17 effective employee incentive programs to boost morale

Published

Oct 16, 2024

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A competitive salary is one good way to attract and retain top talent. But it’s not the only factor keeping your workforce engaged and productive. Employee incentive programs can also be a strong motivator; when thoughtfully designed, both cash-based and non-monetary incentives can help keep employees on top of their game and in your company for a long time.

In this article, we’ll cover a few key things employers should know:

What are incentives?
Why should incentive programs be part of your business strategy, no matter the size of your business?

We’ll also cover some employee incentive ideas you can implement in your business.

What are employee incentive programs?

Incentives are rewards employers give employees as recognition for outstanding results.

Gallup and Workhuman's study shows that employee recognition can improve engagement and retention. Their two-year research (2022-2024) confirmed that highly recognized employees are less likely to leave their jobs. Another Gallup report revealed that highly engaged employees can result in 23% greater profitability, highlighting the positive effects of incentives on both employees' performance and business growth.

11 common incentive examples

Incentives come in many shapes and sizes and can vary greatly from one company to the next, including both monetary and non-monetary rewards. Financial incentives are monetary rewards employees receive on top of their regular pay, like bonuses or profit-sharing. Non-monetary incentives can include travel, company swag, gifts cards, and more.

Some commonly offered incentives are:

Bonuses
Profit-sharing
Salary raises
Gift cards and vouchers
Travel vouchers and trips
Stock options or equity
Recognition awards
Extra paid time off
Career advancement opportunities, such as promotions
Company swag
Personalized gifts

Benefits of offering incentives for employees

There are many advantages to offering incentives to employees, such as:

Increased employee motivation

We work to make a living, but salary is not the only factor motivating employees to contribute to a company’s success. When employees know their performance can earn them monetary or non-monetary rewards on top of their base pay, they may be more likely to approach their work with greater enthusiasm and dedication.

Higher employee retention rates

Employee retention is critical for businesses. Turnover—and subsequent recruitment efforts to replace employees who have left—can slow down operations and disrupt team cohesion and the company's financial stability.

Well-thought-out incentive programs that align with employees' unique needs add a personal touch to workplace relationships, demonstrating employers' support for employees' professional development and well-being. One study shows that strong benefits reduce turnover by 26% and increase employee retention by 14%.

Enhanced employee engagement and productivity

The larger your organization, the more likely it becomes that employees can feel like just another cog in a machine—unless, that is, you make the effort to make them feel valued at work. Employers who show appreciation to employees fuel productivity within their teams. One of the reasons incentive programs effectively increase employee engagement is that they are an employer's way of telling employees they are a valuable part of the org.

Improved team collaboration

While many employee benefits are designed for individuals, you can use your incentive program to encourage employees to work together, stretching the boundaries of what your company can achieve.

Team incentives, like group outings, shared team-building experiences, or bonuses tied to meeting team goals, can increase teamwork, encouraging employees to mix and match their strengths to reach the target and enjoy the prize—together.

17 employee incentive program ideas

If you’re looking for employee incentive ideas, the list below can provide some inspiration to get you started in designing your program:

Financial incentives

Financial incentives are monetary benefits employees receive for outstanding performance or to reward them for taking specific actions. These can be regular or occasional perks.

1. Profit-sharing programs

Profit-sharing gives employees a portion of the company's profit, sometimes as a direct payment, but often as a contribution to their retirement accounts.

Profit-sharing programs can give employees a vested interest in the company’s growth and success—the more the company succeeds financially, the more employees stand to earn via a profit-sharing program. This gives employees a type of ownership stake in the business that can be extremely motivating and boost engagement and loyalty.

2. Commission programs

Commission is compensation employees earn on top of their base pay, typically for performing a service or selling a product. It is an incentive commonly offered to sales teams, where employees get paid a certain amount of commission per sale or when they meet predetermined revenue targets.

Commission-based incentives create a direct link between effort and reward—and between employees' individual goals and your organizational objectives. This provides motivation for employees to meet their goals to earn extra income, which can also improve employee engagement and boost productivity.

3. Spot bonuses

Spot bonuses are one-off rewards employees receive for a particular achievement. Employers can use spot bonuses to reward employees' outstanding performance, motivating them to keep up the excellent work.

Spot bonuses can vary in amounts and may only be given occasionally. Regardless, this incentive fosters a culture of appreciation, encouraging employees to excel in their roles, as they never know when their hard work might be seen and rewarded.

4. Stock options

Incentive stock options (ISO) are a form of equity compensation that allow employees to purchase company shares at a specific exercise price, and later exercise their options to become shareholders. Like other forms of equity compensation, employees can often purchase their options at a strike price that’s lower than the open market stock price.

Stock options can help boost employee retention, since employees often have to wait a certain amount of time for their options to “vest” before they can exercise them and purchase their shares. They’re also a good motivator—by becoming shareholders, employees become literal part owners of their company, which gives them a stake in its continued growth and success.

Wellness incentives

Wellness incentives can benefit employees across the organization, motivating them to establish and maintain healthy habits and routines and improve their quality of life.

5. Wellness programs

Wellness programs give employees the skills, knowledge, and tools to make healthier lifestyle choices. By providing wellness programs as an incentive, companies can help their teams combat burnout and achieve better work-life balance.

Wellness program incentives can include onsite health checks, healthy catered meals, and healthier workspaces, like ergonomic chairs and standing desks.

Employers can also offer rewards for achieving health goals such as quitting smoking or switching to healthier, more eco-friendly alternatives, like cycling or walking to work instead of driving.

6. Paid time off (PTO) rewards

In addition to annual paid vacation benefits, employers can offer additional paid time off as an incentive. Like wellness programs, these incentives can help employees achieve better work-life balance and avoid burnout.

Paid time off enables employees to manage their private responsibilities, enjoy hobbies, spend time with loved ones, take vacations, and rest—and employers should encourage their workforce to make use of their paid time off, since rest is a prerequisite for high performance. According to a Gartner survey, employee productivity increases by 26% when an organization provides proactive rest.

Team-building incentives

Team-building incentives promote collaboration, motivate employees to work together, improve communication, and build trust, ultimately enhancing team performance.

7. Team outings or retreats

Team outings are an excellent way to foster a sense of belonging and community among employees. These incentives allow employees to relax and get to know each other beyond the office atmosphere.

Team outings don’t need to be large-scale events—even a company-sponsored lunch can give your team a good chance to unwind and bond. But if time and budget allow, consider a trip to an industry conference or a weekend retreat.

8. Office perks

Office perks make your workspace more comfortable and enjoyable. They can include coffee, snacks, video and board games, access to gym facilities, or wellness rooms. Office perks can improve employee satisfaction, promote positive company culture, and even bolster your recruiting efforts.

9. Team-building experiences

Team-building experiences are group activities designed to enhance employee collaboration, communication, and trust. Informal settings like volunteering allow employees to bond around common interests and goals.

Shared experiences can strengthen workplace relationships, creating a more cohesive and productive work environment. In fact, employers and employees agree that fostering a sense of community is essential for business success.

Personal growth incentives

Professional growth incentives help employees advance their careers, which can make them strong motivators—especially for Millennials and Gen Z workers. According to a study from Workplace Intelligence, 74% of younger workers reported they were likely to leave their job within a year due to a lack of skills development opportunities, underscoring how valuable these types of incentives can be.

10. Career development opportunities

Career development opportunities as incentives can take a few different forms: Think company-sponsored courses or conferences as rewards for an employee’s hard work. Even a promotion could be considered a career development incentive.

Companies should consider career development incentives as a long-term investment in their human capital. After all, when employers support their employees' growth, they set their businesses up for long-lasting success.

11. Tuition reimbursement programs

Tuition reimbursement programs cover employees's education expenses, either partially or entirely. These incentives help employees gain new skills or build on existing ones so they can continue to excel and become even better prepared to succeed in their roles.

When employers reimburse their workforce’s tuition expenses, they remove some of the financial barriers to new and continuing educational opportunities. This can be a worthwhile investment in your employees, who can use their new skills and qualifications to benefit the business.

12. Mentorship programs

Mentorship programs pair experienced employees with new or less experienced hires, creating opportunities for skill-building, career development, and knowledge-sharing. These incentives benefit both mentors and mentees. Mentees get to learn and advance their careers under experienced guidance, while mentors sharpen their leadership skills and strengthen their team.

Fun and recognition-based incentives

Monetary incentives are often attractive, but don’t overlook the power of offering employees fun and recognition to reward their hard work.

13. Fun gifts

Gifts can be customized rewards that reflect employees' unique interests and personalities. Through these incentives, employers show appreciation for employees' commitment and achievements and can build better relationships with their employees.

14. Choice of projects

Choice of project allows employees to choose projects they want to work on based on their expertise and interest. Doing so can help foster open communication and build trust between managers and employees.

15. Public recognition

Most people appreciate occasional praise. Public recognition at work can build up employees’ self-esteem and make them feel like a valued, respected part of the organization.

Travel and experience incentives

If you are wondering how to incentivize employees, travel and experience-based incentives might be the answer.

16. Travel incentives

Travel incentives can be offered in many forms: hotel vouchers, flight discounts, travel allowances, etc. Group travel incentives may include trips around the country or overseas.

Offering glamorous travel incentives, such as a fully paid vacation for your company’s top performers, can enhance engagement and foster a culture of appreciation and recognition.

17. Experience-based rewards

Experience-based rewards offer high-achieving employees memorable experiences rather than monetary compensation. They can take various forms, including event tickets, cooking or dance classes, or adventure/sports activities like water skiing or skydiving. Experience-based incentives can help boost employee morale, even motivating employees to work harder to receive these types of rewards.

Employee incentive programs for small business

An effective incentive plan requires research, planning, and an adequate budget. For small businesses in particular, it can be difficult to strike the balance between finding the right incentives to motivate your employees while keeping the cost (and other resources) in check.

But low-cost incentives can still be motivation, encouraging employees to contribute to the company's growth. Here are some ideas small businesses can implement on a budget.

1. Milestone-based rewards

Milestone-based rewards are bonuses, extra time off, or personalized gifts given to employees for achieving team or individual goals or on a special occasion, such as the company's anniversary or at the end of a major project.

Milestone-based rewards recognize employees’ commitment to the company over time, and their contributions to reaching specific targets or desired outcomes. They can be very effective at motivating employees to stay engaged or encouraging them to reach the next goal or milestone.

2. Employee of the Month program

An Employee of the Month program celebrates top performers each month. The company recognizes an employee who has shown exceptional work ethic, teamwork, and devotion during the previous month. Some companies celebrate with ceremonies, while others offer rewards like bonuses or gifts.

Employee of the Month incentives motivate everyone in the company to work harder to earn recognition and rewards. While affordable, this type of incentive can still boost employee productivity and engagement.

3. Team-building events

Team-building events, like escape rooms, getting-to-know-you activities, or group challenges, can improve employee relationships. Providing these types of incentives can help small businesses create a supportive culture, with teamwork and open communication as driving forces of productivity.

4. Personalized thank-you notes from leadership

Personalized thank-you notes from leadership are simple and affordable—yet effective—gestures that show management's appreciation for employees' hard work. Thank you notes can be sent via email, but a handwritten note gives an even more personal touch.

Regardless of how you choose to send it, employees are likely to appreciate the effort and may even reciprocate with greater engagement and commitment to reaching business goals.

How to build an employee incentive plan

Building incentive programs takes time and effort. But the investment is well worth it due to the positive effect incentive programs can have on organizational growth. Here’s how to get started building your own employee incentive plan:

1. Identify your business goals

Define the purpose of your employee incentive plan. Is it to increase employee productivity, boost sales, or improve employee retention? Setting goals will help you choose what incentives to offer so that they support your overall strategy.

2. Understand your employees' needs and preferences

Understanding your team's wants and needs is essential for creating incentive programs. Some are more for financial compensation, while others prefer career development opportunities or more time off.

Employee surveys or one-on-one conversations can help you collect data to build the most effective incentive programs to motivate and engage your team.

3. Choose a variety of incentives

Offering a variety of incentives ensures everyone's needs are met and valued. For instance, bonuses and gift cards are popular monetary incentives, while public recognition or extra time off can be highly appreciated non-monetary perks. Having a variety of offerings makes your incentive program more inclusive and appealing to diverse teams.

4. Align incentives with company values

Your incentive program should reflect your company’s core values. Identify what you want to achieve with the incentive program (e.g., increased innovation, customer satisfaction, teamwork), and then align your incentives with your values. For example, if sustainability is a value, offer incentives for ideas that reduce the company’s environmental impact.

5. Set clear criteria and objectives for earning rewards

Establish criteria for earning incentives. Clear guidelines prevent confusion, help employees choose the incentives that best suit their needs, and make your incentive program transparent and fair for everyone..

6. Implement, communicate, and gather feedback

Inform employees once incentive programs are live. Explain what incentives are and how employees can earn them. Give employees time to explore and use incentives. Then, ask for feedback to adjust and optimize your program.

7. Maintain transparency and fairness

Ensure fair incentive application across the organization by giving clear instructions for how employees can earn incentives, and being transparent about how reward decisions are made. Transparency builds trust and helps avoid perceptions of favoritism, which can also help motivate employees to take part in incentive programs.

8. Balance short-term and long-term incentives

Consider combining short-term incentives, like spot bonuses, and long-term incentives, like profit-sharing, to give employees a more diverse array of choices and keep them more engaged in your program over time.

Employee incentive programs: Common mistakes

Not every company gets their incentive program right on the first try. Here are some common mistakes businesses make when creating employee incentive plans:

1. Creating a one-size-fits-all incentive program

People are motivated by different things—some are motivated by money while others are driven by other forces, both intrinsic and extrinsic. A one-size-fits-all incentive program may be faster and easier to design and implement, but it will likely be less effective, since it won’t suit the needs of your entire workforce. Stay mindful of that when deciding on incentive types.

2. Overlooking the importance of clear communication

Clear communication is critical when implementing an incentive program. Employees need to know the what and why behind incentives, and should be encouraged to share feedback on the program so it can be adjusted to suit their wants and needs.

3. Focusing solely on monetary rewards

Financial incentives can be effective. But they aren’t the only effective incentive options you can choose for your program.Focusing only on monetary rewards and building your incentive program around them is likely to limit participation, leaving employees who would prefer non-monetary incentives feeling left out.

Boost employee engagement with Rippling

Before you can give out employee incentives, you need to be able to track employee performance. With Rippling Performance Management, you can unite your entire team around goals that are ownable, trackable, and measurable.

All of Rippling’s apps are built on a single source of truth for employee data. That empowers you to assign everyone the right goals based on any attribute, from department to team—or even custom Supergroups you create. When everyone knows the goals they’re responsible for, you can hold your entire org accountable. Surface goal progress in performance reviews, and give incentives as rewards for meeting important objectives.

Everything you need to develop a retain talent

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Employee incentive program FAQs

How often should employee incentives be offered?

Employers should offer incentives regularly—both short term, like Employee of the Month rewards, and long-term incentives, like bonuses tied to annual performance reviews.

What are the most effective employee incentives?

Incentive Research Foundation's findings suggest that compensation, recognition, growth opportunities, and flexible working arrangements, including remote work opportunities, are vital for employee engagement and retention.

How do you measure the success of an employee incentive program?

Asking for feedback or conducting surveys can help companies determine employee satisfaction with incentive programs. Metrics like participation, retention rates, engagement, and productivity are also good indicators of success.

Schedule a demo with Rippling today