Most leaders would agree—keeping your team motivated and productive is essential, no matter your company’s size or industry. But the real question is: how do you actually make that happen?

One effective way is through employee incentives. Research from the Incentive Research Foundation shows that well-designed incentive programs can increase productivity by 22% and boost performance by 44%.

What is the definition of incentives?

Incentives are rewards or motivations that encourage someone to take a specific action or avoid doing something. They act as external motivators, like the promise of a reward, pushing individuals to take certain steps. The main goal of incentives is to encourage the behaviors and attitudes needed to achieve a desired outcome.

For example, sales commissions are a popular type of incentive pay—your sales team earns a percentage of each sale they make.

While incentive pay is typically financial, it doesn’t always have to be. You can also offer non-financial perks, like giving out gifts, hosting team dinners, or even offering employees the chance to buy shares in your company.

Incentive pay is a great way to motivate your sales team when they hit their targets or to retain key senior leaders. You could also extend it to all employees to boost productivity and morale.

Just make sure the criteria for earning these incentives are clear, so everyone knows what’s expected and how they can qualify.

Employee incentives vs employee benefits: What’s the difference for your team? 

Employee Incentives are rewards you offer based on your team’s performance or specific achievements. These are designed to drive short-term results and encourage employees to go above and beyond. Think of it as a way to recognize great work when it happens. 

Examples include cash bonuses, performance-based rewards, gift cards, or even shout-outs for a job well done. Incentives are meant to spark immediate action and keep productivity high.

Employee Benefits, on the other hand, are part of the overall compensation package you provide to all your employees, regardless of their performance. Benefits are long-term and consistent, offering security and support to improve your team’s overall well-being. 

These might include health insurance, retirement plans, paid time off, or flexible working arrangements. Benefits show your employees that you’re invested in their long-term success and work-life balance.

In a nutshell, incentives help you recognize and reward specific achievements, pushing your team to hit short-term goals, while benefits create a foundation for long-term satisfaction and loyalty. Both are essential, but knowing when to use each can make a big difference in building a motivated, happy team.

What are the most common examples of incentives?

Here are 10 common examples of incentives:

1. Performance bonuses
2. Commissions
3. Profit sharing
4. Stock options
5. Salary increases
6. Employee recognition programs
7. Flexible work hours
8. Paid time off (PTO)
9. Career development opportunities
10. Wellness programs (e.g., gym memberships)

Key benefits of implementing employee incentive programs

Employers set up incentive programs for several key reasons:

1. Recognizing high performance: Incentives are a great way to reward employees who go above and beyond or hit important milestones. Whether it’s a bonus or a special reward, it makes employees feel valued for their hard work.
2. Boosting productivity: The promise of a reward—like recognition or even a voucher—keeps employees focused and motivated to use their time productively.
3. Encouraging teamwork: Incentives that promote collaboration can motivate employees to work better together, whether on specific projects or across departments.
4. Lifting morale: Recognizing hard work helps create a positive workplace culture. It makes employees feel appreciated and strengthens the sense of community within the team.
5. Attracting and keeping top talent: Offering rewards and benefits can make your company more appealing to top talent and help you retain your best employees.

In short, a well-thought-out incentive program shows employees that their efforts are valued and motivates them to keep delivering great results.

14 employee incentive programs to improve engagement

Here are 14 employee incentive program ideas to help boost engagement in your workplace:

1. Performance-based Bonuses

A performance-based bonus is extra pay on top of an employee’s regular salary, given as a reward for hitting specific targets. The criteria are usually explained upfront so everyone knows what’s expected, and performance reviews are used to decide who qualifies for the bonus.

A common question employers ask is how to determine the right bonus amount. Typically, bonuses are tiered based on performance. For most, annual bonuses range between 0.5% to 7.5% of the employee’s salary, but in some cases, they can go up to 15%, depending on the employee’s experience and how well they performed throughout the year.

2. Employee of the Month Awards

An Employee of the Month award is a simple but effective way to recognize team members who go the extra mile. A Glassdoor survey found that 53% of employees would stay longer at a company if they felt appreciated.

Here’s when you might want to give out an Employee of the Month award:

• When they’ve shown real dedication to the company’s goals.
• When someone has done something outstanding in their role.
• When they’ve gone out of their way to support others.
• When they’ve made a positive change, big or small, in the organisation.

3. Spot Award

A spot award is a spontaneous way to recognize employees for outstanding performance or behavior as soon as it happens. The reward can be either monetary or non-monetary, and it’s a great way to show appreciation and keep employees engaged by acknowledging their efforts in real time.

Everyone, whether they’re new or have been around for years, likes to feel that their work matters. When people know their contributions are valued, they’re more motivated and engaged. In fact, one of the top reasons employees leave their jobs is because they don’t feel recognized enough.

4. Flexible Working Hours

Employee burnout often comes from ongoing exhaustion and dissatisfaction with work. According to a Future Forum Pulse survey, 53% of employees who were unhappy with the flexibility in their work experienced burnout.

One way to address burnout is by offering flexible working hours. This means letting employees choose when they work instead of sticking to the traditional 9-to-5 schedule. How this looks can vary from company to company.

Some businesses ask employees to be available during certain “core hours” but let them decide the rest of their schedule. Others focus less on specific hours and ‘more on the results employees deliver.

5. Extra Paid Time Off (PTO)

According to research by the Society for Human Resource Management, more employees today are opting for time off over extra cash or benefits, especially with leaner teams and longer working hours. It’s no surprise, considering the value of downtime in our busy work lives.

Interestingly, giving employees more time off doesn’t negatively affect productivity—in fact, it boosts it! A study by Xylo Inc. revealed that 93% of employees feel more productive after taking a break, and 98% believe vacations help them perform better at work.

6. Wellness Programs

Millennials and Gen Z aren’t just looking for competitive salaries—they’re looking for companies that genuinely care about their well-being. When candidates see wellness programs like gym access, mental health support, and health screenings as part of the benefits package, it sends a strong message: you value their health, both physically and mentally.

But it’s not just about recruitment. Once onboarded, employees who feel supported in their well-being tend to stay longer. Wellness perks lead to greater job satisfaction and, ultimately, better retention. It’s simple: when people feel good, they perform better and stick around longer.

Why not make wellness a part of your workplace culture and see how it positively impacts your team’s happiness and loyalty?

7. Referral Bonuses

Referral bonuses make a lot of sense for businesses, and here’s why.

First, they boost employee retention—data shows 45% of referred employees stay at the company for over four years, while only 25% of non-referral hires stick around that long. So, encouraging your team to refer candidates can actually improve your long-term workforce stability.

Second, it helps with cost efficiency. Typically, the average cost per hire can reach up to $4,700 (according to SHRM), but referral programs can cut this down to less than $1,000. That’s a huge savings, especially when you consider the additional expenses like leaving a role vacant for too long.

8. Team-based Rewards

A team-based incentive plan works similarly to commission-based sales roles, but with a focus on group performance. Instead of individual targets, the entire team’s success determines the payout. Essentially, the better the team performs, the bigger the rewards for everyone involved.

This system encourages employees to support one another. Top performers often take the lead, helping those who may be struggling by offering tips, advice, and guidance. The idea is that no one wants to let their team down, and this collective accountability creates a sense of shared responsibility and motivation to reach common goals.

9. Learning & Development Grants

Learning and Development (L&D) grants are a great way to motivate your team while supporting their growth. In fact, LinkedIn’s Workforce Learning Report shows that 94% of employees would stick around longer if a company invested in their development.

L&D grants also boost engagement by giving employees access to courses and certifications that help them grow in their roles. According to Gallup, companies with highly engaged employees see a 21% increase in profitability. When you offer L&D grants, you’re showing your team that you’re invested in their future, which builds loyalty and helps retain talent.

10. Profit-sharing

Profit sharing is a straightforward way for companies to reward employees by giving them a portion of the company’s profits. It can be paid directly or added to their salary and bonuses, depending on how the employee’s pay is structured and how much the company earns. The company can decide how much to contribute each year based on its performance.

According to a Gallup poll, 40% of employees would love to have profit sharing as part of their compensation. It’s a great way to show employees they’re valued and tied to the company’s success, making it a win-win for everyone.

11. Office Makeover

Giving your office a fresh look is a great way to boost productivity and show your team you care about their workspace. A refreshed environment can lift morale and make the office feel more comfortable and inviting. Plus, it’s a chance to make practical changes that really help your team in their day-to-day tasks.

Sometimes, small upgrades make all the difference. For example, adding blackout or electric blinds can create privacy in key areas, helping your team focus better. These simple updates can go a long way in making the office more productive and efficient.

12. Lunch with Leadership

Lunch with leadership is a simple yet effective way to show your team they’re valued, and there’s data to back it up. According to Harvard Business Review, employees who feel connected to their leaders are 32% more engaged at work. A casual lunch with senior leaders gives your team a chance to share ideas, ask questions, and have an informal chat, which can really help boost morale.

These lunch sessions also build stronger bonds between staff and management, making everyone feel more involved and appreciated. It helps your team get a better understanding of the company’s direction, making them feel like they’re part of something bigger.

13. Peer Recognition Programs

Peer recognition taps into the idea that employees feel more valued when their hard work is noticed not just by management but by their colleagues as well. According to a Gallup poll, employees who feel recognized are 2.7 times more likely to be highly engaged at work.

In Peer Recognition Programs, employees can give shout-outs or nominate their teammates for doing great work, and these recognitions can be tied to tangible rewards like vouchers, extra PTO, or even a lunch with leadership.

14. Travel Incentives

Travel incentives are a great way to tie employee rewards to memorable experiences, making them a highly effective form of employee incentive. Unlike cash bonuses or gift cards, travel incentives provide employees with unique experiences, giving them something exciting to look forward to, which can greatly boost motivation and morale.

Research shows that 72% of employees feel more motivated by experiential rewards, like travel, than monetary incentives. Offering travel incentives, whether it’s a weekend getaway, a trip abroad, or even a local staycation, shows that the company values work-life balance and wants to reward hard work with something more personal and exciting.

5 best practices for employee incentive programs

Here are 5 simple, effective practices for employee incentive programs to keep your team engaged and motivated:

1. Align Rewards with Company Goals

Keep your incentives tied to business objectives. If you’re aiming to boost sales, customer satisfaction, or team productivity, make sure your rewards encourage employees to focus on those outcomes. When your team knows their efforts directly impact the business, it makes the rewards feel even more valuable.

2. Personalize the Incentives

Everyone is motivated differently—some by cash, others by time off or public recognition. Offering a range of rewards gives employees options that resonate with them personally, boosting overall engagement.

3. Keep It Clear and Fair

Transparency is key. Make sure everyone knows how the program works, what the goals are, and what they need to do to earn rewards. Clear guidelines and fair implementation make the program more attractive and build trust across the team.

4. Promote Teamwork

Introduce team-based rewards to encourage collaboration. When everyone’s working toward a common goal, it builds stronger connections and motivates top performers to help others shine too.

5. Regularly Review and Improve

Check in on the program’s effectiveness regularly. Gather feedback from your team to ensure the rewards are still motivating and relevant. Be open to tweaking things based on what’s working—and what isn’t.

What are common incentive mistakes?

Here are descriptive common mistakes companies make with incentive programs:

1. Assuming One-size-fits-all Incentives Work

Not all employees are driven by the same rewards. While cash bonuses might appeal to some, others may value non-monetary incentives like additional vacation days, personal recognition, or professional development opportunities. Failing to tailor incentives to different employees’ preferences can lead to disengagement from those who don’t feel motivated by the standard rewards being offered.

2. Setting Vague or Unclear Objectives

An incentive program needs clear and measurable criteria for success. If employees don’t understand exactly how they can earn incentives, it creates confusion and diminishes motivation. For example, if the goals are too broad, like “improving performance,” without specific benchmarks, employees might feel unsure about what’s expected of them and may not try as hard to meet targets.

3. Making the Process Too Complicated

A common mistake is over-engineering the program with complicated rules or multiple steps to qualify for the reward. When employees feel like they need to jump through hoops or constantly track their progress in a complex system, it can reduce their desire to participate. Simple, transparent programs with easy-to-understand metrics are much more effective in keeping people motivated and engaged.

4. Encouraging the Wrong Behaviors

Offering incentives that drive the wrong kind of behavior can be counterproductive. For instance, incentivizing only sales volume might push employees to close deals at any cost, potentially harming relationships with clients. In these cases, the short-term boost in numbers may result in long-term harm to the business, especially if quality is sacrificed or ethical shortcuts are taken to meet targets.

5. Overlooking the Importance of Teamwork

Focusing solely on individual performance incentives can inadvertently create a competitive environment that discourages collaboration. Employees may become more concerned with outperforming their colleagues rather than working together towards common goals. This can lead to internal friction, lower morale, and a decrease in overall team productivity.

6. Ignoring Regular Feedback and Program Reviews

Once an incentive program is launched, many companies fail to review and adapt it based on employee feedback or changing circumstances. If an incentive scheme becomes outdated, irrelevant, or less motivating over time, it won’t be as effective. Regularly soliciting employee feedback, analyzing the program’s performance, and making necessary adjustments ensures the incentives stay aligned with both business objectives and employee desires.

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