The Role of Rewards and Incentives in HRM

A workplace’s productivity depends upon the employees working in it. Employee engagement and morale can increase productivity and lead the company towards growth. Therefore, human resource management (HRM) gives certain incentives and rewards to employees.

Today’s workplaces are competitive and the challenge to acquire talented employees is greater than ever. So, to get better employees and reduce employee turnover, companies need to be creative while rewinding or giving incentives to employees. 

Here, we will talk about rewards and incentives in HRM

The Role of Rewards and Incentives in HRM

What are Incentives and Rewards?

Incentives are the perks given to employees by management. It can either be monetary or non-monetary. Either way, employees receive incentives according to their performance and achievements in the workplace.

Rewards are tokens of gratitude given to the employees. Sometimes rewards are considered as incentives as well. However, rewards often come as non-monetary perks. HRM rewards employees to achieve personal goals or improve the quality of work.

Both incentives and rewards play important roles in improving relationships between employees and HRM. It builds trust in employees and inspires them to give their best for the organization. 

Difference Between Incentives and Rewards

As mentioned earlier, rewards are a form of incentive. Non-monetary incentives are mostly considered as rewards.

Performance bonuses, commissions, bonuses and raises, professional development scopes are considered as employee incentives. Here employees get monetary benefits according to their performance. Incentives can motivate employees and remove insecurities from their minds.

Rewards can be a great way to acknowledge the work of an employee. It encourages them to work better and get engaged with the office culture. Branded merchandise, better devices, flexible schedules are some examples of employee rewards.

In a nutshell, rewards are given to employees for achieving personal goals, while incentives are reserved for greater achievement.

Examples of Employee Incentives and Rewards

Employee behavior has shifted a lot in past years. Now employees want to achieve everything, from competitive workplaces, job security, career enhancement options to better work-life balance. Good employee recognition programs like incentives and rewards can help employees achieve all their desired factors.

Here are a few options for employee incentives and rewards that can work exceptionally well.

Incentive Examples

Performance Bonuses

Performance bonus is one of the most common incentives provided by organizations. When employees show exceptional performance in their overall work, they qualify for this bonus. Here the company offers compensation beyond usual wages. 

Most organizations give this bonus annually or bi-annually. Some companies also distribute performance bonuses after performance appraisal and analysis projects conducted by employees.


Start-ups and small companies are the ones who generally practice profit-sharing. These companies may not get huge revenue. However, when they earn profit from a project, they share it among employees. Profit-sharing practice is a great way to build bonds and trust among employers and employees.

Professional Development

Looking for scopes to develop professionally is a significant change in employee behavior. Around 87% of millennials expressed their desire to grow professionally. As a result, many companies are now offering learning opportunities to their employees.

Companies either develop their own learning and development programs or outsourcing to third-party learning management systems.

Referral Programs

In this incentive, the company rewards employees when they suggest well-suited candidates for the organization. When employees suggest a good candidate, the company offers them a cash prize.

The referral program is a reward on its own. Here, the company relies on the employee to bring fresh talent and trust them to make better choices.

Bonuses and Raises

It is the oldest incentive practice of any organization. Depending on the employee’s performance, organizations give them a bonus. Also, when employees add value, the company gives them more responsibilities with a pay rise. This is a widespread practice and still a viable option.


Giving commission is another incentive option to motivate employees. Here, employees get a percentage of profit upon reaching their goals. Sales teams, management teams can have higher commissions depending on the action they achieve.

Employee Rewards Example

Employee of the Month/ Year

The employee of the month is a common practice in organizations. Here the organization chooses an employee at the end of each month. Here employees are selected based on their activity and performance.

On the other hand, companies choose employee of the year based on employees’ growth and capability of reaching goals. The company may throw a party and hand over medals or crests to celebrate the employee of the month or year.

Team Recognition

Some companies reward employees based on teamwork. When it comes to completing tasks efficiently, proper teamwork is undeniably vital. So, companies rewarding teams for good performance can experience better collaboration than other companies.

Personal Days

Some organizations focus on better work-life balance for their employees. So, when employees achieve a challenging task, the company may offer them additional paid personal days. It keeps the employees refreshed and helps in increasing productivity.

Flexible Work Schedule

Some companies may offer a flexible working schedule for well-performing employees. Working remotely is a viable option these days. So, when employees achieve something exceptional, the organization may grant them work from home or a flexible office hour.

Technological Accessories

Rewarding employees with a better device or operating system is not such an old practice. Better technology makes work easy for the employee. Therefore, employees perform better in their work, and the company productivity increases.

How Can Online Platforms Help with Incentives and Rewards?

Giving rewards and recognition to employees is a controversial topic for many organizations. Many employees complain that these programs are often rigged, or the management may recognize employees for completely wrong reasons.

With an online recognition platform, manual problems of recognition can be avoided. It promotes transparency and specifies reasons to recognize top performers. Also, it saves a lot of time and provides instant recognition to employees.

Recognition works better when the employees have it immediately. Online recognition platforms provide organizations the option for immediate recognition. Overall, online platforms are efficient, transparent, and effective.

Final Words

A company’s growth depends upon the dedication of its employees. Therefore, companies need to keep their employees satisfied. Incentives and rewards can help in this manner a lot.

Consider integrating an online recognition platform to make the recognition process smoother and time-effective. Only then can your organization achieve optimum growth and productivity.

Karan Singh

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