Crafting an Effective Employee Recognition and Rewards Policy

Recognizing individual employees for their commitment to your company is a simple but powerful way to improve the employee experience. But what does recognition actually mean? The concept is very broad and can look completely different from company to company.

Some managers may think that they are treating their employees well by giving them the occasional "thank you." Other companies have developed a comprehensive recognition program as a tool for giving and receiving praise.

In this guide, you'll learn how employers can develop a recognition program for their employees so that every employee knows how to give and earn praise. You'll learn the benefits of designing a policy, what should be included, and an example of a policy you can use as a starting point.

What is an Employee Recognition Policy?

An employee recognition policy is a formal framework that shows your company's employees, managers, and executives how to provide fair, equitable, and engaging feedback. Your policy should contain at least the following points:

• Who is authorized to give and receive recognition
• What behaviors you want to acknowledge
• The ideal frequency of recognition
• How to reward positive behaviors

8 benefits of a recognition and reward policy

Those who lay the groundwork and take a consistent approach to recognition will reap tangible benefits. Here's why you should create a formal document:

1.Ensure the recognition is authentic

A IceHrm recognition survey of full-time employees found that 87% believe meaningful recognition impacts their job satisfaction. The key word here is “meaningful” – employee satisfaction is only possible if they believe in the authenticity of your message.

A well-written policy can provide examples of authentic recognition that will resonate with your employees. An example:

• Don't say, "Thanks, Vera, great job today."
• Instead, say, "Thank you, Vera, for taking the time to keep us updated. Our success on this project depends on meeting deadlines, and your commitment will ensure we are on the right track ."

By explaining the difference between authentic and inauthentic recognition, you provide a template that everyone in your company can use to be specific, detailed, and meaningful.

2.Increase employee motivation

A well-designed recognition program has the potential to boost employee morale. A survey by IceHrm found that 83.6% of employees believe recognition influences their motivation to succeed at work. When your team members are praised for a particular task or activity, they feel motivated to show up every day and strive for excellence.

3.Promote productivity

Motivation goes hand in hand with employee productivity. Employees who want to do good work and are recognized for it naturally become more efficient. This aligns with our research, which found that 77.9% of employees would be more productive if they were recognized more often.

A clear recognition and reward program policy creates a culture of productivity by defining the behaviors and actions you want to value and reward in your company.

4.Encourage engagement

Employee engagement is a major issue in the modern workplace - Gallup's research shows that only 33% of US employees are engaged, down from 36% in 2020. At the same time, 17% of the U.S. workforce is actively disengaged, adding to recent trends like quiet resignation and widespread resignation that have left their mark on the post-pandemic climate.

Regular recognition can turn the tide by adding meaning and value to your employees’ everyday tasks and workflows. When this happens, 81.9% of employees agree that recognizing their contributions increases their engagement.

5.Ensure bonding

Nobody wants to work for a company that doesn't value their commitment. Compensation and benefits only go so far, and employees who don't feel respected or valued by their employer will leave. On the other hand, 71% of employees would be less likely to leave their employer if they received recognition more often.

Consider the impact that simple praise could have on turnover rates and hiring costs. This starts with creating a recognition policy and sharing it with your team. This step is also an important employer branding measure because it shows your employees that you are as committed to them as you are to them.

6.Build excellent relationships between supervisors and employees

When we asked employees who they received praise from, managers emerged as particularly influential. 40% of employees said their managers have the most influence on them when it comes to recognition, more than their colleagues and managers.

Strong relationships between managers and employees are critical to the employee experience. Gallup research finds that managers account for 70% of the variance in employee engagement ratings, and additional research from McKinsey suggests that a third of employees blame "insensitive managers" when they leave their jobs.

A solid recognition policy can significantly improve relationships between superiors and employees. Your policies should include several examples of how leaders can formulate and distribute praise. They serve as a training tool for managers who need to convey the importance of recognition to their teams.

7.Strengthen team bonds

Praise from above isn't the only type of recognition you should focus on in your company. IceHrm's Workplace Connections study examined the importance of friendships in the workplace. 69.5% of employees said they would feel happier if they had a deep connection with a colleague.

Appreciating team members for their daily contributions is an essential part of building relationships. But unfortunately, 63% of employees we surveyed admitted that they wish their colleagues would say “thank you” more.

Your peer recognition program will outline how colleagues can share praise and the manner in which this should be done. Even better, include challenges and recognition awards in your program so team members can encourage each other to achieve their best.

8.Create clear guidelines for AI

As discussion of artificial intelligence in the workplace continues to grow, some companies are tempted to lean on artificial intelligence to accelerate the practice of recognition. Some use AI to develop recognition ideas or check the grammar of their thank you message. Others use them to compose and send entire messages to employees, with the result feeling hollow. 53% of respondents do not believe that artificial intelligence leads to meaningful employee recognition, which is something to keep in mind when considering using this technology.

Artificial intelligence is still quite new, and employers need to adapt quickly to use it without jeopardizing their reputation and company culture. It's important to set clear guidelines for how you expect employees, managers and leaders to use artificial intelligence to convey recognition. This is an area of your policy that you will need to review frequently in the coming months as technology advances rapidly.

What to include in your employee recognition policies

Your employee recognition policy can be tailored to your company's size, goals and business activities. Many recognition guidelines are based on the following core elements:

1.Purpose and objectives

Clearly articulate the reasons for implementing your recognition program so that all employees keep these in mind when praising their colleagues. Maybe you want to increase employee morale or engagement, or improve overall performance. Whatever your goals are (and it's okay if you have more than one), share what success would look like for you.

Example: Imagine you have a recognition program in place to increase employee retention. You could measure success by measuring the turnover rate or length of service over a specific period of time, e.g. one, three or five years.

2.Define your recognition program

To begin your policies, clearly define your recognition program and how it will work. For example, do you use dedicated recognition software like IceHrm or do you hang employee photos on a recognition wall? In any case, you should describe the mechanics of your program. Do you use a points system, nominations, or exchange messages of appreciation with each other? Consider what forms of recognition exist and how they fit (or don't) with your company's policies:

• Formal Recognition: Planned awards such as employee of the month, annual performance awards, or service milestones. This type of recognition can be based on a nomination and voting process that should always be transparent and easy to understand.
• Informal recognition: All employees can give and receive recognition on a regular basis, e.g. in the form of encouraging notes, encouragement in meetings, gift vouchers or small tokens of appreciation.
• Peer-to-peer recognition: In a positive company culture, all employees recognize their teammates, colleagues from different departments, and managers and executives to promote a culture of mutual appreciation at all levels.

3.Criteria for eligibility for recognition

Fair recognition requires that an integrative program is offered. All employees should be able to participate in your recognition program regardless of their rank, role, work location, or employment status. However, there may be some employees you want to exclude because they don't work enough hours or the program doesn't make sense for them.

Consider how each of these groups might be perceived differently in your recognition program:

• Part-time employees
• Telecommuters
• Interns
• Contractors and freelancers

If you exclude a group of employees from your formal recognition program, it's important to find ways to make them feel valued and recognized at work. A freelancer may not be part of your typical program, but there may be another way to make sure he feels the love. For example, you could: collect the good feedback you receive on your work and pass it on to them in personal conversations.

4.Recognizable behaviors

Your policy should contain a comprehensive list of the work practices and behaviors you want to promote in your company. Consider which activities or characteristics provide the greatest value to your company and align with your company's values and goals. This could include employees who are particularly committed to:

• Diligence
• Positive attitude
• Creativity and innovation
• Teamwork and collaboration
• Customer service
• Exceptional problem-solving skills
• leadership qualities
• Punctual and reliable attendance
• Efficient communication‍

5.Examples of good praise and appreciation

In addition to listing behaviors that deserve recognition, it is also helpful to provide examples of good praise and recognition. This ensures that the recipient receives specific, detailed and meaningful feedback. A useful recognition recipe contains the following ingredients:

• The person's name
• An expression of gratitude
• Details about the specific action or performance of the employee you want to recognize
• A statement of how it supports your company's values
• The result of the employee's performance
• A summary that motivates the employee to continue their great work

Meaningful praise should come from the heart. If you plan to use artificial intelligence to create recognition messages, your policy should set clear guidelines for the use of the technology. For example:

• Only use AI to review and improve messages that have already been created.
• Do not enter sensitive or confidential information into an AI tool.
• Always review and approve AI-generated messages before sending them to individual employees.
• Never use AI to create multiple messages for more than one employee.

6.Recognition Awards

If you use employee rewards, define:

• How often they are given
• How many employees are awarded, e.g. one employee per company, department, location, etc.
• How you will honor the honoree
• Who nominates deserving employees for the award, how nominations are reviewed, and who makes the final decision
• What employees have to do to be nominated

7.Employee Rewards Policy

Rewards can take many forms, and your policy should clearly outline the employee rewards available for each recognition level. For example:

• Monetary rewards such as rewards or gift cards
• Non-monetary rewards such as extra free time, a day of working from home, or tickets to an event
• Social recognition, such as mentioning employees in newsletters or on the company website
• Rewards that align with your company's core values, such as: E.g. eco-friendly gifts or donations to a charity of the employee's choice.

Point out the extent to which personalized gifts are possible or appropriate. For example, if gift cards are available, you should specify whether employees can choose the merchant themselves.

Finally, you should also point out the tax implications of bonuses. Employees may be required to pay taxes on items such as gift cards, so you should mention this in accordance with your tax advisor's guidelines.

8.Implementation plan

Communication is an essential factor in the success of your recognition program. Your employees need to understand how it works and have confidence in the process for it to be effective. Your policy can help you do this by setting out:

• How you plan to communicate your program to all employees, including how it works, recognition criteria, and eligibility requirements
• How new employees are informed about your program so they can receive recognition from day one
• How managers are trained to give and receive employee feedback
• How all employees will be trained to use your rewards and recognition software (if applicable)

9.Feedback and Rating

Your recognition plan should be a living document that evolves with the needs of your organization. Regular reviews and updates ensure your program promotes employee engagement while supporting a positive company culture. Include information about the following in your policy:

• How regularly you plan to review and adjust your program based on participation and engagement rates, progress toward your company goals, and changes in company performance or culture
• Who is responsible for the evaluation process, including tracking and reporting on the success of the program
• How can employees provide suggestions or feedback about the program?
• How you will communicate updates and improvements to the program to all employees

10.Compliance with Laws and Ethical Considerations

Use your policy to maintain high ethical standards in your organization and ensure fairness, transparency and respect for all participants.

Always ensure that your program complies with all relevant laws and regulations, including the tax implications of cash rewards. List this information in your policy so it is accessible to your employees.

Developing a robust employee recognition policy is crucial for fostering a positive workplace culture. With IceHrm's guidance, empower your employees and drive success.

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