Staff incentive schemes: the options
Weigh up your options for introducing staff incentive schemes in your workplace.
There is a wide range of staff incentive schemes, each with different costs and appeal. They include financial and non-financial schemes, individual and group benefits, and short-term and long-term schemes.
Options for staff incentive schemes
Financial incentives in the workplace can help your business meet targets, motivate staff, and improve performance and productivity.
Financial incentives
Examples of financial incentives include:
- bonuses
- commission
- employee stock options
- paid time off
Non-financial incentives
Non-financial and non-pay incentives reward staff performance through perks and opportunities. Non-financial incentives include:
- flexible working hours
- formal recognition/awards
- vouchers
- extra unpaid leave
- gifts
- company cars
- training opportunities
- further education opportunities
An incentive scheme can offer employees extra pay as long as they reach individual or group performance targets. See .
Advantages and disadvantages of incentive schemes
| Type | Advantages | Disadvantages |
|---|---|---|
| Financial incentive | Can focus employees on hitting a target.
Places a value on achievement. |
Rewards are sometimes small.
Can demoralise if not earned. |
| Non-financial incentive | Can recognise employee priorities and lifestyles.
Can encourage attachment to business. |
Can be taken for granted.
May be inappropriate. |
| Individual incentive | Can focus the individual on achievement.
Links extra pay with extra output. |
Can be divisive.
Individual earnings can fluctuate. |
| Group incentive | Can encourage teamwork.
Can correct individual under-performance. |
Can undervalue individual skills.
May encourage bullying of under-performers. |
Some businesses allow staff to select their own benefits from a pre-defined list, eg, staff might be able to choose between health insurance and a gym membership.
Promotion and training opportunities are not strictly incentives as they are ways of fulfilling business needs. However offering employees the opportunity to access training or further education courses that aren't directly related to the person's job role with some or all of the costs met by the organisation, can work as a staff incentive.
Ensure your business avoids using negative incentives, eg, threat of dismissal. These may work in the short term, but may create a toxic workplace culture and can decrease morale and loyalty.
Tax considerations for staff incentives
There are tax and National Insurance implications for most financial incentives and for non-financial benefits with an equivalent cash value - see .
Other considerations
When offering any incentives in your workplace, ensure equality and avoid discrimination by enabling all staff the opportunity to access all available incentive schemes.
In addition, you are required to treat married employees and those in civil partnerships in the same way. For example, if you have a benefits package that is available to an employee's spouse, it should also be available to an employee's civil partner.