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What No One Tells You About Employee Incentive Programs

8 min read   |  
Last Updated on

You’ve probably heard about employee incentive programs and may already have a basic understanding of what they entail. However, there’s much more to these programs than offering a simple bonus.

It is now widely understood that traditional reward programs are no longer sufficient for today’s workforce, especially for Millennials and Gen Z. Having grown up in the age of social media and side gigs, they are constantly on the lookout for greener pastures.

Even amidst the global economic crisis of 2020, nothing could stop them from job-hopping. According to a report by IBM, 1 in 5 employees voluntarily switched jobs in mid-2020.

Hence, in today’s competitive job market, offering perks or a mere bonus isn’t enough. Pandi Alagu Raja Mahamuni, an HR business leader of SEGULA Technologies, has highlighted how employee incentive programs have helped organizations and evolved with time.

Employee incentive programs allow organization to improve its productivity through employee performance, fulfilling individual goals, controlling absenteeism & optimize production costs. It also encourages teamwork, Boost morale and motivate them.

In post pandemic era, employee incentive programs have completely transformed from monetary benefits to Employee Experience. Every organization started offering incentives that attract and top talents that go beyond monetary benefits. Investing in Employees professional development, focusing on Holistic wellness of the employees, Flexible working time, joining hands through social recognition, Mandatory mentorship programs, No limit sick leaves option are few among the new-age trending incentive programs for employees.

Understanding the employees and the job market can be the initial steps to learning the difference between an average team and a winning one. So, with no further delay, let’s get started with the basics first.

What Is An Employee Incentive Program?

An employee incentive program is a program designed to reward employees for achieving company performance goals.

The best employee incentive programs are those that are SMART (specific, measurable, relevant, and timely) They provide the proper incentive at the right time for the desired behavior.

Employee incentives plans can be in the form of -

  • Tangible rewards (merchandise, travel, cash).
  • Intangible rewards (recognition, praise, promotion).

An employee incentive program is a key factor in the success of any business. Incentive programs offer employees an opportunity to be rewarded for their hard work.

Incentive programs can be as simple or detailed as you want them to be. You can use employee incentive programs as part of a total rewards strategy, You can also use it as a standalone employee reward program.

There’s no perfect formula for creating the perfect incentive program. So, it helps to understand how these programs work and why they’re beneficial.

How Do Employee Incentives Programs Work?

"Employees are the backbone of any company."

A company that has invested in its employees is more likely to see a major payoff in its future. That’s why it’s so critical for companies to develop incentive programs that help motivate employees to work harder and feel good about coming to work every day.

There are many advantages to employee incentive programs. They go a long way towards increasing employee retention and productivity. They can also lead to an increase in revenue for your company.

They can be used to reward employees for hitting milestones and for going above and beyond their job description. It will also increase employee morale while providing you with greater returns on investment. Employee incentive programs must be aligned to assist employees in achieving measurable goals. This is what Patrick Curtis, CEO & Founder of has to stay about the potential impact of such incentive programs.

Employee incentive rewards play a critical role in making the team part of the fabric of the company and more like family. It's important, however, to provide rewards that don't just reward team members monetarily but also help their career development. For example, for many of our interns we provide free financial modeling resources and Excel guides as well as access to our top modeling courses.

The trick to implementing successful incentive rewards is to tie the rewards to measurable goals and set fair thresholds where the employee has a direct impact. For certain internal operations it's harder than for sales, for example, but they should be implemented carefully in as many places as possible to help employees feel and act more like owners.

Recommended Read: 10 Types Of Employee Bonus That Your Workforce Will Adore

Things To Consider While Designing an Employee Incentive Program


Employee incentives are powerful tools that can help create a competitive advantage for your organization. If designed and implemented correctly, employee incentive programs can increase employee satisfaction and reduce turnover. It can also boost the bottom line and help retain top talents.

Here are a few pointers to help you design the ideal incentive program.

1. Eligibility Criteria

Companies that are committed to performance-based pay find that there is a lot more to consider than simply selecting eligible employees to reward. Factors like job category, length of employment, and more must be considered when drafting eligibility criteria.

For instance, long-term employees often earn more than new hires. Moreover, executives are more likely to receive higher bonuses than their regular counterparts.

You can implement both individual and company-wide incentives. To ensure that your company fully motivates its employees, you must offer incentives based on a variety of factors, including -

  • Job type (such as finance or sales)
  • Years of service with the company
  • The goal of an incentive program (such as productivity, sales, employee retention)
  • The payout structure (bonuses, stock, cash)

2. Payout Options

Employee incentive programs shouldn't be the same for everyone. Each employee has different goals and needs. So, offering one cookie-cutter incentive might not give employees enough reason to participate.

A good example of this is how some people would rather get a coupon to their favorite restaurant or gym membership than a generic gift card at a store they don’t even shop.

Businesses can avoid these oversights by seeking an employee incentive program that offers different options. It is crucial to determine what type of reward better suits your workforce and makes them happy.

For example, Vantage Circle provides a plethora of rewards and gifts from a global catalog of top online and offline brands. It gives employees the flexibility to choose their own rewards with exclusive corporate discounts.


Also Read: Top 9 Non-monetary Incentives To Motivate And Retain Your Employees

3. Align Your Rewards With Your Goals

Although simple, the incentives that you use should complement your larger organizational goals and company culture.

Define the goals of your business and decide whether they reflect your company's core values. The ideal employee incentive system is the one that supports and promotes what your company stands for.

Make sure upper-level management is aware of how the program is working. Check whether there are any unforeseen challenges or expectations that aren't being met.

There's nothing worse than finding out that an employee incentive program isn't accomplishing what it set out to do.

Vantage Circle’s R&R solution has a unique feature that gives deep insights into employee performance and trends. It also allows you to generate and download data reports. It acts as a great tool for equal and fair recognition.

Further Reading: Top 11 Remarkable Sales Incentives That Aren't Cash

4. Communicate Effectively

Before you can hope to inspire your employees, you must first get them on board with any fresh changes.

A lack of communication is often an issue with small-business owners trying to motivate their teams. But communication is just the first step. It's also important to pinpoint what motivates your employees and have a transparent conversation about what you both want.

Send out a full rundown of the program through emails or company-wide memos. You can also organize a meeting or a team huddle. Highlight the goals of the program and the ways your employees can reach their goals.

Employees need to be aware of the purpose of an employee incentive program. When employees understand what the program is and how they will benefit from it, it is much easier to get them on board.

5. Know Your Employees

Employees are more likely to be satisfied if they have a say in the program's design. Ask your team members what incentives they value most, and apply them to the program. Check-in with them regularly to ensure that you're offering the best incentives possible.

Conduct a survey to find out how employees perceive the rewards and financial incentives that your business offers. If you notice any dissatisfaction, carry out a meeting or ask employees what changes they would make.

Many companies use different tools to gauge employee feedback. Vantage Pulse is one such kind of powerful employee survey tool that lets you collect, measure, and act on real-time employee feedback.


Also, keep an eye on employee turnover rates. If an employee is leaving because they're unhappy with their compensation, it's worth asking them why to understand the issue.

The Other Side of Employee Incentive Programs


When we talk about the disadvantages of employee incentive programs, most people shrug it off! What could possibly be a drawback to offering rewards?

Let’s find out below.

1. Work Ethics

One of the biggest concerns with employee incentive pay is that it can motivate employees to act in unethical ways to hit their targets.

If they aren't able to achieve a certain target, they might be tempted to cut corners in order to achieve their goals. For example, an employee who misses a goal might feel inclined to falsify numbers so he can receive a bonus.

Virginia Tech conducted a study to gain insights into “The effects of goals and pay structure on managerial reporting dishonesty”. They found that setting compensation goals to hit certain targets can increase dishonesty between employees.

2. Work Standard

Employee incentive plans can also shift the focus on quantity over quality. Employees can become overly competitive in order to reach their targets that they neglect the standard of the result.

Also, rewarding only some department or members of a team can add to this issue. Many companies use compensation plans that reward only certain segments of an organization, leaving other teams feeling dissatisfied.

3. Peer Pressure

Employees could feel as though their peers are doing better than them, and this can create animosity among them. If an employee cannot achieve the same level of performance as their peers, it can create unnecessary peer pressure for others.

The real objective should be to design an employee incentive program that doesn’t discriminate among employees but promotes individual motivation and excellence.


Businesses are growing increasingly reliant on employee incentive plans to boost results. Indeed, incentivization has slowly become an integral part of business strategy.

Employee Incentive Programs have come a long way from the days of casual Fridays and free lunches. Companies realize that by tying employee behavior to employee performance, they can get the most out of their workforce while greatly reducing costs.

Thadoi Thangjam is a content marketer and digital marketing executive at Vantage Circle. When she’s not geeking out over content strategies, she is probably hunting for the next perfect track to add to her playlist. For any related queries, contact

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