With fall now in full swing, thoughts turn to football, warm fireplaces, and, oh yes, the holiday season. Also on the horizon is the coming new year, which means 2024 budget preparation time for your employee recognition program
A key question is just how much should a company budget for their employee recognition programs. According to the Incentive Marketing Association (IMA), the answer to this can vary as every company has different goals for these important programs.
A World at Work study found that while some organizations spend as much as 10% of payroll on employee recognition, the average budget for employee recognition is 2% of payroll, and the median amount is 1%.
Here at All Star Incentive Marketing, we advise our client companies to set aside $15 to $50 per employee per month.
Here are four of the major categories of an employee recognition program that should be part of any comprehensive budget plan:
Service Awards Program –
This is a traditional and beneficial way to increase employee retention. The IMA cites studies that show on average U.S. employees will stay at a company two years longer if the company has a milestone program.
Spot Awards –
Spot Awards are designed to recognize special contributions as they occur, for a specific project or task. They are also a great choice for frequent and ongoing recognition. These programs recognize and reinforce the behaviors and values that are important to your company. Spot awards can be achieved through many methods including point redemption programs.
Social Recognition –
This program provides a platform to create an overall culture of recognition. The basic idea is to create recognition initiatives that are visible in one location. Typically, each employee earns points for their accomplishments, and they can redeem their points for gifts and merchandise.
With the rise in technology, this program option also helps to keep remote workers connected and engaged. A SHRM study found that peer-to-peer recognition is 35 percent more likely to have a positive impact on financial results than manager-only recognition.
Performance Recognition –
This form of recognition rewards employee performance. These programs can be used to help increase engagement in your sales team, or to increase participation in your wellness or safety initiatives. Neuroscience has shown over-and-over again that when good behavior is rewarded, that behavior is very likely to be repeated.
When mapping out your employee recognition budget, here are some other important considerations that we recommend you consider:
Save by Using One Platform –
It can take a lot of time to manage many recognition programs on different platforms. All your measurements and data should be in one place, so you can get a holistic view of how your plan is working. This helps to streamline the process for the administrator and allows you to bundle all your recognition efforts together for cost savings.
Tailor Your Approach –
Based on your goals, decide what program you want to prioritize. You can scale your recognition efforts to fit the target goals you’re trying to reach. The cost can vary based on the type of program you choose.
Consider All Costs. –
Beware of hidden fees. Some recognition providers don’t make you aware of setup charges and technology fees. Be sure to ask questions about all charges before you start the program. When budgeting for your recognition program, be sure to consider sales tax, shipping and handling costs.
Budget for Taxes –
Some award programs are exempt from payroll taxes, such as years of service recognition. Others are not exempt. Please consult your tax adviser to plan a recognition budget that takes this into consideration.
The employee recognition experts at All Star Incentive Marketing work together with clients to create reward and recognition budgets that are not only cost-effective, but produce meaningful, verifiable results. Contact us for assistance with your budgeting process.