HR Word of the day: Tangible and Intangible Rewards

Tangible and Intangible Rewards

Intangible rewards, also known as intangible benefits, are rewards provided to an employee that doesn’t have an inherent monetary value and are often applied in response to a particular achievement.

What are intangible rewards in the workplace?

Intangible rewards refer to non-material awards provided to an employee that does not have inherent financial value. They are used to recognize and show appreciation for an employee's efforts and performance. Intangible rewards are usually given in response to a particular achievement by an employee.

Examples of intangible rewards include:?

• Public praise from a manager
• Thank you notes
• Praise on social media
• Flexible working hours
• An extra day off
• Letting an employee work a 'half-day'
• An employee recognition trophy
• A free lunch
• Time for an employee to work on their personal projects
• Personal development opportunities
• Providing employees with an experience they'd like?
• Time-off for volunteering

Benefits of intangible rewards

Intangible rewards can be given instantly: Intangible rewards are instant and in the moment. Tangible rewards, however, may have a financial value that could be delayed due to payroll processes.?

Creating a significant moment: A company-wide email thanking an employee for their excellent work creates a lasting positive impact on an employee. The employee's happiness can be more significant than a financial reward.

Not requiring a lot of money: You don't need to make a large monetary investment to award intangible rewards. It may affect your bottom line (such as giving an employee additional time off), but the positive effect could outweigh the loss.

Motivating employees: Employees who feel recognized and appreciated by an employer are more likely to feel motivated and work harder.

Positively impacting employee engagement: Intangible rewards create an environment where employees can engage with each other and build bonds. For example, an employee's efforts recognized by a company on social media will receive likes and comments on posts from peers. Internal messages and emails may additionally be sent to the employee.

Improving retention: Employees who feel recognized are likely to remain with the organization longer. Employees are more likely to leave if they are not recognized or feel valued by the employer.

What are tangible rewards?

Tangible rewards are defined as rewards provided to recognize a job well-done and show appreciation. These can be either cash or non-cash rewards that can be assigned a monetary value.

Tangible rewards create psychological empowerment for employees, leading to discretionary behavior, such as improved job performance and morale. For example, an employee is given a cash bonus for helping a high-valued customer in a difficult situation.

This reward reinforces the employee's decision to go 'above and beyond' their usual call of duty as part of their normal behavior. If an employee feels well-rewarded for showing this behavior, then they may display the behavior more regularly, as well as other positive behaviors, such as increased creativity.

What are the types and examples of tangible rewards?

Salary or wage increase: A fixed reward that increases the employee's regular wage or salary.

Bonus: Awarded in the form of cash. Can be awarded annually or as a one-time payment.?

Gift cards: A gift card or voucher the employee might find useful. Tailor the type of gift card to the employee's preference or interests.

Company-branded merchandise: This could be a company hoodie or laptop, for example.?

Lunch: Paying for an employee's lunch or providing them with a lunch card to use at the work cafeteria.

Miscellaneous rewards: Sporting event tickets, electronic gadgets, clothes, etc.

Why use tangible rewards?

Tangible rewards form a significant part of any successful compensation strategy for an organization. Some of the benefits of tangible rewards include:

• Motivating employees to reach a specific goal: Employees are likelier to work harder when a tangible reward is linked to a particular outcome.
• Reinforcing motivation and company values: Employees are rewarded for demonstrating positive behaviors.?
• Additional financial rewards: It's a great way to celebrate employee accomplishments and provide additional financial rewards beyond an employee's usual salary or wage.

Potential downsides of tangible rewards

Not every employee will receive a tangible reward at the same time, or even at all. As a result, the following negative repercussions can occur:

• Feelings of jealousy or unfairness among employees: Even if an employee is undeserving of a tangible reward, they may still feel a sense of entitlement or resentment, leading to a loss of productivity.
• Employees focus primarily on receiving tangible rewards: This might create a narrow focus and compromise the quality of work less likely to be rewarded.
• Managing a rewards budget: If tangible rewards are the main form of employee recognition, costs can add up quickly. Your tangible rewards must vary in form and financial value.?
• Low performers feel undervalued: As tangible rewards are predominantly rewarded to top performers, it may isolate low performers who may feel that their efforts are going unnoticed.

Conclusion

Rewards and incentives work because people need them. Psychologically, people desire recognition, need to feel a part of a team and want to do a good job. But people, after all, are only human. Long-term personal goals often fall prey to daily or weekly frustrations. Also, people may find it hard to meld personal goals with their organization's long-term or even short-term goals. Some people may have trouble sculpting individual performance goals at all. In all cases, excitement, interest and performance can suffer.

An organization should use both intangible and tangible rewards. Providing employees with only intangible rewards will create dissatisfaction, as it will create the perception that the employer is not committed to financially rewarding employees for their efforts.