How much should your company spend on an employee recognition and reward program?

How much should your company spend on an employee recognition and reward program

How much you spend on an employee recognition and reward program is going to depend on a few things:

How much you’re company is ready to invest, considering the issues you are trying to address (e.g. spend time calculating the time and recruitment cost of attrition. If it’s costing you $75,000-$150,000 to recruit, replace and retrain someone each time an employee leaves, we’d argue spending this amount in a recognition program that would lead to more people staying would be a worthwhile investment!), and

whether employee recognition and reward is one of several cultural and wellbeing initiatives your company is running.

Start by working out your budget per employee

Based on our experience working with over 18,000 employees, the best performing companies invest at around $250-$300 per employee (this figure includes what the company spends on other cultural and wellbeing initiatives). Some companies kick off with a budget of $200 per employee and start seeing results, so they invest more the following year.

Spend your recognition and reward budget wisely

Rather than blowing your entire budget on big, annual awards that only recognise 4-5 of your “top achievers”, make recognition and reward available people to everyone in the company, regardless of their role or tenure. Making recognition an everyday part of your business spreads the positive morale, and makes the productivity-boosting effect of recognition last throughout the year. That way, your employees are getting regular feedback and the feeling of progress as they go through it, which helps to keep them engaged long-term.

Once you know how much you want to spend per employee, spread that budget out over the award types you chose in step 3. Use a mix of free recognition and micro and large awards.

A sample recognition and reward structure

Here’s a sample structure for an employee recognition program for a 200 person business. Unlike traditional top-down programs that recognise only a handful of people each year, this program can generate over 5,000 instances of recognition across the entire organisation within 12 months. Imagine what that would do to morale and productivity!

Budget: ~$65,000/year
$250/employee ($50,000) + admin + tech fee = approx $14,500

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