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Looking after your staff – particularly the good ones – so that they stay is one of the most financially important decisions that you will make. Making sure that you have proactive and fair reward systems in place is an investment that will both make your employees feel recognised and motivated, and will enhance your position as a positive place to work when recruiting.

Finding and hiring new recruits is an expensive business, and the more elevated the position, the more expensive it is to fill key roles. According to various studies, the basic cost of recruiting someone into an average salary role is about £3000 (when using a recruiter). This does not take into account advertising and interviewing fees, training, handover costs, setting up with new equipment, nor the implications of potentially hiring the wrong person. In short, once you have got the right person, you want to make sure you hold on to them.

The benefits of a reward system

Establishing a robust reward system for employees helps establish a motivated workforce. If an employee is committed to working on behalf of your organisation to the best of their ability, then having that commitment recognised and acknowledged goes a long way towards boosting an individual’s overall sense of achievement and purpose – two drivers that are fundamental to maintaining motivation.

During difficult economic times, reward systems are also a key tool that employees can use to help them combat rising costs. Whether through access to generous retail discount schemes or instigating performance-related bonus schemes, anything that places a greater degree of power and control into an individual’s hands encourages greater productivity and loyalty.

But what are the elements that contribute towards an effective staff reward system, and how does an organisation go about establishing employee reward and recognition systems that are congruent to your particular business?

Salaries – the ultimate reward system for employees

A salary is the fundamental part of an ultimate reward system for all employees and the first part of an overall package that an employee will consider when either looking to join a company or looking to move on as part of their individual career progression.

It is important to implement an annual pay review across the board. Salary benchmarking will ensure that your workforce’s salary across the different pay ranges positions you competitively in the market. This information is vital both as an understanding of the cost implications faced by those who are experiencing the same trading environment as you and to possibly prevent employee ‘poaching’ through your competitors offering higher salaries.

There are two key reasons why an employee may want to leave your employment – because they are unhappy and don’t feel like they are progressing or because they are looking for more money. An annual pay review will help ensure that both these elements are addressed before they grow into something too significant and will make sure your employees feel heard on a regular basis.

Employee reward system examples

In addition to the main salary, there are a number of elements that can be integrated into established reward systems, including the use of third-party suppliers. Reward systems examples include benefits packages that can offer a wide range of additional benefits such as health and wellbeing services, financial advice, gym memberships, stock options, retail vouchers and even more flexible working conditions.

This mixture of tangible and intangible benefits can be drawn on by employees as and when needed, giving them easier, more cost-effective access to benefits that will ultimately make their lives easier.

Employers can encourage retention, by offering additional benefits based on length of service, whether that is the opportunity to take a sabbatical, a more flexible approach to working remotely (if appropriate), increasing the number of days holiday commensurate with length of service, even the introduction of ‘duvet days’.

Is a bonus or commission scheme an effective reward system for employees?

Bonuses or commissions do not exist purely for those working in banking – they can provide excellent motivation at every level of an organisation, from the factory floor to the boardroom.

There is a difference between the two. A bonus is given after achieving a particular set goal, and a bonus scheme can be developed to motivate every department, no matter where in the product cycle they are operational. In the same way, when times are bad, employees are often asked to tighten their belts and understand why pay raises are frozen. In good times, employees could and should expect to share in the good times with a bonus scheme.

A commission scheme, on the other hand, is built into the cost of sales. A rising scale of commission rates is probably the most effective form of reward system for employees who are driven to exceed performance metrics through financial motivation.

Encourage reward system ideas for your workforce.

The most powerful ideas can often come from your employees themselves, so cultivate a culture of listening and participation. Reward systems do not have to be financially based, and your most loyal employees will not specifically leave you for cash, but they will be more likely to leave if they feel unvalued.

If you need support in setting up employee reward and recognition systems, Paydata can provide extensive knowledge and expertise. Contact us now for further information.

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