Employee Incentive Schemes and How to Choose the Right One

People love recognition. I know I do, and I’m pretty sure you’re on the same page! It’s one of those basic human needs that we all crave in our lives. We all want to feel appreciated for the effort we put in, don’t we? Your employees are no different; they have the same feelings.

There are many ways to show appreciation, but incentives are a concrete way of demonstrating that recognition. A well-thought-out incentive scheme can be the difference between an employee who happily sticks around for years and one who updates their LinkedIn profile the moment something better comes along.

Companies with highly engaged employees outperform their competitors by 202%. Wild, right? It turns out that keeping your team happy and engaged is directly tied to your bottom line!

So, what exactly are these employee incentive schemes? And why do they matter so much? Let’s plunge in and learn how they can turn your workplace into a productivity powerhouse. 

What Are Employee Incentive Schemes?

Employee incentive schemes are rewards or benefits employers provide to motivate their teams and recognize achievements. These can range from monetary incentives like bonuses or profit-sharing plans to non-monetary perks such as flexible working hours, career development opportunities, or wellness programs.

Employee Incentive schemes, whether monetary or not, send a clear message: We see you. We appreciate you. That’s powerful!

Importance of Employee Incentive Schemes in Engagement and Retention

Job satisfaction increases for 72% of employees when they receive recognition. Wow!

Incentive schemes aren’t just a “nice-to-have”, they’re crucial for keeping employees happy and loyal. When employees know their efforts are being recognized, it creates a sense of purpose. And when people feel valued, they’re far less likely to seek greener pastures elsewhere.

Employee incentive schemes are the “mile markers” of motivation, giving employees something tangible (or sometimes intangible but equally valuable) to look forward to. A well-designed employee incentive scheme keeps people engaged, helps with retention, and makes the whole workplace experience more rewarding, literally and figuratively.

How Incentive Schemes Influence Company Culture and Performance 

Human nature is pretty straightforward: you do something nice for someone, and when they return the favor, you're all in, ready to do it again. We’re wired to reciprocate kindness, creating a cycle of positivity that just keeps rolling. 

Incentives work the same way. When employees put in the effort for you, and you recognize and reward that hard work, it encourages them to keep raising the bar. Suddenly, your company culture also shifts into high gear! It's like a chain reaction, one act of recognition leads to another.

Incentives also set the tone for your company’s values. Do you value teamwork? Individual achievement? Innovation? The way you design your incentive programs will reflect and reinforce those priorities, guiding employee behavior and driving performance.

Types of Employee Incentive Schemes

Monetary Incentive Schemes

1. Bonuses and Performance-Based Rewards

Who doesn't love a good bonus? Tie it to performance metrics like sales targets, and you’ll see motivation skyrocket.

2. Profit-Sharing Plans

When the company wins, employees win too. This type of scheme ties rewards directly to the company's success, making everyone feel like they’ve got skin in the game.

3. Commission Programs

 Common in sales, commission programs reward employees based on the revenue they bring in. It’s a great way to directly link effort with earnings.

4. Employee Stock Ownership Plans (ESOP)

Give employees a literal piece of the company. They become shareholders, and the more the company grows, the more their investments do too.

5. Referral Bonuses

Your team is full of talent, so why not encourage them to recruit more? Offering a referral bonus for bringing in great new hires can expand your talent pool while rewarding your existing team.

Non-Monetary Incentive Schemes

1. Recognition and Awards Programs

Sometimes, all it takes is a shout-out at a company meeting or a certificate to show someone’s efforts haven’t gone unnoticed.

2. Career Development Opportunities

Offering additional training, mentorship, or even leadership programs can be a huge incentive for ambitious employees looking to grow.

3. Flexibility and Work-Life Balance

Flextime, remote work, and extra vacation days might not be cash, but they’re just as valuable to employees who value their work-life balance. A survey by FlexJobs found that 80% of workers would turn down a job that didn’t offer flexible work options. Yep, it's that important!

4. Health and Wellness Programs

Investing in your employees' well-being (Gym memberships, mental health days, or even office yoga) goes a long way in keeping them happy and productive.

5. Employee Wellbeing Initiatives

Whether it’s access to therapy, nutrition counseling, or a meditation room, offering holistic wellness options shows you care about employees beyond their job performance.

Examples of Successful Employee Incentive Schemes

Some of the most successful companies have cracked the code on incentives. Google is famous for its over-the-top perks like free meals, fitness centers, and even massage rooms. But more importantly, they give employees autonomy and space to innovate, which is a powerful non-monetary incentive in itself. On the other hand, Salesforce does an excellent job with recognition, offering a “Trailblazer” program where top performers are publicly celebrated and given special perks.

Best Practices for Implementing Incentive Schemes

When you’re ready to roll out your scheme, keep these best practices in mind:

#1 Establish Clear Goals

set those goals! Clear, measurable objectives give your incentive scheme direction and purpose.

#2 Define Quantifiable Metrics

How will you know if your goals are being met? Establishing quantifiable metrics is essential. This could be anything from sales figures to project completion rates.

#3 Customize for Roles

Not all employees are the same, and neither should their incentives be. Customize your incentive schemes based on the roles and responsibilities of your team members.

4. Promote Transparency

Transparency is key! Make sure everyone understands how the incentive scheme works, including the criteria for earning rewards and how payouts are determined.

#5 Diversify Rewards

Variety is the spice of life, and that applies to incentives too! Offering a mix of rewards, like bonuses, extra time off, or recognition awards—can keep the motivation high.

#6 Keep It Straightforward

While it’s tempting to create elaborate schemes, simplicity is often more effective. Keep your incentive program straightforward and easy to understand.

#7 Ensure Prompt Payouts

Last but definitely not least, don’t delay those rewards! Timely payouts help reinforce positive behavior and keep the momentum going. 

Wondering whether to go for team incentives or individual incentives? Luckily, this blog will be your guiding light:  Team Incentives vs Individual Incentives: A Comparison

‍

Avoid Common Pitfalls 

• Steer Clear of Unrealistic Goals

Setting goals is crucial, but setting unrealistic goals? That’s a fast track to frustration. If the bar is set too high, employees may feel demotivated before they even begin.

• Avoid Lack of Transparency

Nothing kills motivation faster than confusion. If employees don’t understand how the incentive system works or feel like the rules are vague, you’ll lose their trust.

• Prevent Overcomplication

Sometimes, less really is more. If your incentive program is too complex, it can feel like a puzzle nobody asked for.

• Lack of Communication

Even the best incentive scheme can fall flat without good communication. You’ve got to keep employees in the loop.

Key Performance Indicators (KPIs) to Track Success of Incentive Schemes

So, you’ve rolled out an employee incentive scheme, but how do you know if it’s actually paying off? Tracking the right metrics can give you a clear picture of whether your incentives are driving results, or if you need to tweak things a bit.

1. Revenue Growth: This one’s the biggie, has your revenue gone up since implementing the incentive scheme? If sales are climbing, it’s a good sign your team is more motivated to close deals or boost output.

2. Productivity Rates: Are employees getting more done in less time? If you see a boost in productivity rates, that’s a solid indicator that your incentive scheme is driving efficiency.

3. Employee Retention: Happy employees stick around. If your incentive program is working, you should see a dip in turnover rates.

4. Sales Performance: For teams with a direct impact on revenue, like sales, tracking performance is key. Are your sales reps hitting higher targets? Are they closing more deals?

5. Time to Goal Achievement: How quickly are your employees reaching their goals? If targets are being met faster than before, it’s a sign that your incentive scheme is pushing the right buttons. 

Automate your Incentive Schemes

Now, here’s where things can get a little tricky, calculating, tracking payouts, and managing all the data that comes with running an incentive program.

Manually handling all those numbers takes up hours of your HR or admin team’s time, and let’s be honest, mistakes can still slip through the cracks. You might miss something, and then, boom! the whole incentive scheme falls apart.

But here’s the good news: incentive compensation software takes all that heavy lifting off your plate. It automates everything. From tracking data to calculating payouts, every task tied to your incentive program gets done automatically, saving time and reducing the chances of errors. And if you’re wondering how to get started, Kennect’s all-in-one ICM (Incentive Compensation Management) tool has got you covered. It handles everything from A to Z, and you can see it in action by booking a free demo.

Wrapping It Up!

Employee incentive schemes aren’t just about tossing a reward in front of your team like some dangling carrot, it’s so much more than that!

They can benefit your business in ways you might not expect. First, Understand Your Employees’ Needs (not everyone wants the same thing). Then, Balance Short-Term vs. Long-Term Rewards (a quick win is great, but you also want to keep them around for the long haul). Incorporate Feedback Loops (adjust based on what’s working and what’s not), and don’t forget about Inclusivity and Accessibility (everyone should feel like they’re part of the game).

And yes, all of that adds up to better results and higher revenue.

And trust me, it’s worth getting this right. Do you know the number one reason employees leave their jobs? Lack of recognition. In fact, 66% of employees say they’d leave if they didn’t feel appreciated. That's huge!

So, if you’ve been sitting on the fence about rolling out an incentive scheme, now’s the time to jump in! Get it going, make it meaningful, You’ve got this!

‍