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What is Reward Management? Expert Tips for HR

Company Culture
February 2, 2022
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A little bit can go a long way. When it comes to keeping employees happy and engaged, rewards can play a big role. This leads us to the big question: What is reward management? Here, we will touch on reward and benefits, as well as the importance of reward management for organisations.

But, even beyond rewards, organisations can even go a step further to promote the wellbeing of their employees by incorporating an employee wellbeing tool into their business. We’ll share more about the benefits that can be achieved by doing so as well as everything you need to know about reward management.

What is Reward Management?

Reward management includes policies and strategies to reward employees on a fair and consistent basis. The strategic approach should be geared at incentivising and motivating employees to increase their performance and engagement with the workplace, as well as to promote positive sentiments about the workplace.

Organisations should develop reward management systems so they are able to define how, when, and why an employee is deserving of a reward. The reward management strategy is also used to dictate the means by which the organisation will fulfill the reward and measure its impact. 

A reward management strategy should be in place when you hire an employee. This way, you can share their salary, benefits, and rewards all at once so that everyone is aligned when it comes to knowing what to expect. Unlike a salary, rewards are not always strictly financial. A reward can be as simple as acknowledging an employee for stellar work in the company’s monthly newsletter. We’ll get to more reward strategies examples shortly. 

Why is Reward Management Important?

Reward management is important because it affects how your employees think, feel, and act when they show up for work. While you can easily share a reward with an employee, you may not really understand its impact if it’s not measured or managed through a reward management program. 

The workforce is shifting from employees who solely care about the financial aspect of a job to one that is more purpose-driven. That means that employees who are aligned with company goals are more likely to achieve them. And, when you find top talent that truly cares about what they do, then you should acknowledge their accomplishments. 

Reward management has an impact on:

  • Employee retention 
  • Talent acquisition 
  • Brand loyalty and trust 
  • Employee satisfaction 
  • Employee engagement 

When employees are happier at work and feel recognised for their efforts, they are more likely to want to remain in their position. 

That being said, you may have the greatest rewards in the world, but if your employees don’t feel like their mental wellbeing is actually being supported, then the rewards won’t have the benefits you're expecting. 

An employee’s mental health and happiness is very closely tied to their motivation, engagement, and performance on the job. As such, along with rewards, you can support your employees’ happiness and wellbeing by implementing an employee wellbeing tool that can help employees track, monitor, and better support  their own mental wellbeing. We’ll touch on this again shortly. 

What is the Difference Between Benefits, Perks and Rewards?

Rewards are easy to confuse with other strategies that organisations use to promote satisfied employees. 

Let’s break down the difference between benefits, perks, and rewards so we can make sure that we are on the same page.


Benefits are typically a part of an employee’s salary. They may include pensions (that employees can access after a certain age), or paid leave, for example. Non-financial benefits are also becoming more popular, such as flexible work options, like working from home. 


Perks are like treats that make an employee’s day or week better. They are simple things like a company that hosts Taco Tuesday and provides employees with food and time to socialise, or fitness classes that are paid for by the organisation. These perks are emblematic of the company culture and may even be reason enough to attract top talent. 


The best types of rewards are in line with the company goals and can be used to enhance productivity and engagement. An example of a reward may be to offer employees a paid vacation. While it doesn’t seem aligned with boosting a company’s bottom line, if your company values work/life balance and refreshed employees, then setting up a vacation for a stellar employee will support these values. 

How to Create an Employee Reward Scheme?

If you’re starting from nothing, then creating a reward scheme can feel a bit overwhelming. 

The good news is that it takes a little bit of planning and thought to create a reward management scheme that is successful. 

Start by asking your company’s leaders and stakeholders what the reward process should ideally look like in the future. By having a forward-thinking approach, you can initiate actions today that are going to drive you to meet those goals down the line. 

Once you have that big answer that considers “What is reward management in the future?” then you can get to designing the plan. Consider a multiple rewards system, which means that you will incorporate different methods of rewards for different employees. 

It goes without saying that what motivates one person isn’t always the same as what motivates another. So, it pays to know what your employees want on an individual basis. You may elicit the use of an employee opinion survey to find out more from them directly. 

What are the Parts of Reward Management?

When you have your plan in mind to develop your reward management system, then pay attention to the following checklist of its components: 

  • Set reward objectives that are in line with business goals
  • Review your current reward practices and policies. Look for areas of inefficiency or room for improvement. 
  • Decide on how you will measure your reward system. This includes considering what data to collect, where you’ll collect it from, and how.
  • Define a process by which you will determine whether or not a reward system is successful or not. Make sure that it can stand over time as a marker for evaluation. 
  • Regularly implement or update your rewards systems on an as needed basis. 

While reward programs may take some time to implement and even measure for successes, you can incorporate an employee wellbeing tool immediately to reap similar (and sometimes even more powerful) effects. 

An employee wellbeing platform provides a virtual safe space where employees can pause and reflect on how they are feeling, at a time that works for them. From an employer perspective, you can leverage the real time mood insights from such a tool to be able to provide support to the departments that need it most. 

Image source: Unsplash

What are Examples of Employee Rewards?

To get an idea of what employee rewards look like in action, check out this abbreviated list of ideas that are noted as best practices.

  • A simple thank you can make all the difference. If you send out company newsletters or email updates, then dedicate an email to celebrate the success of an individual team member or department. 
  • Set up an employee of the month scheme by which employees themselves can vote for the top employee each month. You can provide a gift card as a form of an award for the person who gets honored with the title. 
  • Rewards can be granted for a variety of reasons to team members. You can give rewards for longevity, as in offering a reward to an employee who passes a certain milestone, such as being part of the team for 1 year, 5 years, 10 years, etc.  Or, you can host annual or biannual events in which you give out rewards based on different reasons, such as the most improved employee, the most dedicated employee, the most happy employee, etc. 

What are the Types of Reward Management?

Reward management tends to fall into two categories, namely performance-based rewards and membership-based awards. 

Performance-based rewards are based on how an employee performs over a defined period of time. This means that rewards are granted on an individual basis, but it is important to ensure the rewards are given based on capability in role, not overly tied to outputs or outcomes. 

This is because outcomes can be influenced by things outside of an employees control and therefore can become demoralising if a bonus is missed, even though the employee has excelled in capability. Some examples of these rewards may be: extra pay, bonuses, or even a promotion. 

If you’re going to go with performance-based rewards, then it’s recommended to focus on incentivising one’s capabilities in their roles rather than their performance of outputs and outcomes. This way, you can create an environment that fosters continuous support rather than a one-time reward. 

Membership-based rewards are irrespective of individual efforts. Instead, if the entire company passes a goal or a department does better than expected, then everyone involved in that group (a.k.a. each member) will receive a reward. 

What are the Benefits of Reward Management?

Reward management provides an array of benefits to both the employee and employer. The basis of rewards finds its foundation in psychology. You can probably think back to when you were a child and did something well in school. 

You may have been rewarded with a golden star on the chart that kept track of your progress and behavior. When you hit a certain number of gold stars in a week or month, then you got a toy or extra play time. 

Regardless of the reward or scheme that was designed for you, reward management works in the same way when it comes to employees and organisations. That’s because people work well off of positive feedback loops. A reward management program is exactly this. 

Regardless of the reward scheme you initiate, it’s vital to be mindful about what you reward, as rewarding capability deepens skill sets and competency to perform well. On the other hand,  rewarding outputs and outcomes can incentivise negative behaviours, like gamifying results, doing just enough to get the reward, competing against other teams (hoarding information or resources), instead of collaborating for the overall company benefit,

That being said, when employees are rewarded on their competency to perform well, then it helps to maintain and potentially increase their productivity levels. This is because they feel motivated and supported for their job well done. Happy and motivated employees are less likely to quit, which leads to higher retention rates for the business (and in turn, reduces costs of talent acquisition and training). 

Additionally, when employees are aware of how the contributions they make help to work towards the overall company goals, they have a higher sense of job satisfaction. When people are invested in the work they are doing, everyone benefits, including customers because the level of care and support they’ll receive from your team will be strong. 

Employee Wellbeing vs Reward Management

Reward management can be useful in motivating employees, but it can also come along with its fair share of hurdles to get right. The rewards have to be timely and closely aligned with what the employee values or even wants in the first place. 

A focus on employee wellbeing leaves less room for error because it is focused on the overall mental wellbeing of each individual. Employee wellbeing refers to how a person’s job, from their work environment to their work-related stress levels to their duties can affect their overall happiness, health, motivation and performance. 

Organisations can provide a wellbeing tool to better support and increase awareness around employee wellbeing. When employees operate in a healthy state of mind, the outcomes can be much like that of a reward management system as positive mental health creates increased employee engagement, lower absenteeism, reduced turnover, and highly motivated employees.

Reap the Rewards 

Now that we’ve answered, “What is reward management?” it’s up to your team to decide what kind of reward management strategy to deploy. 

If you are finding that your workforce is lacking motivation or engagement levels are low, it could well be along with rewards, you may actually need to offer better support.

To do so, you can prioritise your employees’ health and wellbeing by incorporating an employee wellbeing tool within your organisation.

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