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Types Of Rewards: A Quick Guide For HRs

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When we talk about the types of rewards, we are essentially classifying the multiple ways through which you can appreciate your employees better.

Typically, the types of rewards can be divided into three main categories- intrinsic versus extrinsic rewards, non-financial versus financial rewards, membership versus performance-based rewards.

Unlike popular perceptions, you can reward employees without breaking the bank. Monetary rewards are not the whole reward system but only a small part of it. Nowadays, even small businesses can afford to recognize their workforce through affordable gift cards.

The past two decades have seen a constant rise in companies investing in an employee reward system.

Why? Because it works. When people feel valued, they:

  1. Get a feeling of accomplishment, which results in higher job satisfaction and productivity.
  2. More likely to improve job performance and organizational results.
  3. Enhances employee experience and inspires loyalty.

Altogether, having a reward and recognition program is beneficial not only for the workforce but also for the company.

Let's have a look at the three different types of rewards and what each of them carries.

The 3 Major Types Of Rewards

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1. Intrinsic versus Extrinsic Rewards

Intrinsic rewards are the rewards that are non-tangible but yet results in higher levels of job satisfaction. Some examples are- an impressive job title, career growth, personal achievements, praises, etc.

Extrinsic rewards are tangible rewards that employees receive upon doing good work. It includes bonuses, raises, gifts, etc.

Intrinsic rewards make employees feel valued in a company. Similarly, extrinsic rewards focus on improving employees' performance through appreciation. It's necessary to find a balance between extrinsic (performance) and intrinsic (motivation).

2. Non-financial versus Financial Rewards

Financial rewards work by positively contributing to the overall employees' financial wellbeing. It includes bonuses, salary raises, etc.

Non-financial types of rewards do not provide any financial gain to the employee. Instead, it focuses on appreciating employees through employee benefits. Gym memberships, parking space, gift cards are a few examples.

Non-financial rewards are more feasible for companies to reward employees mainly because:

  • Long term effects as compared to financial rewards. Employees are more likely to keep enjoying the benefits. However, financial rewards give one-time satisfaction.
  • Employees feel more comfortable about discussing their rewards with their peers.
  • For the same performance, financial incentives require higher investment.
  • A more affordable option for small businesses and startups.

3. Membership versus Performance-based Rewards

Performance-based rewards are allocated based on the performance of an employee in a company. Performance-based rewards are given in the form of pay plans, incentive systems, group bonuses, or commissions.

Membership-based rewards are given in the form of benefits and services provided to the company's employees. It might be in the form of the annual Christmas bonus, company retreat, upgraded office furnishing, etc.

How To Reward Employees In A More Effective Manner?

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  1. Having a reward system that fits your organizational needs will make recognizing employees much more effective. Vantage Rewards is an easy to use, cloud-based rewards platform that automates and simplifies employee recognition.

  2. Make sure the type of rewards fits the person you're rewarding. Performance-based rewards would more benefit a salesperson. Similarly, a new hire will be more motivated by intrinsic rewards such as praises and career advancement.

  3. Recognition from one's peers is a strong motivating factor for any employee. No matter the type of rewards, be sure to acknowledge it openly. Put it up on social media, office notice boards, and give the award publicly.

  4. Frequent and timely recognition is a crucial factor. Never hold off rewarding a piece of good work for a later date.

  5. It's essential to measure the effectiveness of your reward system. One way to do so is to take necessary feedback from your staff.

What types of rewards do they prefer? Are the rewards motivating? Do they feel that anything can be improved?


According to you, which of the above types of rewards would suit your company the most? Tell us in the comments below.

This article is written by Barasha Medhi who is a content marketer at Vantage Circle.She is always on the lookout for interesting tidbits about the current HR and employee engagement space. For any related queries, contact