Employee recognition remains pivotal to employee retention. Learn why non-cash rewards are proving to be more effective than cash rewards at the workplace.
When it comes to employee recognition, cash is not always king. While cash rewards have always been a motivator for employees, it is often viewed as transactional, commonplace and impersonal.
Cash rewards are ones given to employees with a definitive monetary value, such as assets in their bank account or can be liquidated in the future, like stocks. Non-cash rewards are those without an explicit dollar value tied to them, broken down into two main categories: extrinsic and intrinsic rewards.
An intrinsic reward is an internal reward that employees achieve from completing their tasks or projects successfully. These rewards are mostly psychological and motivated by personal goals. An example would be receiving training or social recognition. An extrinsic reward typically has a monetary value and is given to an employee for achieving something. Examples include bonuses, pay raises and additional benefits.
Rewards, as a whole, are important for recognising the employees’ continued commitment to produce quality work. Research done by McKinsey shows that up to 55% of employee engagement is driven by non-cash recognition, which serves as the biggest driver of employee experience. And, when employees feel engaged at work, they are more likely to be productive, collaborative, and creative.
Employee recognition can be an essential contributor to a team’s happiness and morale. A more engaged team is one that enjoys higher levels of job satisfaction and commitment to the organisation.
As part of the 12 New Rules of Engagement, a BI WORLDWIDE framework for employee engagement relevant to present-day concerns, the organisation’s role in engaging employees is demonstrated through helping employees thrive, giving the work they do meaning, and challenging them. The set of approaches also guides organisations to make money a non-issue when engaging their employees. Cultivating a culture that values employees for their skills, contributions, and potential, rather than just their financial value can deepen the sense of recognition.
Before organisations can devise a balanced rewards program that incorporates both cash and non-cash rewards, it can be helpful to understand what motivates employees in order to make the experience a less transactional and more meaningful one.
BI WORLDWIDE’ S Rewards Marketplace offers employees access to unique experiences and gifts, a form of non-cash recognition that is memorable and significant.
Here are five ways non-cash rewards outperform cash rewards:
Non-cash rewards present the aspect choice, are less repetitive or predictable compared to cash rewards. For example, organisations can reward their employees with a family vacation, making it potentially more attractive than a cash bonus when happy memories are made with the family and the experience is now personalised.
Cash rewards are known to trigger a process of mental accounting, which is when the recipient blends the cash reward with salary and uses it for a utilitarian purpose such as paying the bills. Non-cash rewards have the ability to linger in the minds’ of the employees for much longer than that of the cash reward once it has been utilised.
People place greater market value on things they’ve worked to build or achieve. Even though non-cash rewards aren't more economically valuable than equivalent cash, recipients often place a greater monetary value on awards that are personally meaningful to them and they have worked towards.
A non-cash reward like a television set is visible to family, friends, and peers therefore, beyond the pure consumption of the reward itself, individuals enjoy the social reinforcement that comes with the attention drawn to their stellar work performance.
Cash rewards tend to be viewed by recipients as transactional, which means they lack potential for the positive emotions associated with receiving a meaningful gift, which goes towards relationship-building. On the other hand, a non-cash reward has the emotionally impactful quality that triggers appreciation, leading to a greater desire to reciprocate the gift.
Motivating your employees can take many forms, and the decision on the type of rewards should be made based on the unique situation and desired business outcomes. Motivated employees are more likely to have a positive attitude, be more resilient in the face of challenges, and be more open to change. Overall, investing in employee recognition to keep them engaged and motivated is a win-win for both employees and the company.