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How to effectively design and implement an employee rewards program
Image by Maya Ramadhina

8 min read

How to effectively design and implement an employee rewards program

Learn how to design and implement an effective rewards program that fosters trust, collaboration, and innovation.

Do employee rewards really matter? Aren’t they just like those recognition rewards given to young children at school? You know, when little Jonny brings home a certificate for being the kid who always remembers to put his hand up before speaking out in class. 

They mattered then, and they may matter even more in the workforce. Employee rewards aren’t just about the employee — they also have a significant impact on the success of an organization. Why? They contribute to various aspects of the overall workplace environment.

Since every leader should be interested in organizational success, developing a strategy to design and implement an employee rewards program — assuming you haven’t already — should be a priority. Keep reading, and we’ll dig into the why and how of building an effective employee rewards program.

Understanding employee rewards

First of all, the term employee rewards refers to tangible or intangible benefits, incentives, and recognitions that an organization provides to its employees as a way of acknowledging their contributions, performance, and dedication.

The purpose of these rewards is to motivate and retain employees by creating a positive work environment that contributes to overall job satisfaction. Rewards are used to reinforce positive behaviors, boost morale, and create a workplace culture that values and appreciates the efforts of its employees.

Types of employee rewards

As mentioned above, rewards can be tangible or intangible and could include:

  • Monetary rewards: Obviously, monetary rewards involve providing financial incentives — and should be a part of any program. They could be in various forms, such as:
    • Salary increases
    • Bonuses
    • Profit-sharing
    • Commission structures
    • Stock options and equity
  • Non-monetary rewards: This type of reward can be equally essential when creating an employee rewards program, as not everyone is motivated by financial compensation. Some ideas are:
    • Flexible work arrangements
    • Professional development opportunities
    • Career advancement opportunities
    • Workplace wellness programs
    • Personalized gifts or tokens of appreciation
  • Benefits of employee rewards: If you’re not convinced that an employee rewards program will benefit your organization, consider the following:
    • Increased motivation
    • Enhanced job satisfaction
    • Improved employee engagement
    • Better morale
    • Retention or attraction of top talent
    • Employee well-being

Bring your people together

Designing an effective employee rewards program

An effective employee rewards program will be as unique as your organization. That means there’s a lot of things for you to consider.

Set clear objectives:

Your objectives should serve as the foundation of your program, providing a roadmap for what your organization aims to achieve through a rewards initiative. When you clearly define your objectives, you can tailor your rewards program to address whatever areas of specific need you identified, whether that’s improving employee engagement, enhancing job satisfaction, or something else. Regardless, you want to ensure that your initiatives resonate with your employees and ultimately lead to positive outcomes.

Identify key performance indicators (KPIs):

This step is crucial. KPIs serve as measurable benchmarks that align with your organization’s objectives and help to provide a clear understanding of what your success may look like. They can range from individual performance metrics to broader team or departmental goals, depending on your organization’s priorities. Once you pinpoint the KPIs that matter most, you can tailor a rewards program that will directly reinforce and celebrate the behaviors and outcomes that will contribute to your overall success.

So how do you identify them? This should be a collaborative process that involves key stakeholders, including department heads, team leaders, and the employees themselves. This type of collaborative approach ensures that whatever indicators you choose reflect a comprehensive understanding of performance expectations and employee contributions.

Align rewards with company values and goals:

When you closely tie employee rewards to your organization’s core values and objectives, it creates a powerful connection between individual or team achievements and the company’s mission. This can reinforce the desired behaviors and attitudes and communicate to your employees that their contributions help pave the way to organizational success.

Achieving this alignment means organizations must clearly articulate their values and goals, ensuring that these principles are integrated into the core of your rewards program. Any recognition or incentives should be designed to celebrate behaviors that exemplify your company’s values, reinforcing a shared understanding of what constitutes success within your unique organization.

Ensure fairness and transparency:

When designing your employee rewards program, ensure you factor in fairness and transparency. Fairness can help establish trust among employees, helping to foster a positive workplace culture. It also means you’ll need to distribute rewards based on objective and consistent criteria, always avoiding favoritism or bias. Transparency will provide your employees with a clear understanding of how rewards are determined, which will create a sense of equity and reduce any potential dissatisfaction.

In order to achieve fairness and transparency, you’ll need to establish clear guidelines for reward eligibility and criteria, which will ensure that all employees understand how their performance is assessed. And then be sure to communicate those guidelines — then follow up by keeping your employees informed about the program structure, criteria, and any changes.

Involve employees in the process:

When they solicit input from their workforce, organizations gain valuable insights into the types of rewards that would resonate with most employees. Having them participate helps create a program that reflects the diverse needs and preferences of your workforce and enhances the overall effectiveness of your program. Additionally, involving employees in the decision-making process helps to develop a sense of ownership and engagement since individuals will feel that their perspectives are valued.

How can you gain involvement? This could be through a variety of ways, including surveys, focus groups, or feedback sessions. Any of these can be used to gather input on desired rewards, methods of recognition, and even the criteria for determining exceptional performance. And if you provide a platform for open communication, it will allow employees to express their preferences and offer suggestions for improvement.

Types of monetary rewards

Just like there are different types of people — employees — there are different types of recognition. Monetary rewards offer your employees some sort of financial recognition. This could include:

  • Salary increases: Salary increases typically occur annually during performance reviews or merit-based evaluations. They’re also given in response to increased responsibilities, promotions, or to better align with market standards. This reward provides employees with a stable and ongoing financial reward, impacting their overall compensation and long-term financial well-being. 
  • Bonuses: One-time, lump-sum payments for exceptional performance, goal achievements, or any outstanding contribution. This type of reward offers an immediate form of monetary recognition, providing an extra financial boost for an employee’s efforts.
  • Profit-sharing programs: This type of reward involves employees getting a share of the company profits — typically calculated as a percentage of their salary. They are either received on a regular schedule or as part of an annual bonus. They serve as a long-term incentive and can contribute to employee retention and loyalty.
  • Stock options: This is a form of equity compensation that gives employees the right to buy company stock at a predetermined price and within a specified period. This reward can help align employees’ interests with the company’s long-term success, as the value of the stock options is tied to the stock’s performance over time.

Types of non-monetary rewards

Since not all staff members are motivated by monetary recognition, a well-rounded employee rewards program should include both monetary and non-monetary rewards. Here are a few examples of non-monetary rewards:

  • Recognition and appreciation: Recognition can take various forms, including verbal praise, written commendations, public acknowledgment during staff meetings or events, or even a simple thank-you note. Additionally, recognition can be individual, only highlighting specific accomplishments, or it can be team-based, celebrating collective efforts and achievements.
  • Career development opportunities: Organizations could offer different types of training programs, workshops, or seminars that will help their employees acquire new skills and knowledge relevant to their current role or future career aspirations. This can also help set your employees up for promotion and advancement.
  • Flexible work arrangements: Not too long ago, the corporate world realized that employees could do their work just as effectively from a remote location. Continuing to allow your employees to work remotely, whether on a regular or occasional basis, gives them flexibility and can contribute to improved work-life balance.

Implement and manage employee rewards

You’ve designed your employee rewards program and decided on what type of rewards and recognition you’re going to provide. Now it’s time to put it all into motion. Keep these steps in mind:

  • Communication and employee engagement:
  • Performance evaluation and feedback:
    • Incorporate performance metrics that are aligned with your organization’s goals, vision, and mission
    • Provide constructive feedback to your employees on their performance
    • Link performance evaluations to reward criteria
  • Monitor and adjust the rewards program:
    • Your organization and workforce continue to evolve and change, so regularly assess your program’s effectiveness and impact
    • Analyze employee feedback and make necessary adjustments
    • Stay adaptable to changes in organizational priorities and employee needs
  • Ensure sustainability and scalability:
    • Develop a rewards program that has long-term viability
    • Ensure that it is scalable and can accommodate organizational growth
    • Establish mechanisms for ongoing program sustainability and effectiveness


So what do you need to do to design an effective employee rewards program? Let’s recap:

  • Set clear objectives that are aligned with organizational goals
  • Identify key KPIs to measure success
  • Align rewards with company values, always fostering a positive culture
  • Involve employees in the design process for meaningful input

Then, when it comes time to implement and manage the program:

  • Communicate transparently and engage employees in the program
  • Integrate performance evaluation feedback so you can link recognition with goals
  • Regularly monitor and adjust the program for effectiveness
  • Be sure to build in sustainability and scalability for long-term impact

A well-designed employee rewards program has numerous benefits, contributing to both individual and organizational success. Benefits include:

  • Increased motivation
  • Enhanced job satisfaction
  • Improved employee engagement
  • Better morale
  • Retention and attraction of top talent
  • Increased productivity
  • Enhanced employee well-being

In other words, it’s a strategic investment that not only recognizes and motivates your employees but also contributes to a positive workplace culture and the overall success and sustainability of the organization.


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Gabe Scorgie

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