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How Do I Create an Employee Incentive Program?

It’s common for workplaces to suffer from a lack of employee engagement from time to time. It could be an overall decrease in organizational productivity, employees experiencing burnout after a particularly difficult stretch, or ineffective management. Whatever the reason for disengagement, it should be a cause of concern for every business. This is because continuously low morale can significantly impact your bottom line. According to a report by Gallup on the State of the American Workplace, when workers remain unhappy, it can end up costing companies up to almost $550 billion every year.

So, you might ask – what is the best way to keep your employee engagement levels up? The answer to this question lies in employee incentive programs for small businesses. Incentives act as a tangible acknowledgment of great work, and they also provide the employees with something to strive for. When employees are given incentives, they feel greater motivation to do their best.

If you want to know how to implement an employee appreciation program in your organization, you’ve come to the right place. In this article, we’ll take you through the step-by-step process of creating an effective employee incentive program that is sure to increase engagement levels across the organization.

What is an employee appreciation program?

Employee incentive programs leverage human behavior to motivate and encourage workers. To put it in simple terms, an employee appreciation program is a system of providing your employees with some useful incentives, privileges, and rewards that motivates them to meet the company goals. These incentives can either be in the form of monetary or non-monetary rewards. The goal is the same – to encourage the employees to do their best to increase their job performance.

An effective incentive program, consisting of some great financial perks and cash bonuses can help in driving employee productivity and success. Even non-monetary incentives like casual dress days, vacation days, and flexible schedules can have a huge impact on employee morale. A good employee incentive program should offer a combination of both monetary and non-monetary incentives.

How are employee incentives and employee benefits different?

Many people end up confusing employee benefits with employee incentives. The truth is that these are two different concepts. Incentives are optional perks that companies can provide their employees to increase their job performance or reward them for a job well done. Employee benefits, on the other hand, are mandated unpaid additions that are offered besides an employee’s salary. Common employee benefits consist of –

  • Healthcare plans
  • Retirement plans
  • Sick leaves
  • Disability leaves
  • Paid time off
  • Unemployment compensation

Common monetary and non-monetary expenses consist of –

  • Bonuses in the form of commissions
  • Vacation time (beyond the normal paid time off)
  • Profit sharing
  • Merit pay
  • Stock options
  • Concert tickets
  • Charitable donations
  • Luxury gifts, such as laptops or designer clothing
  • Vacation packages (including accommodations and airfare)
  • Gift cards
  • Vehicle or vehicle allowance

How to create effective employee incentive programs?

Now that you have a rough idea about employee incentive programs, let’s look at the process of creating an employee appreciation program. It’s important to note here that the incentive program should be designed after taking into account the needs of your workplace. It should ideally be a program that displays a company’s personal interest in the well-being of its employees. It should also spur your employees to achieve more.

Here is the step-by-step process of creating an employee incentive program –

Step 1. Start by defining clear goals for the incentive program

Before you start creating the employee incentive program, define the goals you want to achieve with the program. For instance, if your business depends on marketing work, you should design an employee incentive program that encourages employees to come up with more creative ideas.

Step 2. Try to understand what makes your employees happier

This is another step you need to complete before creating the incentive program for your employees. Something that seems like an attractive incentive to you might not be appealing to the other team members. This is because different people in your organization might have different motivators. It would be a good idea to conduct a survey to identify the best incentives to motivate different departments. Even after you implement the incentive programs, it would be a good idea to conduct periodic surveys to understand what is the best way to keep your employees motivated.

Step 3. Determine your budget for the incentives

To ensure that you create effective and sustainable incentive programs, you would first have to determine your budget for the same. It’s always best to include the incentives you can afford. Make sure that the incentives you plan to offer are aligned with your profits. Start small and determine its feasibility as you build upward. This way you can be certain that the incentives won’t lead to financial difficulties later on.

Step 4. Get a team of the right people together to create the program

To create an effective and sustainable employee appreciation program, get a solid team together consisting of people from the HR, finance, and management departments. This team, by collaborating together, will be able to come up with the best plan for the employee incentive programs. The management team members will be able to develop the objectives, while the HR team members would be best for assessing the market conditions. The finance team members, on the other hand, will be able to determine the feasibility of the program.

Step 5. Implement the employee appreciation/incentive program

After completing all of the above-mentioned steps, you can go ahead and implement the incentive program. To implement the incentive program, first define the conditions of the program, including the eligibility, performance assessment process, and objectives. Thereafter, you can design the payout process of the program (for monetary incentives), including the minimum threshold, calculation, and timing for payout.

Wrapping up

With the tips provided in this article, you’ll be able to effectively develop employee incentive programs that will motivate your employees to perform their best at their jobs. But before implementing these programs, make sure that you are customizing them to meet the needs of your employees. The ideal employee appreciation program will target your employees’ professional aspirations, emotional well-being, and work-life balance.