How To Budget For Employee Recognition
Employee recognition can be as simple as a firm handshake and a gracious “Thank you for your work.” Then again, employees might expect other forms of recognition when their work goes above and beyond what is expected. Plus, employees need to be recognized more frequently than during their annual performance review. Thus, to produce the high-quality and regular recognition that workers need to feel seen and valued, businesses need to develop employee recognition programs — and just like any other business program, recognition requires funding.
So, how much should an effective employee recognition program cost? Frustratingly, the best answer is: It depends.
It Depends on the Size of the Business
It should go without saying that the size of the business has a significant impact on the budget required to fund an effective employee recognition program.
A startup with a handful of employees is always going to have lower recognition-related expenses than a corporation with thousands of workers.
Generally, the more one-on-one attention a supervisor can provide to employees, the lower the costs of recognition are likely to be, as managers can offer timely praise in lieu of expensive rewards. Thus, the bigger the team size, the more budget should be devoted to the recognition program.
Most businesses maintain multiple incentive programs to cover the diversity of motivations that employees can maintain. Unfortunately, the more complex the recognition program — meaning, the more methods of incentivizing different types of workers — the more expensive the program is apt to be. Business leaders need to put effort into researching the most effective motivators within their organization, so they can avoid wasting resources on unnecessary complexity.
Most recognition programs are tied into a digital platform that makes it easier for business leaders to track employee performance and achievements. There is a wealth of recognition program platforms for businesses to choose from, allowing individual organizations to select the service that best suits their needs. Business leaders need to evaluate not just the features of available platforms but the costs associated with them, as well. Generally, it is best to stick with a single recognition program platform, which will keep all data in a single, accessible location. What’s more, one platform is easier to integrate into related systems, like accounting and HR, to save a business additional time and effort.
How to Save Money on Employee Recognition
After business leaders consider how variables like business size, program complexity and recognition platform impact their budget, they can look for ways to keep costs as low as possible. Some successful strategies for reducing employee recognition expenses include:
Tailor recognition to individuals and teams. Not every employee receives the same level of motivation from the same incentives. Business leaders should form connections with their employees and use insights from their relationships to know how to tailor recognition to each worker and each team. The alternative to personalized appreciation is equally luxurious rewards for every team member, so businesses can save money by tailoring the way they recognize to individual needs.
Look for hidden fees. Some recognition program platforms advertise an eye-catchingly low price but end up costing significantly more due to setup charges, technology fees and other hidden expenses. Business leaders can reduce the cost of a recognition program by thoroughly investigating any platforms they are considering. It is worthwhile to speak directly with a sales or customer service representative to ask for clarification on all fees and charges to include sales tax, shipping and handling costs and more.
Consider using tax-advantaged benefits. Some employee awards programs are exempt from payroll taxes, which saves the business and the employee some expense. For example, length-of-service awards celebrating employees who have a tenure of more than five years at the company can be tax exempt up to $400. Business leaders should look into other ways to lower taxes on qualifying forms of recognition.
The only time employee recognition comes without any costs is when the company has just one worker on the payroll. Every other business needs to think about the budget of their recognition program — and how to keep that budget manageably low without compromising employee performance and satisfaction.