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Ask Madison: Do I blend Performance-based Pay with my Employee Recognition Program?

August 3, 2021
| ByDan Davenport
  • Is performance-based pay something that falls under an Employee Rewards and Recognition (R&R) program? Is R&R part of a performance-based pay program? How is it all tied together for the end-user (the employees)? After all, it’s all coming from HR…


Balancing Performance-Based Pay with Rewards and Recognition

While compensation tied to performance can be a successful motivator, it is a balancing act in reality when it comes to engaging employees, increasing productivity and improving business outcomes. Performance-based pay can certainly be lucrative for an employee and can trigger high productivity, but an employee recognition and rewards program aims beyond that. In fact, recent studies have shown that employees who are compensated via a performance-based structure might “work harder, but they also end up with higher stress levels and lower levels of job satisfaction.” With an employee rewards & recognition program, the goal is to inspire, celebrate the hard work of your team and encourage a positive connection to the company culture. Nothing could be more anti-stress than that!

While you can have facets of your R&R program include compensation-based milestones, generally, employee rewards and recognition activities should stand on their own as part of the whole employee experience. Both may originate from the same HR function, but true performance-based pay is part of an employee’s compensation plan, overseen by sales, payroll and accounting in most organizations. Further, Employee Rewards and Recognition is also not a component of a traditional benefits package, like healthcare, PTO, retirement packages, etc.. A good R&R program is a brand differentiator, used to build confidence, support company core values, improve recruiting and retention of top talent and increase employee engagement. It is not a mandatory program in an organization per se, but is often a pillar of the organization’s foundation and a top driver for engagement, performance and satisfaction among the workforce.


Recognition amplifies a good pay-day

For instance, you may have a top sales agent who consistently performs well in their capacity, contributing to the bottom line and in turn is compensated handsomely. Sending the employee a duly deserved paycheck is incredibly important (pay is still a top reason for accepting or leaving a job), but so is acknowledging their hard work with a genuine thank you as well as peer and management recognition, both of which improve the quality of their work life. Recognition beyond pay increases their tie to the organization, their peers and the culture. Essentially, this could be viewed as a “blend” of both, but ultimately the engagement beyond the payment will likely be more memorable.

In terms of memorable experiences, an example of tying the outcome of performance-based pay to employee rewards and recognition is found in incentive-based travel opportunities to events and conferences that recognize top performance. Top performance is often tied to sales and “hitting numbers”, but the incentive-based travel is recognition beyond what the compensation may have been for said sales.


R&R is inherently inclusive, as not everyone on your team receives performance-based pay

Employee Rewards & Recognition components often have a monetary value for all employees, including those that don’t fall within the performance-based pay category. Some salaried employees, administrative employees, technical personnel or hourly workers have specific job responsibilities that can be somewhat harder to quantify in some instances against direct revenue, but their work is no less important. Many times, these employees will have goals to hit in their respective divisions through milestones, activity and engagement and can be acknowledged with a monetary-based reward on top of regular pay. An employee rewards and recognition budget is typically allocated to reward team members through a number of vehicles. These include gift cards, company events and celebrations, redemption stores based on accumulated point systems, in-office (or virtual) gestures like lunches, swag, allowances, and more.

Social recognition programs like Maestro CHEER and the On-The-Spot platforms are examples of tools that recognize and appreciate team members, but are not based on monetary value. With Maestro CHEER, a company activity stream enables employees to make meaningful connections with one another through recognition delivered via interactive messages, audio, video and likes. It’s a robust, in-house networking tool that keeps teams connected through praise and appreciation. With On-The-Spot, companies use custom-designed certificates for any desired award type, so that managers and leaders can deliver recognition the minute an ideal behavior is observed.

It’s not money, but it means something. And based on the following research, it means a lot! Research shows:

  • 75% of employees who were recognized by their manager once a month – which is a good cadence to check in on progress to long-term goals – reported being satisfied with their job. While 85% of those that were recognized weekly reported being satisfied.” (BambooHR)
  • 83% of respondents said recognition for contributions was more fulfilling than any rewards or gifts; 76% found peer praise very or extremely motivating; 88% found praise from managers very or extremely motivating; 90% said a “fun work environment” was very or extremely motivating. (Psychology Today)

The above data is evidence of what employees find valuable and also provides incentive for organizations to build their cultures to reflect values of appreciation and celebration. We can agree that companies strive to be a great place to work. Given the amount of time and energy spent at work over our lifetimes, it’s paramount that expenditure should be meaningful and satisfying.

A well-thought-out Employee Rewards and Recognition program that supports employees through fair compensation along with the tools to recognize their hard work beyond what money can do sets the stage for a thriving organization and healthy company culture. At Madison, we intend to give organizations the tools to inspire anytime, anywhere to help create memorable experiences and a balanced life between work and home.

At Madison, it’s not business as usual, but instead, we are focused on support. Supporting our invaluable customers by maintaining business continuity, sharing advice about new working models and providing an opportunity to connect with others. 

While you adjust to your new working routine – whether it be at home or part of an essential service - please join the conversation. Ask Madison is an opportunity to share ideas, ask questions and help create our ‘new normal’, together. We believe that employee recognition is an essential business function and that, now more than ever, it is our responsibility to celebrate each other, recognize every milestone and collaborate together—even though we may be sitting apart.

Have a thought on this article, share your comments and share this post using one of the social media links. Have a question? Ask Madison by emailing info@madisonpg.com or leave a comment below.

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