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Updated Oct 24, 2023

How To Develop Employee Incentive Programs That Boost Morale and Productivity

Ross Mudrick
Ross Mudrick, Business Operations Insider and Senior Writer

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Hiring competent employees is the first step in forming a productive and successful team. In the face of workplace stress, economic downturns, and declining employee engagement, though, small business owners and entrepreneurs are on the hunt for strategies to maintain employee satisfaction and commitment. Employee incentive programs might be the solution.

Employee incentive programs aren’t new, but their importance is escalating in today’s fiercely competitive labor market. This article will delve into the role of employee incentive programs and how they can foster organizational unity, boost morale and stimulate productivity.

Understanding employee incentive programs

Employee incentive programs reward employees or teams for reaching certain milestones or meeting specific goals. You can create an employee incentive program around any type of target you want your employees to strive for, including:

  • Individual performance benchmarks
  • Team-based projects
  • Project goals
  • Consistent high-quality work

The goal is to motivate workers, and employee incentive programs can use a variety of rewards to achieve this. While cash bonuses, including holiday bonuses, are the most common forms of employee incentives, monetary rewards alone often fall short of adequately motivating employees. In a struggling economy, it may also not be feasible to provide pay raises and cash bonuses. Fortunately, there are other workplace incentives that employees may find desirable, and you can use these to build an appealing employee incentive program.

FYIDid you know

Workplace incentives can boost company morale and decrease turnover, but incentive programs must be detailed and available to everyone.

Identifying the workplace incentives employees seek

The best way to determine which workplace incentives your employees actually want is to ask them directly. Think about running employee surveys to understand their preferred rewards and the incentives that would motivate them the most.

Frame your survey to uncover the incentives that would make employees feel more appreciated. To give you an idea of the responses you can expect, these were the top six incentive offers from a 2022 survey by the Incentive Research Foundation:

  1. Cash
  2. Gift cards
  3. Gifts
  4. Points toward a larger reward
  5. Individual travel
  6. Non-travel experiences

Remember: Employee incentive preferences can greatly differ based on company culture and individual perceptions, so make sure your plan is grounded in your own workplace culture and your employees’ needs. Think about what would meaningfully improve their work experience or their personal life outside work, and incorporate it into your employee incentive program.

How to present workplace incentives to employees

Implementing employee incentive programs is about recognizing and appreciating employees who are performing well, not conducting a competition. When providing and awarding incentives, consider these tips:

  • Give employees the option to choose their incentives. For the incentives to serve their intended purpose, they should be versatile enough to allow employees to make their own choices. This might include selecting from a range of enticing incentives, such as restaurant gift certificates, concert tickets or weekend getaways.
  • Let employees personalize their rewards. When employees can make their reward their own, they’ll feel more connected to and motivated by it. For example, let your employees choose a restaurant, concert, or experience that aligns with their interests.
  • Exercise caution with gifts as incentives. It can be challenging to pick a gift that would motivate a diverse team. Include specific questions in your employee survey about preferred gifts or gift cards, or opt for flexible rewards like Visa gift cards.
Did You Know?Did you know

While team building is a laudable business goal, not everyone wants to be rewarded as part of a team. According to a Genesis Analytics survey, 85 percent of employees prefer individual incentives to group incentives.

Planning an employee incentive program

Organizations must meticulously plan employee incentive programs to prevent the arbitrary distribution of rewards. Here are some best practices for planning an incentive program:

  • Identify the purpose of the incentive program. Pin down the specific behaviors or achievements you want to reward with the program. This includes outlining when and how often you will distribute incentives to employees or departments.
  • Decide on the specific incentives to offer. You need to detail the particular elements of your incentive program. The incentives should be above and beyond the usual organization-wide benefits, like health insurance, free parking, paid leave policies, and traditional bonuses. Incentives should also surpass creative company-wide perks, like gym memberships and wellness programs.
  • Clearly explain the incentive program to employees. To ensure the program works as intended, inform your employees about the program and how they can earn the rewards on offer. While not everyone will receive a reward, everyone should have the opportunity to earn one.

Benefits of employee incentive programs

Employee incentive programs provide a myriad of interconnected benefits to both employees and organizations, including a happier work environment, more engaged and loyal employees, and improved employee retention.

  • Employee incentive programs enhance productivity. These programs motivate workers with performance-based rewards, leading to increased productivity.
  • Employee incentive programs help employees feel valued. Recognition of excellent work significantly boosts performance and engagement. Incentive programs, when provided as a token of appreciation for commendable work, can greatly enhance an employee’s sense of fulfillment and loyalty.
  • Incentive programs can encourage teamwork. Offering incentives to a team can enhance the team members’ sense of unity and their productivity. Plus, any form of recognition in the workplace is bound to improve morale.
  • Employee incentive programs boost employee happiness. These programs can increase employee happiness, and happy employees tend to be more creative and productive. They are also less likely to quit.
  • Employee incentive programs aid in employee retention. In the current labor market, attracting and retaining top talent requires innovation. Employees are more inclined to move to roles with better pay, benefits, and company culture. Employee incentive programs can provide the spark needed to retain employees.
  • Employee incentive programs can help businesses save money. Content, engaged employees are less likely to quit, reducing hiring costs, which can be substantial.
Did You Know?Did you know

Fostering an improved work-life balance, communicating transparently, and offering cool job perks are other ways to keep employees happy and fulfilled.

Existing workplace culture and employee incentive programs

Incentive programs can effectively enhance employee morale and retention. However, no amount of gift cards or concert tickets can offset a toxic work environment, lack of meaningful work, or lack of basic benefits. A positive company culture includes benefits and perks available to all, such as professional development opportunities, mentorship programs, and a flexible workplace. An effective incentive program can build upon this positive environment, leading to increased engagement.

If your workplace culture is stymied by in-fighting, high turnover, and lack of team cohesion, you should focus on repairing these elements first. Otherwise, you’ll just be funding a workplace incentive program that’s unlikely to make up for the drawbacks of your company culture.


If you want to improve your existing company culture, check out our guides to creating an inclusive company culture and hiring employees as cultural fits.

Are employee incentive programs the boost you need?

Recognition through appreciation, praise, and employee incentive programs can significantly contribute to a healthy work environment and engaged employees. In the current uncertain business landscape, offering tangible incentives to employees can bolster a company’s culture, retention rate, and bottom line. Crafting an effective employee incentive program can help you stand out from other workplaces and give employees another reason to stick around, but you need to develop them with your employees’ real needs in mind. 

Ross Mudrick
Ross Mudrick, Business Operations Insider and Senior Writer
Ross Mudrick has more than 10 years of experience counseling organizations on fundraising, strategic communications and operations development. Over the course of his career, his consultative services have helped organizations obtain grants from the U.S. State Department, W.K. Kellogg Foundation, Carnegie Corporation of New York and many others. Past clients include the New York City Economic Development Corporation and Mudrick is well-versed in crafting budget proposals, business cases, press releases and more documentation. Recently, his work has expanded to recommending the best business software for nonprofits and other enterprises. Mudrick holds a masters in public administration from NYU, where he studied adaptable organizations and systems management.
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