Effective Types of Incentives to Engage Your Employees

“Motivation is the art of getting people to do what you want them to do because they want to do it”. ~Dwight D. Eisenhower. 

Whether it’s a bonus for hitting sales goals or recognition for a job well done, incentives create a clear link between effort and reward. People like knowing that if they put in extra effort, there’s something in it for them. It’s human nature! 

The right incentives can boost team performance by a whopping 44%! Turns out, motivating your team isn’t just about dangling a carrot; it’s about offering the right carrot.

Incentives come in all shapes and sizes, financial bonuses, public shoutouts, or even opportunities to level up their skills. But here’s the catch: not every incentive will hit the mark for every employee.

The research breaks it down: when people first get incentives for completing tasks, performance jumps by 15%. Throw in a goal, and that number skyrockets to 27%. Want your team to work smarter, not harder? Incentives boost that by 26%, too. 

So, how do you build an Incentive program that fires up your whole team? Let’s break it down!

Types of Incentives & How You Can Implement Them!

First things first, there are many types of incentives, and each serves a different purpose. Here’s a quick overview of some of the most common ones.

Bonuses

 A classic incentive. Who doesn’t love a little extra cash for a job well done?

Tip for implementation: Keep an eye out for exceptional effort and reward it on the spot. Empower managers to award these bonuses without too much red tape, so they stay spontaneous. Consider offering a range of bonuses (monetary, gift cards, extra time off) to keep the rewards exciting and personalized.

Co-partnerships

Give employees a sense of ownership in the business. They’re not just working for a paycheck, they’re working for the success of the company.

Commissions

Often used in sales roles, commissions reward employees based on the revenue they generate.

Effective Non-Financial Incentives

Sometimes, it’s not about the money. Recognition, additional responsibilities, or even a better office space can be highly motivating.

Employee Stock Options

These long-term rewards align employees’ goals with the company’s growth, making them invested in the business’s success.

Extra Allowances

These might include housing, travel, or meal allowances—small perks that add up.

Goal-Based Incentives

Hit the target, earn the reward. These are great for motivating employees to focus on key objectives.

Performance-Based Incentives

Tied to specific metrics, this type of incentive rewards employees who consistently perform above average.

Tip for implementation: Define specific, measurable goals from the start. Whether it’s increasing sales, improving customer satisfaction, or cutting down response time, ensure the targets are clear and achievable. Use tools like dashboards or progress reports to track real-time performance so employees can see how close they are to hitting their targets.

Profit Shares

If the company does well, the employees do well. Simple, but effective.

Tip for implementation: Be transparent about the company’s financial goals and performance. Set a baseline for profit sharing and communicate how the team’s efforts directly affect profitability. Make sure the formula is easy to understand so employees know how their work ties into the company’s success and their personal reward.

Recognition-Based Incentives

Public acknowledgment of hard work goes a long way. This could be through awards, shout-outs at meetings, or even just a personalized thank-you note.

Tip for implementation: Create a consistent system for recognizing achievements. Set up a weekly or monthly meeting where you publicly acknowledge top performers. Use formal (like ‘Employee of the Month’) and informal methods (a simple thank-you email or team shout-out). Keep it timely—recognizing someone right after a big win makes a bigger impact.

Referral Programs

 Encourage employees to bring in new talent, rewarding them for referrals that lead to successful hires.

Retirement and Fringe Benefits

Think beyond salary with retirement plans, health benefits, or company perks like gym memberships.

Salary Raises

The most direct way to show appreciation—more money for continued hard work.

Skill-Based Incentives

Reward employees for gaining new skills or certifications that help the business.

Tip for implementation: Offer personalized growth opportunities that align with both the company’s needs and the employee’s career goals. Provide a budget for courses, certifications, or even mentorship programs. Make it easy for employees to access these resources and ensure they feel supported in their growth journey.

Team-Based Incentives

Celebrate collective wins, fostering collaboration and a sense of unity.

Tip for implementation: Clearly define what success looks like for the team. Set shared goals and regularly update everyone on progress. Make sure the reward is structured in a way that benefits everyone on the team, but also allows for individual accountability. This prevents any feelings of imbalance, where some might feel they’re doing more than others.

Wage Incentives

Increase hourly wages based on performance or tenure.

How to Create an Effective Incentive Program That Works for All Employees

Not every incentive will work for every employee. That’s why an effective program needs to be flexible and varied. Here’s how you can build a program that hits all the right notes:‍

1. Know Your Team:

Take the time to understand what motivates each employee. Some might thrive on financial rewards, while others might prefer public recognition or career growth opportunities.

2. Mix It Up

 Use a combination of monetary and non-monetary incentives to appeal to different personalities and needs.

3. Set Clear Goals

Make sure your incentives are tied to measurable and achievable goals. This gives employees something tangible to aim for.

4. Be Transparent

 Communicate the program clearly so everyone knows how they can earn rewards.

5. Stay Fair

Ensure the program is fair and achievable for all employees, not just the top performers.

Sales is one of those careers where motivation is key, without it, your team can lose steam fast. Read this interesting blog on Top 20 Sales Incentive Ideas to Stoke Your Sales Team's Motivation

Solving for Incentives via Automation!

It’s the end of the quarter, and you’re knee-deep in spreadsheets, trying to figure out who earned what bonuses. You’re cross-referencing sales numbers, checking targets, and trying not to lose your mind over broken formulas. That’s not just frustrating, it’s a huge waste of time. the more manual the process, the more room there is for errors. One wrong keystroke and the whole thing goes sideways.

Now imagine if all of that was handled automatically. Automation tools don’t just calculate incentives, they track performance in real time, apply the right formulas, and ensure everyone gets paid correctly without you lifting a finger.

Plus, automating incentives saves serious time and money. The hours you (or your team) spend wrangling spreadsheets could be spent doing something more valuable, like strategizing how to boost those performance numbers even higher.

Why Make the Switch?

With automation, you're not only saving time, but you’re also avoiding costly errors, reducing admin work, and ensuring that your incentive program actually motivates employees, because they trust it’ll be accurate. It’s a win for everyone involved.

So, ditch the spreadsheet madness and let technology do the heavy lifting, book Kennect’s free demo and get to see Incentive automation in action!

Extrinsic vs. Intrinsic Incentives

Monetary vs. Non-Monetary Incentives

When it comes to motivating your team, there are two big players in the incentive game: monetary and non-monetary incentives. Both have their strengths, but how you use them can make a big difference in the impact they have.

Now, let’s talk about non-monetary incentives, things like recognition, professional development opportunities, flexible work hours, or even a simple thank you. 

On the other hand, monetary rewards tend to be a short-term fix. Sure, your team might get a quick boost of motivation when there’s money on the line, but after a while, the excitement wears off, and it can start to feel like they’re just chasing numbers.

Non-Monetary Incentives: The Underappreciated Powerhouse

Now, let’s talk about non-monetary incentives, things like recognition, professional development opportunities, flexible work hours, or even a simple thank you. These might not immediately put extra cash in someone’s pocket, but they tap into something deeper: the feeling of being valued and appreciated.

For example, a shout-out during a team meeting can make someone feel like their hard work really matters. Offering skill development or mentorship shows employees you’re invested in their future, not just their output. And guess what? This type of motivation tends to last longer.

Which One Is Better?

Honestly, it’s not about choosing one over the other, it’s about balance. Use monetary incentives to drive immediate results or reward high-stakes achievements. 

So, the trick is mixing both. Give people financial rewards when they hit those big goals, but also make sure they feel valued on a daily basis with things that money can’t buy, like appreciation and opportunities for growth. That’s how you build a winning incentive strategy.

How do incentives affect employee performance?

When incentives align with clear goals and show that effort pays off, they don’t just increase employee performance, they create a more motivated, loyal, and engaged workforce.

#1 The Motivation Boost

Incentives give employees a reason to strive for more. When employees know there’s a tangible or meaningful reward waiting at the end of their hard work, they’re more likely to stay focused and push themselves to perform better.

#2 Clear Goals Lead to Clear Action

One of the key ways incentives affect performance is by providing clarity. If you know exactly what you need to achieve to get that bonus or reward, you’re more likely to stay on track. Incentives help employees prioritize their tasks and work toward specific, measurable goals. It’s like having a finish line in sight—you know where you need to go, and the incentive is what pulls you forward.

#3 Improving Engagement and Retention

Incentives don’t just boost performance—they also improve engagement. When employees feel that their hard work is being recognized and rewarded, they’re more likely to stay engaged in their work. And let’s not forget loyalty. People want to stick around in a company that appreciates their effort. Offering meaningful incentives can be a great way to reduce turnover and keep your top performers around for the long haul.

Wrapping It Up

Incentives are more than just nice-to-haves, they’re key drivers of motivation and performance. As the old saying goes, “You get what you reward.” By offering the right mix of incentives, you’re not only encouraging better results but also fostering a culture of recognition and growth.

As the management expert Ken Blanchard once said, “People who feel good about themselves produce good results.” When you make sure your team feels valued, they’ll consistently bring their best selves to the table.

Use the right kind of incentives for the right people, and watch the difference unfold!