Flexible monthly business insurance
The employee bonus - a lump sum of cash paid out to a productive workforce - feels in some ways like a throwback to a more old fashioned time of large, paternalistic corporations whose employees might spend their entire career at one company before looking forward to a gift of a watch, a handshake from the boss and retirement.
In the modern working economy, tradition takes a back seat to innovation and original thinking when it comes to rewarding a hard-working set of employees. Cash is out and new alternatives are in, whether it’s gifts, experiences or charitable donations that warm the heart.
The idea of how to both incentivise and reward your workforce without resorting to plain, old cash bribery is one that has attracted plenty of debate and even academic research. From a professor in Canada researching how employees psychologically react to incentives, to cutting edge debates around altruistic rewards, this is a subject that can have a serious impact on how your employees feel about their workplace.
Here’s our rundown of the best ways to reward your employees as an alternative to a cash bonus.
Incentives without cash
Incentives and rewards are, in many ways, two sides of the same coin. An incentive for your employees is simply a promise of a reward in return for a high standard of performance. So, how can you incentivise your workforce without promising cash rewards?
Dr. Scott A. Jeffrey, an academic at the University of Monmouth who researches business ethics and the use of incentives, believes that rewarding employees without cash is not just possible, but even preferable. His article in the Journal of Human Performance suggests that employees may engage better with challenging mental tasks when incentivised with what he calls ‘hedonic non-cash’ rewards. Put simply, this means rewards of material or experiential value other than money itself.
So what does this all mean? Well, Dr. Jeffrey’s study concluded that offering employees hedonic, (or pleasure-giving) rewards can lead to better performance than simply offering cash. So, why not reward your employees with a non-cash bonus rather than the less personal method of an extra paycheque, for example:
Going even further, there is an argument to suggest that generously rewarding your employees with hedonic incentives as a group, rather than individually with money can inspire greater motivation. A phenomenon known as the Principle-Agent Problem suggests that the offer of money by itself will inevitably make people more self-interested, meaning they may not contribute to the greater, wider success of the team. Rewarding a group of employees as a collective, with non-cash alternatives such as a group holiday or expensive dinner party, can drive group motivation, rather than ego-centric motivation.
Fascinatingly, Dr. Jeffrey’s research led him to discover that most subjects expressed preference for a reward of money for their efforts, but actually worked harder and performed better when offered a non-cash reward. This is because of what’s known as ‘justification concern’, where employees feel they cannot justify being rewarded with luxury or hedonic experiences or goods and so ask for money, even though the hedonic reward is what is proven to incentivise them more. Put simply, when asking employees how they would like to be rewarded for their work, their answer might not align with what will actually incentivise them to work their hardest.
Many companies are active in supporting charitable causes throughout the year, but it can take a major leap to replace employee rewards, gifts and bonuses with donations to charity, made on their behalf.
This could seem like a risky strategy, leaving employers wondering whether their staff will be disgruntled that they never get to see their rewards, but in reality it is highly effective and immensely positive.
The act of giving, altruistically, is closely aligned with improved mental health. In short, those who selflessly choose to give away rather than receive, can actually benefit themselves from an improved sense of satisfaction and self-worth. Whether this means that any action can be said to be truly altruistic (if the giver will always benefit in some form) is another debate entirely.
From small businesses donating £20 to charity in the name of each employee, to huge corporations making major charitable donations, gift giving to charity on your employees behalf is more popular now than ever before. Indeed, back in 2017, Google’s parent company, Alphabet, replaced holiday gifts for their employees with $30 million of tech supplies donated to schools. The impact such a donation can have on the recipients can be huge and the positive impact on the morale of the company’s employees can also be significant. Don’t underestimate the power of that ‘warm and fuzzy feeling’ of being selfless and doing good.
Restoring work-life balance
‘Work-life balance’ is a well-worn phrase that often sits at the heart of conversations surrounding job satisfaction, company culture and employee motivation. Finding a way to create the right balance without hampering productivity can be difficult, but you can reward your employees for their hard work with something more valuable than money; time.
Some innovative ways to reward your employees and help them perfect their work-life balance include:
Flexible working hours
This is a big one. Prior to the 2008 recession the model of flexible working hours was significantly on the rise and has continued to maintain at a steady level ever since. Companies are embracing flexible working as a way to retain standards of productivity as well as keep employees engaged and content. According to a report by the Chartered Institute of Personnel and Development, “flexible working may enable a higher rate of labour force participation and use of people’s skills”.
The offer of more flexibility in working hours can be a great reward for employees who are dedicated to a business but wish to improve their balance between work and leisure.
Dedicated time for their own projects
Many employees work around their regular jobs on passion projects which are often creative and entrepreneurial ventures. Businesses can reward their staff by supporting and encouraging them in pursuing their personal projects with occasional time off to attend training or conferences for their side-ventures.
Far from being a full-time distraction from their main job, these “side hustles” can often help shape employees’ attitudes to business and hard work, increasing their productivity.
Extra days of annual leave
For many employees, enjoying time away from work isn’t all about trying to get a side hustle off the ground, but revolves around enjoying time with family and friends, relaxing and recuperating. A great way to reward hard-working employees is to offer additional days of paid leave. This doesn’t have to cost the business anything in real terms, as a rested and relaxed employee is likely to be more productive during the time they are in the office.
Indeed, a long-term experiment in shorter working weeks in Iceland between 2015 and 2019 found that productivity often actually increased overall with more time off for employees.
Time off to volunteer
Unlike in some countries, there is no legislation in the UK that specifically mandates that companies have to offer volunteering opportunities to their employees as part of their corporate social responsibilities. However, the chance to escape the office briefly and engage in activities such as gardening at a care home or cooking at a homeless shelter can have a positive impact on employees' attitude to both their company and their work.
As part of a reward for your hard-working staff, why not incorporate a day in the following year where your employees can ‘down tools’ and enjoy the satisfaction of giving back to the community?
Opportunities to attend wellness sessions or therapy
In the last decade, the many and varied issues surrounding our collective mental health have become significantly more prominent in public discourse. Stress-related mental health issues are particularly worrying in high-pressure corporate jobs or indeed any career where employees are subject to tense and difficult situations.
The charity Mind have produced a useful guide to promoting the mental wellbeing of employees in the workplace which includes suggestions surrounding company culture, inclusivity, communications and mentoring.
Also, there are a number of corporate therapy businesses that your business can partner with to provide opportunities for therapy and wellbeing sessions for your employees. Read our guide to mental health resources for entrepreneurs and small businesses to learn more.
What's the right way to go?
We’ve outlined three general ways in which you can positively reward your hard-working employees without resorting to the old fashioned technique of handing out cash bonuses:
- Rewarding employees with hedonic non-cash incentives, especially when the reward is given collectively to a group of employees.
- Making charitable donations on behalf of employees has a positive impact on the world and can promote an altruistic spirit that can have significant benefits to employees’ mental health.
- Rewarding employees with additional days off, volunteering days, flexible working policies, training or support for their own projects.
So, there are numerous different ways to go about rewarding your employees without directly handing them money, and the right way will be different for each business.
However, given the evidence that non-cash rewards can be beneficial to productivity, a better work life balance can make employees more relaxed and charitable donations can provide a sense of satisfaction, maybe it’s time to ditch the cash and think outside the box.
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This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.