and growth are far-reaching.
When using upskilling opportunities as an incentive, also offer the employee time in which they can attend the course and do course work during working hours. If a reward requires them to sacrifice time from their personal lives, it might not be a strong incentive after all.
4. Remote Recognition
Recognition is important for all kinds of employees, but even more so for remote teams. A culture of remote recognition helps employees feel valued and incentivizes them to invest their time and energy in pursuit of the organization’s goals.
Recognition can be given for achieving goals or overcoming challenges, or for milestones. Virtual birthday and work-anniversary celebrations are a great way to incorporate remote recognition into your virtual work culture. A typical virtual celebration can include an e-card, recorded video messages, or a live call with colleagues.
Free employee recognition ideas work well for remote teams, but some companies may also send small gifts and offer paid time off for the occasion.
Cost to Company: Low
Why it Works: It’s important for people to feel appreciated and acknowledged to stay motivated. This need is magnified in a remote work scenario.
5 Affordable (or Free) Employee Incentive Ideas
1. Virtual Coffee Breaks
Getting to know team members is a way bigger challenge for remote workers compared to employees in conventional workplaces. Virtual coffee breaks are a low-cost to no-cost way of improving collaboration among remote employees and boosting motivation.
Employees who have a friendly rapport and camaraderie will more readily help out a colleague where they can, or suggest a solution that benefits others. In this way, creating a virtual space for building connections incentivizes a better, more collaborative workplace for all.
Cost to Company: Free
Why it Works: Virtual coffee breaks help remote employees counter feelings of isolation. According to a Buffer study, 23% of remote workers feel that loneliness is their biggest struggle with remote work. Virtual coffee breaks can help remote employees connect with their colleagues and create a sense of community.
2. Casual Dress Days
Casual dress days are yet another valuable, yet free, addition to any employee incentive program. Typically, casual dress days work by allowing employees, who are normally required to dress formally or in uniform, to dress casually during a defined period of time.
As part of an incentives program, casual dress days can be offered to employees as a reward for:
- Achieving performance goals or sales targets.
- Winning team-building challenges.
- Exceeding certain KPIs or going above and beyond their duties.
Cost to Company: Free
Why it Works: Incentivized casual dress days promote a relaxed and open environment at the workplace and offer employees an opportunity to bring a bit of their “free-time personality” to work. This can improve employee mood and can bring about a sense of newness in the sameness of a work week.
3. Office Snacks and Edible Treats
Office snacks and special edible treats can be offered as an incentive for meeting certain targets.
Here are some ways food can double up as a reward to incentivize extra effort:
- Taking the team out to a nice lunch at the end of the quarter, if they reach their targets.
- Buying the office cake or doughnuts to celebrate beating a daily sales goal.
- Ordering take-out for team members who stay late to put in overtime on the priority project.
Cost to Company: Low
Why it Works: Offering snacks as part of an employee incentive program works because, first off, who doesn’t love food? Secondly, when this incentive is linked with a wellness program, such as offering healthy snacks and treats, it can also contribute positively to employee well-being, which, according to the Journal of Occupational and Environmental Medicine, can result in reduced absenteeism and improved productivity.
4. Extra Time Off
Extra time off as an incentive is a popular way for organizations to motivate employees. Companies can offer this incentive to top performers in numerous ways, such as:
- Additional vacation days
- Personal days
- A shorter workweek
- Leaving the office early
Cost to Company: Low
Why it Works: Keeping in mind that employees need to recharge from time to time, extra time off can help in the following ways:
- Reduce employee burnout
- Improved job satisfaction
- Increase productivity
Time for themselves and their family is a great incentive to motivate employees. The reward is tangible and sustainable because a hard push to make a deadline or go the extra mile pays off in rest later on.
5. Parking Spots
Designated parking eliminates the headache of finding and paying for parking daily. Offering parking spots as a reward to top employees may not sound like a big deal, but it’s actually a great incentive idea. One for which workers are sure to go the extra mile as it pays off in convenience they can enjoy daily, especially in places where parking is expensive.
Cost to Company: Low to high - depending on the location
Why it Works: Parking spots are a tangible solution to an issue employees face daily. When you remove the stress and frustration of the daily parking hunt, you give your employees a chance to arrive at the workplace focused on what they need to achieve.
Some Final Thoughts on Employee Incentives
A motivated workforce is essential for any organization to succeed. Incentives play a crucial role in keeping employees engaged, productive, and loyal. Therefore, organizations need to come up with financial and non-monetary incentive ideas to motivate their teams, regardless of whether they’re on-site or remote.
There is no all-encompassing solution when it comes to employee incentives. Once you’ve finalized your ideas for the year, remember to collect employee feedback so you can review and revamp these incentives regularly. This would allow you to continuously improve your employees’ experience by focusing on what works and replacing the rest with fresh ideas.
Need help getting started? Here’s a list of 15 non-monetary incentives you can start incorporating into your incentives program today.