The importance of bonuses and

rewards to employees
Introduction
Organizations usually reward its workers to keep them happy and to increase their productivity.
Rewards and bonuses have been there for a long time and still have not lost their importance as
employee recognition programs. Most workers feel their hard work is acknowledged when they are
rewarded for it.

Broadly, more than half of all employees regularly receive one or the other kind of incentives for
boosting productivity and in turn increasing profits for the company. Economic incentives are only
one part of the reward structure. Most companies also follow up with non-cash incentives like giving
away coveted merchandise, arranging vacation package for the entire family and throwing lavish
parties at elite locations.

Incentives Programs
Incentives can be anything from cash to gift to time off to something else a worker values. Bonuses
are awarded for improving profit of the company and are usually linked to performance. Rewards
are usually not related to anything but given off to keep the workforce happy.

Companies give incentives to encourage certain types of behavior and it helps both the employer as
well as the employee. For example, giving incentive to:

 Report to work consistently on time

 Make use of leaves only when required
 Use fewer resources to complete a given task
 Deliver predictable and quality output
 Suggest feasible methods for improving productivity
 Meet or exceed sales quota
 Generate new clients or customers and grow target market
 Collect receivables on time by being firm and persistent
 Improve service and company reputation by adhering to set processes
 Handle irate clients and customers and turn them happy
 Work as a team and cooperate with everybody

However, there are other kinds of incentives that can in fact reduce morale of employees or stop
bringing out the best in them. Examples include:

 Incentives for holiday weekends, anniversaries and birthdays

 Allowing project members to use unused project resources to distribute among themselves
 Favoring workers who take up more work than they can handle and spend all their time
working and considering such workers for promotion
  Basing bonuses or rewards on the position and experience of the personnel rather than
basing it on their performance and role in the success
 Crediting the superiors and rewarding them disproportionately for their team’s work
 Sharing bonuses with other departments when there has been no significant contribution
from them or pocketing a part of the bonus by all superiors.

Companies should move towards offering bonuses and rewards that are strictly linked to a worker’s
performance as an individual and as a team member and must focus on their area of function and
responsibility. Additional incentives should be ad hoc or periodic and for a specific purpose not
covered by the regular incentive programs. Further, incentives need not always be cash-based.

However, incentives that are not linked to performance or productivity should be completely
eliminatedin a gradual manner. They are ineffective, have a significant cost to the company and
result in dissatisfaction among the workforce.

Sources
 http://recognition-rewards.com/importance-of-employee-rewards/
 http://www.morebusiness.com/running_your_business/profitability/tip10.brc
 http://www.biz-development.com/HumanResources/3.5.Employee-Rewards.htm