James Malia, Director of Employee Benefits at Sodexo Engage, asks how organisations can make incentives work harder for their business.


While the news that UK unemployment has reached a 42-year low is of course welcome, it does mean businesses must keep putting greater effort into attracting and retaining top talent. Traditional cash bonuses are a big an asset in this struggle. They allow employers to make themselves more tempting to jobseekers and set themselves apart from the competition.


Cash incentives are a tried and tested method. They inspire employees to up the ante on results year-to-year, and, rightfully, show no signs of disappearing. In fact, UK businesses spent £46.4 billion on bonuses in 2016-17, an increase of 6.5% over the year before and 11.3% more than before the 2008 economic downturn.


However, many business leaders are starting to question whether traditional bonuses can be re-engineered to attract, retain, motivate and benefit employees more effectively. The answer is a resounding ‘yes’.


Rethinking rewards


Business leaders are (thankfully) now very aware of the role that employee psychology plays in the success of bonus schemes. This means that managers need to ensure their approach is considered and supported by human nature, rather than working against it. But how can psychology help make bonus schemes more effective and beneficial?


One point here is timing. Now, the annual bonus may be traditional, but research has shown that an immediate reward is way more effective than delayed acknowledgement. By offering on the spot rewards throughout the year, businesses can improve employee motivation day by day, rather than just a fleeting spike.


At the same time, bonuses need to be more than just a reward for hitting a target. Instead, businesses should offer progressive incentives, that give employees new objectives to strive for.


The context for the bonuses is also important. For example, if the goal is to encourage exceptional work, then businesses should clearly link rewards to mutually agreed, measurable objectives. By setting out how to achieve a bonus, desired behaviours will be reinforced.


On the flipside, a lack of clarity on why bonuses are given can lead to employees simply expecting them. This is especially true for cash incentives, which can risk being seen as an extension of an employee’s salary. This is a big no no, as it totally drains their motivational value. Something else to keep an eye on is any sign that the bonus is tempting a focus on personal gain, to the detriment of the wider team. Equally, poorly conceived incentive programmes can create envy and resentment. To avoid all this, employers should link bonuses to both individual success and the performance of teams or the broader organisation.


Alternative approaches


Research has repeatedly shown that employee motivation is not directly linked to the size of the financial rewards on offer. This gives organisations the chance to experiment with different incentives. Non-cash rewards can not only prove more effective, they’re also good news for organisations struggling to finance bonuses.

The best incentive programmes recognise that there’s more to an employee’s world than their job

The best incentive programmes recognise that there’s more to an employee’s world than their job. They build a long-term, emotional connection with employees through rewards that genuinely impact their day-to-day lives – not just in terms of wealth, but health, family and lifestyle.


Ultimately, every business should put careful thought into what rewards it offers and why. There’s no one-size-fits-all solution, or a ‘best’ approach. The right answer will vary based on long-term objectives and culture. However, the ideal outcome is always the same: building a deeper, lasting connection between a business and its most important asset – people.