Employee incentive programs: 10 ways to incentivize your team
By Kim Rohrer|15 min read|Updated Oct 10, 2024
Employee incentive programs have proven effective at optimizing everything from employee engagement and productivity to generating high-value sales leads to increasing survey results.
In this article, you'll learn:
What an employee incentive program is
Why incentive programs are so effective
How to incentivize your employees
What is an employee incentive program?
An incentive program is a structured system for providing privileges and rewards to employees.
Employee incentives can come in two forms:
Monetary incentives — including cash, gift cards or prepaid cards (like Visa® prepaid cards), and money added to an employee's paycheck. These incentives are an addition to the employee's base pay.
Non-monetary incentives — including swag, praise and appreciation, gifts, travel, merchandise, experiences, promotions, or professional development. Basically, any privilege or reward that isn't money.
Table of contents
3 examples of how to incentivize your team with motivational incentive programs
Implementing an employee incentive program for small businesses
What incentives can be given to employees?
Monetary incentives, such as performance bonuses, profit-sharing, and stock options, directly reward employees for their contributions.
Benefits like health insurance, retirement plans, and paid time off enhance overall job satisfaction.
Non-monetary incentives, including flexible work hours, professional development opportunities, and recognition programs, can also motivate employees.
Companies may offer perks such as wellness programs, gym memberships, and childcare support to improve work-life balance. These incentives, aligned with company goals and employee needs, foster a motivated and loyal workforce.
Certain types of companies and organizations are legally restricted from offering monetary incentives to their employees. These primarily include government agencies, non-profit organizations, and certain healthcare providers.
Government agencies, both federal and state, operate under strict regulations that often prohibit monetary incentives to prevent any perception of favoritism or misuse of public funds. Their compensation structures are typically fixed and transparent, designed to ensure fairness and accountability.
Non-profit organizations also face limitations on offering monetary incentives due to their tax-exempt status and the requirement to utilize funds in a manner consistent with their charitable missions. Excessive compensation or incentives could jeopardize their non-profit status and raise questions about their commitment to their stated goals.
Healthcare providers, particularly those receiving funds from government programs like Medicare and Medicaid, are bound by regulations such as the Anti-Kickback Statute and Stark Law. These laws prevent financial incentives that could influence clinical decision-making or lead to overutilization of services, ensuring that patient care remains the primary focus.
In these sectors, non-monetary incentives like professional development opportunities, recognition programs, and flexible work arrangements are often used to motivate and retain employees within legal constraints.
Benefits of incentive plans for employees
Why, as a business leader, should you care about staff incentive programs?
Engaged employees are 18% more productive and 23% more profitable, according to Gallup.
An employee who gets a bonus (or some other tangible benefit) for exceeding their revenue target might be inspired to work a little harder in order to get the extra sale.
An employee who knows they can count on extra paid time off after a grueling busy season may be less likely to burn out, knowing there’s a light at the end of the tunnel.
Reinforcing your company values through peer recognition awards can foster a more cohesive and connected company culture, increasing engagement and teamwork, which often result in better business outcomes.
When implemented effectively, the benefits of these strategies can build upon each other to fuel business growth. These company incentive programs help:
Emphasize employee wellness
Increase employee engagement and productivity
Improve team collaboration and culture
Bolster partner satisfaction and advocacy
Support top-line and bottom-line growth
People are more likely to behave in a desired way if they’re rewarded with an incentive, according to a behavioral science theory called Incentive Theory in Motivation.
The reward could be:
Positive — a gift, praise or money
Negative — scold or discipline
Over time, people are nudged toward making decisions that benefit them (via the positive reward) and away from actions resulting in a negative outcome. If you think practically in your life, you’ll see examples of incentives everywhere.
They’re often so subtle and commonplace that you might overlook the fact that they’re incentives.
For instance:
Parents promising their child dessert if she finishes her veggies
A boss discussing a promotion contingent on end-of-year results
A car rental company offering a 10% discount if you leave a positive review
For the purposes of this article, we’ll focus on positive reinforcement — meaning employee incentive plans that reward a preferred outcome. When you apply this concept to your business goals, you’ll start to see many clever ways to guide people to take action. The best part: the outcomes can be mutually beneficial to your business and the recipient.
💡 Tremendous Tip: When you’re exploring incentives, remember to check for possible biases, inequities, and potential for abuse. For example:
The child will infer that veggies are something to be endured to get to the dessert, rather than developing healthy eating habits.
A salesperson might not have received the same training or pipeline opportunities as her peers, and would be unfairly disadvantaged in consideration for the promotion.
A rental car customer might be incentivized to leave an untruthful, but positive, review in order to receive the discount.
3 examples of how to incentivize your team with motivational incentive programs
Employee incentives
Employee enthusiasm, engagement, and productivity wane over time, and the motivational appeal of their base compensation can lose power. A formal incentive compensation plan can boost morale and motivate employees. Businesses often provide:
Referral programs for hiring
Professional development
Equity incentive plans
Profit-sharing
Bonuses and raises
Health and wellness-focussed incentives
One-off gift cards
Sales incentives
Sales team incentives are often merit-based performance incentive payment systems that incrementally increase rewards based on how much value an employee generates for the company. The incentives can be both monetary and other — ranging from discounts at local retailers to event tickets. Companies often use:
Cash bonuses
Contests
Extra PTO
Subscription boxes
Activity-based rewards
Entertainment
Product prizes
Employee recognition and rewards programs
Employee recognition and rewards programs play a crucial role in boosting morale, fostering a positive work environment, encouraging high performance within an organization, and even reducing employee turnover by 43%.
Social recognition programs allow peers and managers to publicly recognize employees for their hard work and success, fostering a culture of appreciation and teamwork.
On the other hand, some company cultures might be better suited to gamifying recognition with a points-based recognition program, where employees earn points for meeting certain milestones or exhibiting company values, which they can then redeem for rewards such as gift cards, extra time off, or company merchandise.
Whatever direction you choose, remember to do what feels appropriate for the workplace environment you want to cultivate and the employee population you have.
Implementing a mix of these programs will help to ensure that recognition is inclusive and meets the varied motivational needs of your workforce.
💡Tremendous Tip: Take care to ensure that social recognition programs don’t become a popularity contest. Regularly review both who is receiving and giving recognition, and course correct any unintentional biases or inequities by collaborating with managers or team leads.
10 common and reliable employee incentive program examples
The following employee incentives can be successful for businesses of any size, from small startups to larger corporations. However, some incentive types may make sense for certain organizations and not others – profit-sharing, for example, is a reasonable and effective employee incentive for small business but wouldn’t make sense for a nonprofit.
Our goal is to provide a wide range of effective options that companies can integrate into their employee recognition and retention programs.
While all of these incentive programs boost employee satisfaction, they’re most effective when used together: for example, encouraging teammates to give their colleagues praise and public shoutouts can boost morale for some, while bonuses are more motivating for others. When companies use both forms of appreciation to motivate employees, they’re better positioned to improve satisfaction across the organization.
How you structure your employee recognition program is dependent upon the preferences and financial limitations of your organization. The important thing is to have a recognition program in place: one study found that 82% of employees consider recognition to be an important factor influencing their happiness at work, and companies with any kind of recognition program in place saw a 31% lower voluntary turnover rate.
Referral programs
If you’re actively recruiting and seeking ways to increase your pipeline of qualified candidates, consider a referral program. You’ll want to ensure that your rewards mechanisms are clearly outlined, to maximize understanding and minimize arguments about whether or not someone has earned a reward. You’ll also want to understand your recruiting goals to ensure your bonus program is structured in a way that aligns with achieving those goals.
Referral bonus denominations vary widely. Some companies dole out as little as $250 for an entry-level hire, while others offer thousands. Generally, companies issue larger bonuses for hard-to-fill roles, and smaller bonuses for early-stage referrals.
But there is a sweet spot: according to one study by Instawork, somewhere between the $3,000-$5,000 range yields the greatest number of quality referrals without breaking the bank.
Of course, you can adjust this figure based on your goals. Are you trying to increase your pipeline of qualified candidates? Consider a smaller bonus for candidates who reach the interview stage. Have aggressive goals for hiring specific hard-to-fill roles?
Consider both a pipeline bonus and a larger bonus for referring someone who is successfully hired and makes it past the 90-day mark (or probationary period, depending on where you’re located).
You might also want to consider questions like whether a hiring manager is eligible for a bonus if they refer a candidate who gets hired on their team? (ahem, they should not be), whether you want to set goals that are particular to underrepresented groups, and how you will integrate your company culture into the hiring process, rather than just relying on employees’ own interpretations of “culture fit”.
The more you can be explicit about what you’re looking for, the better your referrals will be.
💡Tremendous Tip: It’s easy to accidentally create a homogenous team by relying too heavily on employee referrals. People are most likely to refer people from their personal networks, which is great in terms of being able to trust the quality of the candidate. But this can also lead to disproportionate amounts of employees from one prior employer, university, or social group.
Professional development programs
If you want to incentivize retention with a workplace incentive program, invest in professional development programs. From informal mentorships to certifications and training, giving employees the opportunity to learn and grow is an excellent way to recognize their performance and potential.
Even if you don’t have large budgets for professional development, you can greatly impact employees’ ability to succeed by focusing on closing skill gaps with peer mentorship and free online courses.
By equipping employees with new skills and knowledge, you will not only enhance their performance, but also prepare them for future roles, which in turn enables you to fill higher-level positions from within.
This approach not only reduces recruitment costs because you’re hiring from within rather than kicking off an external search, but also leverages the institutional knowledge of your workforce to drive success across the business.
💡Tremendous Tip: Track the success of your professional development program to ensure equity across race, gender, age, department, etc. Use requests for new headcount as an opportunity to review existing talent for potential fits, even if they don’t meet 100% of the requirements yet. Be careful of biases; you want to consider every interested employee for development, not only the ones who know how (or are brave enough) to ask.
Profit sharing
Profit sharing is another incentive strategy where employees receive a portion of your company's profits in addition to their regular compensation. When the business does well, individuals do too.
When employees directly benefit from the company's success, you foster a culture of teamwork, as everyone works towards the common goal of improving the company's profitability.
However, the effectiveness of profit-sharing plans can vary depending on the company's profitability, the distribution formula, and how well the plan is communicated and perceived by the employees.
If you over-index on profit sharing and the company performs poorly, you should expect employees to be disappointed and even seek employment elsewhere.
💡Tremendous Tip: If profit sharing is an important part of your incentive strategy, ensure your distribution plans are as equitable as possible. While it may not be advisable for every single employee to enjoy this incentive, this model works best when everyone feels ownership of the company’s success. And if profit sharing doesn’t work with your business model, consider alternatives like a 401k match or company-funded childcare subsidies.
Health and wellness programs
Providing access to health and wellness programs is a great way to curb burnout and help employees maintain high levels of performance. Many programs will provide resources about things like smoking cessation, improving sleep, or mental health for those who are interested, but you must ensure they are opt-in and in no way connected to eligibility for promotion or pay increases.
Support for mental health programs in particular has increased 85% since 2020 - investing in programs to support employees’ mental wellbeing can have significant and lasting impacts on company culture, individual productivity, and business performance.
An employee wellness program can drive a number of benefits: according to The Principal Financial Wellbeing Index, 40% of surveyed workers feel encouraged to work harder and perform better, and 26% miss fewer days of work when these programs are in place.
💡 Tremendous Tip: Stay away from things that might come across as biased or exclusive, such as weight loss competitions or mandatory sports activities. Focus on overall health, with an inclusive lens, rather than specific goals or metrics that might not be applicable to all employees.
Tuition reimbursement
Providing reimbursement for educational programs such as workshops, certifications, and online courses is a great way to help employees upskill, particularly if they can learn things that will immediately contribute to company success.
When you celebrate milestones such as graduation or earning a certificate, you not only reinforce a culture of recognition, but you also give visibility to the program.
💡Tremendous Tip: Make sure to pair education reimbursement with time off to complete the program. Remember that not everyone has time in the evenings, and that people may struggle to juggle their regular work with additional learning program obligations.
Bonuses
Bonuses are a form of financial reward given to employees over and above their base salary, often as a recognition for achieving specific goals, exceptional performance, or for contributions that exceed regular job expectations.
These incentives can be structured in various ways, such as end-of-year bonuses, performance-based bonuses, or bonuses tied to the completion of specific projects.
One survey showed that 65% of U.S. employees prefer performance-based bonuses, and overall, bonuses are a fairly common and well-received incentive across many industries and employee groups.
And think about distributing the costs of these programs across the calendar year - studies find that regular, smaller rewards are actually more effective than a one-time lump sum.
💡Tremendous Tip: Consider the distribution of your bonuses to ensure they are not only available to employees who are already the highest-paid, and that they recognize the performance of every team member who contributed to the success.
Employee gifts
Whether lighthearted or luxurious, employee gifts can be a fun way to augment existing recognition and incentive programs. Reserve these for specific occasions like work anniversaries, hackathon prizes, or internal celebrations, and see if you can make them meaningful to your organization.
But don’t get too cutesy - in a cross-industry survey, we found that 65% employees prefer a cash gift to company swag or a statuette. And it doesn’t have to be big! $50-100 constituted the ideal gift amount for 55% of the employees we surveyed (and another 22% said that the cost didn’t matter at all).
💡Tremendous Tip: Allow employees to choose their own gifts through a rewards platform like Tremendous. Our catalog includes 2,000 redemption options available in over 200 countries, so there’s something for everyone. Letting the recipients have some ownership over the kind of gift they receive demonstrates an intention to be inclusive, allowing people who would rather donate to charity to do so, or those who prefer to put the money toward bills to redeem as a direct bank transfer.
Time off and flextime off
When you think about time off policies as part of your incentive programs, consider what you’re rewarding by offering additional time off. Recognize a job well done, unexpected overtime, or a particularly difficult season with extra time off.
Among the employees we surveyed, extra (paid) time off ranks #2, just behind cash, as the most desirable incentive gift.
This doesn’t have to be a one-time thing either — encouraging the use of flextime can be another way to incentivize quality work in an equitable way, allowing people to work when they are most productive, or to balance their work with other obligations.
Given that nearly a quarter of workers value time off almost as much as they value more cash, time off and flextime are gifts you should definitely consider offering year round, rather than just at the holidays.
💡Tremendous Tip: Make sure to offer time off incentives equitably, based on work, to avoid preferential treatment. Consider a companywide flextime policy to encourage an inclusive and trusting environment where employees are given autonomy over their schedules.
Verbal recognition: public shoutouts and praise
Effective employee incentives don’t have to be expensive. In fact, they can be totally free.
Public recognition and praise significantly boost employee satisfaction and engagement. A Gallup study found that employees who receive recognition are not only more engaged but also more productive and loyal. The study noted a 10% to 20% increase in productivity and a 20% reduction in the likelihood of employees quitting within the next year when they receive regular praise.
There are dozens of ways to publicly praise team members for their hard work. Below are a few ways to shout-out employees that feel meaningful:
Team Meetings: Recognize employees during team or company-wide meetings.
Company Newsletters: Feature employees in company newsletters or emails. Share their stories, accomplishments, and the reasons they’re being recognized.
LinkedIn: Use the company’s social media platform to publicly praise employees on a monthly or quarterly basis.
Intranet and Internal Platforms: Use the company Slack or Sharepoint to highlight employee achievements. Create a dedicated channel for recognition where colleagues can shout each other out.
Award Ceremonies: Host annual ceremonies or recognition events. Present certificates, trophies, or other tokens of appreciation to employees in front of their peers.
Executive Acknowledgment: Have senior leaders or executives personally recognize employees during meetings or through written communications. This top-down recognition can be particularly meaningful.
Peer-to-Peer Recognition Programs: Encourage employees to recognize each other’s efforts. Implement platforms or programs that facilitate peer nominations and acknowledgments.
SPIFs: Sales Performance Incentive Funds
SPIFs, or Sales Performance Incentive Funds, are targeted financial incentives used by companies to motivate their sales teams. These bonuses are typically short-term and designed to drive specific sales behaviors or achieve particular business goals.
As a sales incentive, SPIFs aren’t intended to reward your entire workforce: they’re designed to help your sales team achieve short-term goals.
SPIFs are generally used to boost sales for specific products, move inventory, enter new markets, or achieve particular targets. They’re often used to focus the sales team’s efforts on high-priority areas that align with the company’s strategic objectives.
SPIFs can take various forms, including cash bonuses, gift cards, trips, or other rewards. They are usually awarded based on the achievement of predefined targets, such as reaching a sales quota, increasing the sales of a particular product line, or signing new clients.
To be effective, SPIF programs should be clearly communicated to the sales team, with specific goals, criteria for earning the incentives, and timelines. Transparency in how SPIFs are awarded ensures that the sales team understands what is required to earn the bonuses.
SPIFs can lead to immediate increases in sales performance by providing a tangible and timely reward for effort. They also help to focus sales efforts on critical business areas, driving the achievement of strategic goals.
While SPIFs can be highly effective, they need to be well-designed to avoid potential downsides. They can foster unhealthy competition, promote short-term thinking, or cause some employees to neglect non-incentivized products or tasks.
How to successfully implement an employee incentive program
When you’re thinking about incentive programs ideas, start with your company culture. Do you want to reward teamwork or superstars? Will you prioritize predictable efficiency or risky innovation? How might you connect your incentive program to your values or your mission?
Employees who feel connected to the company’s mission are 87% less likely to resign, so the more you can tell the story of why these incentives exist in your company, the better.
If your incentive program aligns with your company culture, it will feel purposeful and intentional, which in turn makes it more meaningful to employees instead of feeling like a hastily tacked-on perk.
No matter what type of company incentive plan you choose to use to motivate your team, there are certain best practices that will help to ensure your program is effective and fair.
Understand your employees' needs: Don't assume you know what your employees want. Conduct surveys or hold meetings to gather their input on what types of incentives would be most motivating.
Set clear and achievable goals: Make sure the objectives tied to the incentives are clear, attainable, and aligned with the company's goals. If the targets are too difficult, employees may get discouraged.
Offer a variety of incentives: Different employees are motivated by different things. Include a mix of monetary bonuses, extra time off, public recognition, and professional development opportunities to cater to various preferences.
Communicate regularly: Keep the lines of communication open. Let employees know how the incentive program works, how they can achieve rewards, and keep them updated on their progress.
Be fair and transparent: Ensure that the program is fair and transparent. Employees should clearly understand how their performance will be measured and rewarded, without any favoritism or ambiguity.
Regularly review and update the program: Don’t set it and forget it. Regularly review the effectiveness of the incentive program and be open to making adjustments based on feedback and changing business needs.
Celebrate successes publicly: Recognize and celebrate achievements publicly. This not only boosts the morale of the rewarded employees but also motivates others to strive for similar recognition.
Implementing an employee incentive program for small business
Small businesses need to consider their unique resource constraints and close-knit work environment when implementing an employee incentive program.
Unlike larger companies, small businesses often operate with tighter budgets, so it’s essential to find cost-effective ways to reward employees.
Non-monetary incentives like flexible working hours, extra time off, or personalized recognition can be just as motivating without straining finances.
The personal relationships in small businesses mean that fairness and transparency are even more crucial; any hint of favoritism can quickly demoralize the team. It’s also important to tailor the program to the specific culture and values of the business.
If your business prides itself on innovation, consider rewards that foster creativity and new ideas. Regularly gathering and acting on employee feedback ensures the program remains relevant and effective.
Focus on inexpensive or non-monetary rewards: Small businesses often have limited budgets, so consider offering non-monetary incentives like flexible working hours, extra time off, or professional development opportunities. If you do have budget for small incentives, consider offering stellar employees $50-$100 digital incentives they can redeem however they want. These rewards can be highly motivating without putting a strain on your finances.
Tailor incentives to your team: Understand what motivates your employees by gathering their input through surveys or informal discussions. Customizing the incentives to match their preferences, whether it’s public recognition, additional responsibilities, or creative projects, will make the program more effective.
Ensure fairness and transparency: Maintain a transparent process for awarding incentives to avoid any perception of favoritism. Clearly communicate the criteria for earning rewards and ensure that all employees have an equal opportunity to participate. Regularly review and update the program based on feedback to keep it fair and relevant.
Employee incentive program FAQs
Which companies use incentive programs?
Most companies have an incentive program of some kind in place, whether their employee recognition program comes in the form of profit-sharing or public recognition. Employees at public companies including Netflix and Meta provide employees with stock options, while companies like Doist and Brex (and Tremendous!) host employee offsites that include employee award ceremonies and team bonding activities.
How to structure incentive plans that work?
Structuring effective incentive plans requires clear objectives, measurable goals, and alignment with overall business strategy. Start by defining what you want to achieve, whether it’s boosting sales, improving customer satisfaction, or enhancing productivity. Make sure the goals are specific, measurable, attainable, relevant, and time-bound (SMART).
Tailor the incentives to different roles within the organization, ensuring they are meaningful and motivating for each group. Mix monetary and non-monetary rewards to cater to diverse preferences; cash bonuses, extra time off, public recognition, and professional development opportunities can all be effective.
Keep the plan simple and transparent so employees understand how they can earn rewards and see a clear connection between their performance and the incentives. Regularly review and adjust the plan based on feedback and changing business needs to ensure it remains effective and relevant.
How do you distribute incentives to employees?
If you’re sending gift cards, Visa prepaid cards, or monetary rewards to employees as a form of recognition, the easiest way to distribute incentives is with Tremendous. Tremendous lets companies send dozens or thousands of incentives in a single batch to employees in over 200+ countries. Just create a campaign template branded with your company logo and messaging, upload your list of recipients, and click ‘send’. Recipients will receive a reward in their inbox right away. Employees can choose which incentive type they want from a list of more than 2,000+ options, and use their reward immediately.
How is an employee incentive program different from employee benefits?
An employee incentive program and employee benefits are distinct components of a comprehensive employee compensation strategy, each serving different purposes and addressing various aspects of employee motivation and well-being.
Employee incentive programs are designed to motivate and reward employees for achieving specific performance goals or demonstrating desirable behaviors. These programs are often performance-based and short-term, providing immediate recognition and rewards such as bonuses, commissions, awards, or public acknowledgments. Incentive programs are typically tied to measurable outcomes, such as meeting sales targets, completing projects, or demonstrating exceptional customer service. The primary aim is to drive higher productivity, enhance engagement, and align individual efforts with organizational objectives.
In contrast, employee benefits are non-wage compensations that contribute to the overall well-being and long-term satisfaction of employees. These benefits are usually part of the standard employment package and include offerings such as health insurance, retirement plans, paid time off, maternity and paternity leave, and wellness programs. Benefits are designed to provide financial security, promote work-life balance, and support the overall health and well-being of employees. They are not typically tied to performance metrics and are provided consistently regardless of individual performance levels.
How often should I incentivize my employees?
Consider incentivizing employees at least once per quarter – studies show this smaller rewards delivered at regular intervals are more impactful than larger rewards delivered sporadically over long stretches of time.
Conclusion
There are many different types of incentive systems you can implement in order to drive better business outcomes while maintaining a high level of employee satisfaction and engagement. For example:
Financial rewards such as bonuses, referral programs, and profit sharing
Investments in career growth such as professional development opportunities, rewards and recognition programs, and education reimbursement
Benefits and perks such as flextime or additional paid time off, employee gifts, and health and wellness programs
Employing the right combination of these incentives will enable your team to thrive, and create a more sustainable future for your business. Flexibility and career growth are always good choices to incentivize performance.
It’s hard to pick an incentive that makes everybody happy. So don’t. Allow recipients to choose their reward themselves with Tremendous.
Our catalog of 2,000 redemption options across 200 countries includes everything from Amazon and Starbucks to Doordash and Uber, as well as charitable donations, Venmo payouts, Visa prepaid cards, PayPal transfers, and direct deposit.
Ready to launch an employee incentive program that makes everybody happy? Sign up today and send your first incentive in minutes, or chat with our team.
Updated October 10, 2024
