Reward Management: Strategies for Success

Reward management is the introduction of policies and strategies that rewards every employee within the business fairly and consistently across the board. Rewarding employees for outstanding work makes them feel valued and can prove to be a powerful motivational tool that boosts productivity. The most successful reward management programmes provide employees with opportunities to elevate themselves and allow businesses to recognise good workers.

Rewards can come in many forms, with the most effective being those which support your business’s overall strategy, and purpose, culture and performance, and employee requirements. If you are thinking about implementing a reward management scheme, you should give serious consideration as to how you are going to manage it. What rewards will your employees appreciate – will these rewards benefit your employees financially, add to their lifestyle or improve their lives? Will the rewards benefit your company culture and boost its performance? Are you recognising and responding to changes in reward expectations of employees?

A compelling reward management programme promotes a healthy work-life balance that allows your employees to feel at and perform at their best. It can also contribute to a thriving business culture and foster a compassionate environment and caring community. Whilst pay and benefits are significant, research has identified that non-financial rewards can be just as incentivising for employees.

 

The law on pay and reward

 

A key aspect of reward management is being able to determine who should be rewarded. How do you go about choosing those who have contributed to a successful project or group goal?

In all pay and reward policies, all employers within the UK must meet strict legal requirements, such as the National Minimum Wage and equal pay, as well as reporting on the chief executive pay ratio and gender pay gap.

The National Minimum Wage applies to all employees and workers over 16 years of age. And although not a legal requirement, many businesses have signed up to the voluntary Living Wage, which is a higher minimum rate of pay for eligible workers.

Equal pay revolves around sex discrimination and gives the right for men and women to be paid the same for the same, or equivalent, work. Despite this legislation, there still remains huge gender pay differences. This is reflected in the requirement for larger organisations to annually report the size of their gender pay gap.

UK employment legislation also demands businesses provide certain workplace benefits, such as paid leave or pension schemes.

Additionally, businesses must pay their employees in accordance with any contractual agreements. A contract between you and your employee is legally binding and therefore its terms must be upheld by both sides.

 

What is reward management?

 

Reward management is a strategic approach to incentivising your workforce to improve performance, engagement and morale:

 

• It rewards employees according to a business’s values and that they are prepared, or are able, to fund
• It rewards employees for the value they create and contributes to employee wellbeing
• Rewards the things that convey the right message about what is important in terms of behaviours and outcomes within a business
• It helps to contribute to a strong, positive company culture
• It strengthens your EVP (employee value proposition) – your EVP is what sets you apart from other employers (your competitors) and helps you attract top talent to your organisation
• It can help motivate employees and confirm their commitment to the business and engagement within it
• Help to retain top talented individuals to your business
• It increases productivity
• It helps you to build a strong reputation – this can be a key way to engage employees, contribute to a positive reputation and have a significant influence on your clients.

 

 

What do we mean by ‘reward’?

 

The easiest way to separate rewards is to split them into two categories: intrinsic and extrinsic. Intrinsic awards are encompassed by things such as awards, praise, and public recognition, which give a sense of achievement but are not monetised. Whilst extrinsic rewards are physically given and can involve value such as a bonus or paid holiday, for example.

Within that, they can be further divided into three sub-categories: benefits, perks, and rewards.

 

Benefits

 

Benefits tend to be built into the employee’s salary; these include pensions that they can claim after reaching a certain age. Newer elements such as paid leave to adopt a pet are being introduced by some organisations, as are non-financial rewards including flexible working. Recognition through an “employee of the month” award, and opportunities for personal and career development are all good examples of other types of rewards.

 

Perks

 

Traditionally perks are seen as little “treats” that can make working life more enjoyable. These range from donut and coffee hump day to dress-down Fridays. Previously thought of as “fringe” perks, they are now gaining in popularity in businesses and starting to count for more with employees.

Many employees also wish to improve their lot in life, and those companies who are switched on to such things are starting to recognise this. Forward thinking companies are now beginning to include making time allowances to learn new languages, join fitness classes, or cycle-to-work programmes. It probably hasn’t escaped your notice that these types of perks are mutually beneficial to you as an employer. Happier, healthier employees are likely to contribute more to an organisation’s culture by living better lives both inside and outside their working environment.

 

Rewards

 

Rewards give you a chance to promote productivity in such a way that meshes with your business’s values and culture. Instead of providing financial rewards or perhaps an additional day’s holiday for excellent work, think about offering other incentives that advance teamwork, or consideration for others within the workplace, as well as those incentives that encourage quantity and quality of work.

 

Creating an employee reward scheme

 

First, you should start by asking yourself two questions: where do we want our reward practices to be in a few years’ time? and how do we intend to get there? By being able to determine what your reward process will look like several years down the line, it also shows you the way in which the vision will be realised. A reward strategy defines what your business wants to achieve in the longer term, to its development and how it will implement reward policies. It also underpins the basis upon which your employees will be valued and rewarded.

Your business objectives should also be measured by long, medium, and short term goals and be able to respond rapidly to a changing and fluctuating market.

Other aspects to consider:

 

• Multiple reward systems – if you select a single method of reward, it may not work well for all employees. Different methods appeal to different people. This is particularly apparent at a generational level, and it also limits the opportunities for employees to achieve. Multiple reward systems can create additional levels of achievement and recognition and give your employees a reason to try to reach their full potential, whatever their age. Reward systems that deliver a mix of financial and non-financial provisions with pay and other benefits are known as “total reward” programmes.
• Design advice – an important consideration when creating a competitive reward scheme is to understand how other reward schemes within your industry look and how they work. This can be particularly important when attracting and recruiting top talent and making sure they join your business rather than your that of your competitors. That said, it is very difficult to obtain and compile reward data from other businesses, unless they openly agree to share it. However, there are a number of companies that provide reward scheme design services which can be tailored to your industry’s needs.

 

 

Components of a reward management system

 

A well-structured reward management system involves several key components, each designed to ensure that employee rewards align with organisational objectives and contribute to overall success:

 

Set Reward Objectives and Criteria

Begin by defining clear reward objectives and criteria that align with the organisation’s goals. Goal setting ensures that the reward system motivates employees effectively and supports business priorities.

 

Review Current Reward Policies and Practices

Conduct a thorough review of existing reward policies and practices to identify key issues and problems that need to be addressed. This step helps pinpoint areas for improvement and ensures that rewards are both competitive and equitable.

 

Measure Reward Effectiveness

Decide what aspects of the reward system should be measured and how data will be gathered. Specify clear measures based on the organisation’s reward goals and success criteria. Collect and analyse this data to assess how well the current system meets its objectives.

 

Evaluate Reward Outcomes

Use the data collected to evaluate the outcomes of the reward system. This step provides a structured process for ongoing evaluation and ensures that rewards remain effective and relevant.

 

Develop Future Reward Directions and Practices

Based on the evaluation, establish a clear understanding of what needs to be achieved and why. This insight forms the foundation for future reviews and adjustments to the reward management system.

 

Implement New or Improved Reward Schemes

Once objectives and practices have been refined, implement new or improved reward management schemes. Ensure that changes are communicated effectively and align with the organisation’s strategic goals.

 

Employee reward ideas

 

Implementing creative and meaningful employee rewards can significantly boost morale, enhance workplace satisfaction, and foster a sense of appreciation among staff. Here are some effective ideas for rewarding employees.

 

Saying “Thank You”

Although not part of a formal reward scheme, the power of a simple thank you should never be underestimated. A heartfelt thank you can mean a great deal to an employee, creating a sense of respect and recognition that many workplaces lack. Managers should never hesitate to acknowledge and thank hard-working employees when they have done a good job.

 

Celebrating Success

Highlighting successes that benefit the company or align with its mission statement can encourage others to strive for similar achievements, promoting a strong organisational ethos.

 

Employee of the Month

Introducing an Employee of the Month award, especially if the winner is voted for by colleagues, can be an effective way to recognise and celebrate individual achievements. This public acknowledgment can motivate others and create a culture of recognition.

 

Company Awards

Hosting an annual or bi-annual awards evening based on employee votes can be a fun and engaging way to celebrate achievements. Recognising employees’ work through such events promotes happiness and productivity, as employees feel valued by both employers and peers.

 

Long Service Awards

Recognising loyalty and dedication through long service awards can show employees that their commitment to the business is appreciated. The reward does not need to be costly; something thoughtful, like a meal at a nice restaurant, can leave a lasting impression while requiring minimal effort from organisers.

 

Evaluating reward effectiveness

 

Unfortunately, there is no silver bullet set of metrics that every business can apply to improve its reward management practices. Evaluating reward effectiveness typically involves researching and gathering information and evidence on your existing reward policies. Together with collating information on industry trends, external reward practices, and concepts. By using this information, you will be able to make an assessment on the effectiveness and identify any reward issues before deciding on a course of action.

 

Need assistance?

 

Our HR specialists advise employers on all aspects of employee engagement and management, including development and implementation of reward schemes. For guidance on reviewing and enhancing your organisation’s approach to employee rewards, speak to our experts today.

 

Reward management FAQs

 

What is reward management?

Reward management is the process of designing and implementing strategies to reward employees for their performance, contributions, and loyalty, ensuring motivation and alignment with business goals.

 

Why is reward management important?

Effective reward management boosts employee morale, enhances productivity, improves retention, and ensures fairness in recognising contributions to the organisation.

 

What are the types of rewards in a reward management system?

Rewards can be financial, such as bonuses and salary increases, or non-financial, like recognition, flexible working options, and professional development opportunities.

 

How can employers measure the effectiveness of their reward system?

Employers can assess effectiveness by gathering feedback, monitoring employee engagement, analysing retention rates, and comparing productivity before and after implementing reward schemes.

 

What should be considered when designing a reward system?

Employers should consider the organisation’s goals, employee needs, fairness, and competitiveness within the industry to ensure the system motivates and retains talent effectively.

 

How can rewards promote teamwork?

Rewards such as team-based bonuses, collaborative recognition programmes, and group achievements encourage collaboration and strengthen team dynamics.

 

Are non-financial rewards effective?

Non-financial rewards like recognition, flexible hours, or training opportunities can have a significant positive impact on employee satisfaction and motivation.

 

How often should a reward system be reviewed?

A reward system should be reviewed regularly, such as annually or bi-annually, to ensure it remains aligned with organisational goals and employee expectations.

 

Can small businesses implement reward management systems?

Small businesses can create cost-effective reward systems by focusing on personalised recognition, flexible benefits, and fostering a positive work environment.

 

What role does communication play in reward management?

Clear communication ensures employees understand how rewards are determined, increasing transparency and trust in the system. This promotes greater engagement and motivation.

 

Glossary

 

Term	Definition
Reward Management	The strategic process of designing and implementing systems to reward employees for their contributions and performance.
Financial Rewards	Monetary incentives such as bonuses, salary increases, commissions, or profit-sharing schemes.
Non-Financial Rewards	Recognition or benefits that do not involve monetary compensation, such as flexible working, training, or awards.
Recognition	Acknowledging an employee’s achievements, efforts, or contributions, often through verbal praise or formal awards.
Retention	The ability of an organisation to keep its employees over time by maintaining satisfaction and motivation.
Engagement	The level of commitment and enthusiasm employees have towards their work and the organisation.
Performance-Based Rewards	Incentives tied to individual, team, or organisational achievements, often used to motivate high performance.
Team-Based Rewards	Rewards given to a group of employees for achieving collective goals or completing a project successfully.
Reward Policy	The formal guidelines outlining how an organisation rewards employees, ensuring fairness and consistency.
Incentives	Motivational rewards or benefits offered to encourage employees to achieve specific goals.
Job Satisfaction	The sense of fulfilment or happiness employees feel in their roles, often influenced by rewards and recognition.
Competitiveness	How attractive an organisation’s reward system is compared to others in the industry, affecting its ability to attract talent.
Retention Rate	The percentage of employees who remain with an organisation over a specified period.
Transparency	Clarity in how rewards are determined and distributed, ensuring fairness and trust in the process.
Cost-Effective Rewards	Affordable yet impactful incentives, often used by small businesses to motivate employees without excessive spending.
Fairness	Ensuring rewards are distributed equitably based on performance, contribution, or other justifiable criteria.
Customisation	Tailoring rewards to meet the individual needs and preferences of employees, enhancing their effectiveness.
Annual Review	A periodic evaluation of the reward management system to ensure alignment with organisational goals and employee expectations.