Designing Incentive Plans for Employees to Retain Talent

Employee engagement and satisfaction are the pillars of excellent productivity. Today, only a small percentage of employers readily invest time and money in recognition programs that work. Meanwhile, with the right incentive plan, it's possible to drive productivity and increase employee retention.

An effective employee incentive program doesn't have to be complex or expensive. Transparency, consistency, and objectiveness can go a long way toward engaging employees and turning your company into an employer of choice.

Let's take a closer look at designing an effective employee incentive program.

Why Employee Incentive Plans Work

An employee incentive plan is a part of an employee recognition program. Such programs aim to motivate employees, make them feel invested in their work, and ensure higher retention rates. In fact, strong employee incentive plans reduce turnover by 31%.

An employee incentive plan works by offering specific rewards in exchange for achievements and accomplishments. Sometimes perks can come without reason. 

Their goal is to help employees appreciate their company. This boosts performance, engagement, and productivity.

The following are key reasons why employee incentive plans are so effective.

People Enjoy Recognition

All people enjoy being recognized. Recognition confirms a person's value and reinforces their sense of self-worth. Recognition and appreciation confirm that an employee is doing something meaningful.

Receiving praise and recognition stimulates the release of dopamine. This hormone is responsible for pride and pleasure. At the same time, the brain remembers the good feeling and understands which actions to repeat to experience it again.

Recognition Drives Motivation

Recognizing an employee's efforts and achievements makes them feel appreciated and valued. This drives employee motivation. If the incentive program is well-planned, it encourages employees to strive for its benefits.

Meanwhile, it shows other employees how enjoyable it is to feel appreciated. This encourages the rest of your team to work harder to receive the same rewards.

Incentives Boost Engagement  

Engagement is the most important element of success and productivity. According to Gallup, 85% of employees aren't actively engaged at work. 

As a result, productivity is low. By offering incentives, you are encouraging engagement and boosting employee performance.

By working on an employee recognition program, you get a unique chance to outdo the competition struggling with low engagement rates.

Appreciation Improves Employee Morale

Employee morale is an essential part of the workplace environment. When the morale is high, the entire team works harder and achieves goals faster. Low morale leads to more sick days, serious mistakes, and higher turnover.

Recognition efforts enhance employee morale by making people feel appreciated. This, in turn, stimulates positive feelings. Implementing appreciation into your company culture can significantly improve employee productivity.  

How to Develop an Employee Incentive Program That Works

A careful approach to workplace incentive programs can help you reap maximum benefits and achieve the highest ROI. Always keep in mind that money isn't a deciding factor. Many recognition programs aren't expensive since they focus on non-monetary incentives.

Keeping that in mind, here’s how to develop an efficient program.

Define the Budget

Your budget will dictate the types of incentives you can work with. Monetary rewards aren't always necessary. In fact, according to a survey, 65% of people are happy with non-monetary incentives.

However, you would still need to invest in recognition tools and certain tangible rewards. Figure out how much money your organization can allocate for a recognition program. The average budget is between 1% and 2% of the payroll.

Once the benefits of a robust incentive plan kick in and you see its significant ROI, you may decide to rethink the budget.

Set Goals

Goals for implementing an incentive plan can differ. Identifying the current goals can help you structure the program in the most effective way possible. Recognition goals depend on the company's business objectives and can include the following:

• Better performance
• Higher engagement
• Higher retention
• Better workplace morale
• Improved company culture

As goals change over time, you can adjust the incentive program to suit them better.

Choose a Platform

The key to a successful recognition program is the right tools. Since the incentive program has many elements, keeping track of them without software can be complicated and time-consuming.

With a comprehensive employee recognition platform, you can automate the process, streamline peer-to-peer recognition, gather valuable data for analytics, and more. Recognition tools can ensure the required transparency and consistency.

Study Your Employees

Offering exactly the same incentives to your entire team may be consistent but counterproductive. For example:

• Giving baseball tickets to someone who loves soccer (or doesn’t love sports) could hurt morale instead of boosting it.
• Offering public recognition to someone uncomfortable being praised in front of the entire office could kill motivation. 

That's why it's important to clearly understand what your employees prefer and which rewards can ensure the best effect.

Select Incentives

Next, you can make a list of incentives. Common examples include:

• Medical insurance discounts
• Tickets to games and events
• Childcare vouchers
• Gym memberships
• Wellness and appreciation programs
• An employee of the month recognition (on office walls, social media, company newsletter)
• Public achievement announcements

When brainstorming employee incentive ideas, consider adding as many intangible options as possible. Studies show that 85% of employees would like to hear more "thank you's" in day-to-day conversations with the management and team members.  

If the budget allows, you can also throw monetary rewards into the mix. 

Introduce the Program

Workplace incentives have the highest efficiency when employees understand exactly what to expect. Make an effort to introduce the program and its elements to your workforce. Employees should know what they can do to receive specific rewards.

Consider Unstructured Appreciation

Unstructured employee recognition that involves a spontaneous "thank you" is a great addition to your structured incentive plan. Encourage employees and management to offer spontaneous tokens of appreciation. They can boost employee satisfaction and morale without costing your company a penny.

In fact, gratitude is a great way to improve company culture and the workplace. Remember, giving appreciation stimulates dopamine production, making a person feel happy.

Incentive Plans for Employees: Best Practices

When you implement your incentive program, you can consider top existing practices. With time, you can develop unique approaches that work best for your employees. Here’s what to focus on.

Be Specific About Your Incentives

Don't just give out vague "employee of the week" awards when you recognize an employee. Make sure to mention exactly what you are rewarding them for.

Encourage Peer-to-Peer Recognition

Peer-to-peer recognition is an important element that boosts employee morale and drives engagement. Give employees the right tools to say "thank you" and show appreciation even when they work remotely.

Comprehensive employee recognition platforms can help you implement peer-to-peer recognition practices while generating valuable data for analysis.

Make Recognition Easy

Managers and employees are busy people. If they have to think about recognition all the time, they could be missing out on revenue-generating tasks.

Make it easy to give recognition and offer incentives by implementing a clear program, introducing the right tools, and keeping the plan transparent.

Set Clear Parameters

Your entire workforce should know exactly how the incentive plan works. Meanwhile, your management should clearly understand what should be rewarded. This keeps subjectivity out of the process while ensuring consistency.

Types of Employee Incentives

When designing your employee incentive plan, you need to consider different incentives. Implementing as many types as possible can help create a multifaceted and efficient program.

Monetary Incentives

Monetary incentives include tangible rewards such as:

• Profit sharing
• Project bonuses
• Stock options
• Scheduled bonuses (Christmas, end-of-project, annual)

The size of these bonuses depends on your budget. For smaller companies, profit sharing may be an excellent option.

Recognition Incentives

Recognition incentives are usually non-tangible. They can include:

• Verbal or written "thank you's"
• Praise in a company newsletter
• Appreciation on the company's website
• Peer-to-peer recognition

These incentives can be both structured and unstructured. However, keeping track of spontaneous recognition can be hard. This could lead to someone feeling left out.

That's why it may make sense to use a recognition program to account for these incentives and analyze their frequency and effect.

Experiential Incentives

Experiential incentives have the longest-lasting effect. In fact, millennials prefer to invest in experiences rather than tangible things. Examples of experiential rewards include:

• Tickets to events
• Vacations
• Concerts
• Travels
• Dining in a special restaurant

While effective, experiential rewards demand a certain understanding of what employees want or need. That's why it's important to study employee preferences.

Design an Effective Employee Incentive Plan Today

A successful employee incentive plan can drive productivity, improve engagement, boost employee morale, and positively affect your company's bottom line.

Designing this type of plan doesn't have to be complex or expensive. If you focus on clarity and consistency while using the right tools, you can start reaping benefits in the nearest future.

Are you ready to up your employee engagement, satisfaction, and retention? Contact us for a demo request and learn how Bucketlist can help your organization drive productivity.