7.2 Type of Rewards

There are several ways to classify rewards, for example intrinsic rewards; extrinsic rewards; financial rewards; non-financial rewards; etc.

Usually, different types of rewards can be classified as:

  1. Money – A salary is a form of compensation paid periodically by an employer to an employee, the amount and frequency of which may be specified in an employment contract.  The idea of a salary continues to evolve as part of a system of all the combined rewards that employers offer to employees. Salary is thus becoming part of a “total rewards” system, which includes bonuses, incentive pay, commissions, benefits, perks, and various other tools that help employers to link rewards to an employee’s measured performance. It also can offer social benefits (e.g. retirement benefit plans, Group term life and long-term care insurance plans, legal assistance, childcare benefits, transportation benefits), health insurance, medical plans (e.g. prescription, vision and dental plans, dependent care), etc.
  2. Gifts – In performance-based incentives also gifts could be included gifts, for example in the form of: gift cards, profit sharing, increment, VIP parking, promotional materials, discount programs, etc.
  3. Experiences – The employer can also offer different experiences as a reward, for example: additional learning opportunities, mobility programmes, travels, leisure activities on work time, etc.

With a strategic reward system, institutions needs to address all these 4 elements – appreciation, recognition, compensation, and benefits, which have to be aligned with the institutional overall strategies and which would thereby encourage appropriate behaviours and support realisation of planned goals.

Non-financial rewards cost the organisation no money, yet carry significant weight. In a 2009 survey conducted by McKinsey & Company, non-financial incentives were rated as more powerful motivators than financial incentives. The top three non-financial incentives that were identified consisted of: praise and commendation from the immediate manager; attention from leaders; and opportunities to lead projects or task forces.

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

  • Long-term effects as compared to financial rewards: Employees are more likely to keep enjoying the benefits, whereas financial rewards give one-time satisfaction.
  • Employees feel more comfortable about discussing their non-financial rewards with their peers.
  • For the same performance, financial incentives require higher investment.
  • It’s a more affordable option for small businesses and start-ups.


Managers, the Human Resources Department, and the leadership need to understand the significance of appreciation as part of the rewarding system and the direct impact this has on institutional growth and institutional culture. Recognition of an employee’s achievements should be one of the key elements of any rewarding system and is usually seen as a low-cost element. Recognition and appreciation in combination has the most impact to engage and motivate employees. Employee recognition is the positive acknowledgement of a professional’s appreciable work, efforts or behaviour that directly support institutional goals. It should be periodically related to maintain consistency in the recognition process. Usually, institutions would prepare half-yearly or yearly recognition programmes.

Appreciation centres on expressing gratitude to someone for their actions. Showing appreciation to your employees by acknowledging excellent performance and the kind of behaviour you want to encourage is best done through simple expressions and statements.

By applying appreciation to your rewarding system, you will:

  • make your employees happier
  • boost moral
  • show respect
  • built trust
  • straightening company culture
  • increase results
  • incurring innovation

How can you show your employees that you appreciate them?

There are many ways to say appreciation to your employees, here are some examples:

  • send a personal note (handwritten, by email, sticky notes, etc.)
  • say thank you
  • provide a magazine subscription
  • select an employee of the month
  • hand out appreciation certificates
  • stop by the employee’s desk to convey your appreciation
  • provide an opportunity for advancement


Although these terms are often used interchangeably, reward and recognition systems should be considered separately. Employee reward systems refer to programmes set up by institutions to reward performance and motivate employees on individual and/or group levels. Although employee recognition programmes are often combined with reward programmes, they retain a different purpose altogether. They are intended to provide psychological feedback, as rewards usually provide financial feedback and benefits. Although many elements of designing and maintaining reward and recognition systems are the same, it is useful to keep this difference in mind, especially for small institutions interested in motivating staff while keeping costs low.

Source: 50 Employee Rewards and Recognition Ideas to Boost Engagement For 2022 (vantagecircle.com)

Recognition awards are generally presented directly to recipients by their manager or leader. In some institutions, awards are held for presentation at a special event such as a banquet, a luncheon, a staff meeting or a wider meeting. Some employers can generate recognition awards and gifts—for teams at multiple sites, for example—via the Internet. Sometimes awards are mailed to the employee’s home. Beware, though, of the form you choose for the communication: one quick thank-you note personally written by the employee’s leader and hand-delivered to the employee will have much more impact than a perfunctory form letter and a coffee cup with the institution’s logo.

Leaders and supervisors may neglect to recognize employee achievements because they do not know what to say. A simple recipe for recognition can work magic: Thank the employee by name, state what the employee did to earn the recognition, explain how you felt about the employee’s achievement and how it added value to the institution, and thank the employee again by name. Addressing the person by name and saying that you personally value their effort can be as motivating as the actual reward.

Financial rewards

Employees typically receive financial payment from employers in the form of a salary.  This payment is expected to be based on the individual’s work. When the results of the employee are higher than expected, they can be rewarded with additional financial rewards. Financial rewards as compensation or bonuses can be in the form of a direct or indirect reward. The exact financial reward is depending on the organisation’s size and budget.  


The compensation as a reward system should include an ‘incentive compensation plan’ that is directly linked to the goals for am explicit period (for example, some type of longer-term rewards for key individuals in the institution). Additionally, the compensation strategy should also be competitive with reference to the external environment comprising the organisation’s competi­tors. Benchmarking practices and/or conducting compensation surveys enable an organisation to assess their compensation strategy for key talent in comparison to its competitor. While compensating employees, organi­sations pay attention to factors that provide them with a competitive advantage and make them the employer of choice.


Another type of reward in a strategic reward system are benefits. Employee benefits include non-wage compensation in addition to regular salary. Various types of employee benefits typically include medical insurance, dental and eye-care coverage, life insurance and retirement planning, but there can be many more types of benefits and perks those employers choose to provide to their employees.

Some of those benefits are:

  • health insurance
  • free parking
  • vouchers
  • free gym
  • gifts

A few basic examples of out-of-the-box recognition approaches for institutional leaders:

  • Meet and Greet Every Team Member. Start your mornings on a positive note. Make an everyday routine to find time and greet each employee personally. Though it is a basic recognition idea, yet day-to-day interactions build high engagement levels. It is wonderful to show your employees that you feel excited to meet and work with them every day.
  • Circulate an Employee Recognition Symbol. Encourage employees for small achievements to boost their confidence level and give them a reason to always strive for excellence. Get a normal object, let’s say a plant, and designate it as the recognition symbol. Observe performance of all your employees regularly and pass on the plant to any team member who is working brilliantly. Keep repeating the process within your team and recognize each good performer in this way.
  • Social Media Recognition. Employers using a social media platform to connect their employees should make most of it. Recognize a team member in the social media circle for showing extraordinary performance and efforts.
  • Turn Break-Time into Recognition Time. Schedule a suitable break hour when you can find time to interact with your team members and find out what they are up to. You can make important team announcements in the break-time and recognize employees for their good efforts. Also take suggestions from your employees to figure out who has been the best performer in a particular week.
  • Drop Personalized Notes. Depending upon the performance of your team members, create personalized notes for each of them. Drop them before they reach their desk. Few words of encouragement and praise is always a good idea for employee motivation.

Further reading (Sources):