Importance of Reward and

Recognition Programme in MSME

Employee good work attracts not only job appreciation but something more than that. This
something in corporate can be named as Reward. As per the latest trend employer
appreciate good work done by employees in a special way. The ways of sharing their
appreciation however differ. In order to have a systematic approach towards the
appreciation of rewards, there is a need for reward and recognition policy.

Employees besides wanting a good salary, friendly environment, growth opportunity also
want to be appreciated for the outstanding work performed by them. Reward and
recognition play a major role in attracting and retaining talent within the organization. It
not only acts as a morale booster but also promotes 3 P's i.e. Productivity, positivity, and
promotion. Such kind of programme builds up motivation in the workplace. However, an
effective reward and recognition programme cannot work in isolation. It needs to have
collaboration from employee managers and senior management. The role each one of
them plays in making reward and recognition a success is explained below.

Recognition can be given by a large number of ways. Praising is inexpensive. A good

reward and recognition programme should be.

Significant: Rewards must be based on values, goals, and priority.

Flexible: Reward programme must be flexible. It must be as per the demand of time and
place.

Personal touch: Whatever is the kind of reward formal or informal, it is necessary to

have a personal touch.

Timely: An employee should be rewarded on time else credibility is eroded with the
passage of time.
Genuine: The appreciation must be genuine.

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Sample Policy For Reward and Recognition at

Workplace
A quick Guide ,Templates for Example

Index

1. Aim
2. Purpose
3. Scope
4. Definitions
5. Component of reward structure
6. Steps for development of effective reward structure
7. Why reward employees
8. Parameters for reward programme
9. Most important steps for reward and recognition
10. Key responsibilities
11. Reward and incentive
12. Nominations
13. Selection
14. Effectiveness of policy
15. Review of policy.

Aim: The major aim of reward and recognition policy is to attract and retain the best
talent. In order to attract and retain it becomes important to recognize the efforts put in by
the employee in terms of performance, attitude, and achievements.

Purpose: The purpose of the rewarding performance is to build up an organizational

culture where good work done by employees is valued and their tremendous efforts are
recognized.

Scope: This policy is applicable to all the regular employees of the company.
Definitions:
Reward: Cash or noncash award given for outstanding performance by the employee.
Reward and recognition: Reward programme developed and communicated by the HR
department.

An Important component of a reward programme

 Behaviour to be recognized must be linked with organizational mission.
 All staff members, managers, senior management must be trained well for the
implementation of an effective reward programme.
 The programme must be communicated well at all levels.
 Analysis and evaluation of programme effectiveness.
Steps for the development of an effective reward
programme:
In order to give motivation to employees in the workplace, an effective programme should
be designed.

1. Target the audience: One reward programme cannot fit everywhere. It must be
designed keeping in mind the audience. Every employee is different what motivates one
in the workplace might not motivate the other. Though the reward programme can be
customized individually, however the following need to be considered before designing
an effective reward and recognition policy.

a) What are the different types of jobs done by employees?

b) The Total number of employees in the organization.
c) What motivates them individually?
d) What type of recognition is being provided by the company?
e) Does appreciation of employee’s matters for them?
f) How reward and recognition programme is communicated to employees.

2. Choose the Target:

a) In designing an effective reward programme choose your target carefully. Have a look
at the type of behaviour which one wants to improve through the reward and recognition
policy. The behaviour, however, should be measurable for instance decrease in cost.
b) Consider the various types of challenges being faced by your employee. How
rewarding their work motivates them to do better work.
c) Be reasonable while setting the goals for employees. Too many goals do not produce
any fruitful result.
d) Are the goals practically achievable?

The following type of performance can be rewarded:

1.Safety achievement/ Swach /5s Improvement
2. Long-term employment
3. Exemplary attendance
4. Productivity
5. Innovation
6. Excellent customer service
7. Outstanding performance
8. Positive attitude
9. High level of skills
10. Team player
11. Initiative to get the job done.

Carefully design what type of performance you want to reward. Once decided to
communicate your programme to your employees.

3. Know your budget :

In case reward and recognition programme is very fancy you might not be able to run it
for a long time. So before communicating your reward programme to your employees
define your budget. Following should be considered in designing your budget:
a) What kind of advertisement /Promotion you plan for reward programme.
b) How many recipients for your reward and recognition programme.
c) What is going to be the cost of the reward programme?
d) Is it going to be formal or informal reward programme?
e) What is going to be the cost of administration?
f) The cost of training managers and supervisors.

4. Determining the criterion:

a) The criteria must be chosen with due consideration.

b) The timeframe in which the target to be achieved must be communicated to employees.
c) The criterion chosen for employees must be viewed as fair and quantifiable.

5. Choose the type of award:

Choose the type of award you want to give your employees. The Success of the
programme depends majorly on how you want to reward performance. Choosing the type
of reward is an important step.

6. Communicate how your company is rewarding employees?

The communication must be from the top to the bottom of the organizational structure.

7. Evaluate the programme: In order to know the effectiveness of the programme. Try
to understand

a) The employee’s reaction towards the reward and recognition programme.

b) How well is the programme understood?
c) How has the behaviour changed
d) Overall effectiveness of reward programme.

Why reward Employees?

The reasons to reward employees can be explained as follows:
1. Boost employee morale: Appreciation of staff boost up employee morale. They tend
to work with better efforts and sincerity.
2. Increase in productivity: Rewarded employees are dedicated to working with utmost
efficiency thus result in increased productivity.
3. More engaged employees: Employee engagement increases when their efforts are
recognized.
4. Reduces wastage: This is another advantage of the reward programme that it results
in the reduction of wastage.
5. Better retention: Recognizing and rewarding employee performances attract and
retain quality talent.
6. Greater employee satisfaction: When employees and their work are valued, their
satisfaction and productivity rises, and they are motivated to maintain or improve their
good work.
7. Reduce stress: Good reward programme Increases positivity in the environment and
can also be called one of the stress busters.
8. Higher Loyalty: Employee loyalty towards an organization increases if the good work
done by employees is appreciated and rewarded.
9. Better Teamwork: Boosting up employee morale by rewarding their performance
increases employees spirit to work together in a team.
10.Lesser absenteeism: Good reward programme reduces absenteeism.

Parameters for reward programme:

The various parameters to be taken into consideration for rewarding performance are as
follows:
1. Level of job performance ability of an individual thereby rewarding performance of an
individual.
2. Extraordinary efforts put in by an employee in a given task.
3. The Longer stay in service of the company.
4. The Individual with special skills is recognized and rewarded.
5. The Employee who has done a job well despite being complex such employees are
appreciated and awarded.
6. Exhibition of skills that helps in getting work done more effectively.
7. Exhibition of leadership skills is another way to reward employees. Leadership skills
used in getting the complex job done demand rewards.
8. Contribution to process improvement.
9. Doing service above the normal routine.
10. One time outstanding effort which helped the company as a whole.
11. Initiative to work on special projects.
12. Initiative in wastage reduction.
13. Helping colleagues even after fulfilling one’s own duty.
14. Higher quality works consistently.
15. Exceptional dependability.
16. Any extraordinary work is done which has increased the image of the department.
17. Exhibition of team spirit.
18. Exceptional work was done by the team as a whole.
19. The Exceptional contribution of the entire team to get the work done.
20. Outstanding work by going an extra mile.
21. Innovation in work done in routine.
22. Excellent response to customer care.
23. Perfect attendance.
24. High level of extraordinary work is rewarded.
25. Education, training, and development.

Most important steps for reward and recognition:

1. Make all regular employee of the organization eligible under the reward and recognition
programme.
2. Clearly choose the parameters with specific information that will be rewarded and
recognized.
3. Knowing the parameters clearly will let the employee do work with more effectiveness
and sincerity.
4. Meeting the reward criterion is a tough task and the employer must consider all factors
that affect the performance of the employee. However, all the employees cannot be
shortlisted for reward in such case random picks and choose to be done.
5. The recognition must occur as close to the performance of actions as possible so that
the behaviour that attract reward is reinforced. Such behaviour brings in Motivation in the
workplace.
6. The criterion for choosing employees should have a mix of Peers, immediate
managers, HOD, and director said.
7. The communication of effective reward and recognition policy plays a very important
role. It must be communicated well to the employees.
8. There must be an alignment of organizational culture with the reward programme.
9. Recognition is most effective when it takes place regularly.
10. The immediate managers are requested to be aware of their responsibility to provide
effective feedback to employees and they must also give positive reinforcement t the
employees.
11. The immediate manager must have clarity on the ways to reward employees. They
should know how and when to reward employees?
12. Managers must be able to motivate and inspire their employees.
13. The art of communicating or communication expectations and goals must be known
to the managers.
14. Clarity on explanation regarding how the programme works and how the employee
can receive recognition.
15. Clear communication to employees with an understanding of how they impact
organization goals, mission, and success.
Key Responsibilities

Rewards and incentives :

Rewards and incentives are beneficial both for the employee as well as the employer.
When employees are recognized for their best performance and productivity employees
have increased morale, job satisfaction and increased involvement in the organization.
With the help of workplace rewards and incentives, both employer and employee enjoy a
productive and positive work environment.

What does incentive mean?

a) Incentive means something which encourages a person to do something.
b) the Incentive is a performance linked reward to improve motivation and productivity of
the employee.
c) Incentive includes the extra pay for exceptionally good rewarding work in addition to
regular wages of the job.

Types of Incentive:
The types of incentive include the monetary incentive and Non- monetary incentive.
Monetary Incentive: Monetary incentive means a kind of incentive that pays for good
performance of employee through Money. Monetary incentive includes Merit Pay, profit
sharing plan, Pay and allowance, commission, stock option, bonus, suggestion plan and
perks, fringe benefits and perquisites.

• Non-Monetary Incentive: Non-monetary incentive is given to an employee for best

performance through perks and opportunities. These are valuable to the employee as
they result in the increased morale of the employee as they get to learn new skills and
can pursue the advance opportunity. It is not necessary that only money is the motivator,
when the Non-monetary incentive is rewarded to the employee it results in satisfaction of
self-actualization and self-esteem needs.
Rewarding work is always a strong motivator.

Non-monetary incentives include 2 types of rewards

Formal and Informal rewards

• Formal rewards:Formal rewards are being used for rewarding employee performance
within set defined guidelines. There are various ways to recognize employees work in
formal ways. For example Career advancement, job enrichment, employees
participation, diamond star, Year of service award, peer to peer recognition, Celebration
chart, Formal letter of appreciation, team trophy, one dedicated corner in company's
newsletter etc. Formal rewards are an alternative to the spontaneous rewards which are
given on an immediate basis, formal rewards are more planned as compared to non-
formal rewards.

• In Formal Rewards:This is the most effective means of rewarding and recognizing the
efforts of employees on an immediate basis. It is generally given in the form of Personal
or verbal thank you, an email or personal note to the individual, sharing achievement in
team meetings, a day off for a job

• well done, Give an employee more autonomy, Offer flexible work schedules or work
options, Giving employees with a computer upgrade, mentor other colleagues etc.
Informal Rewards:

Formal Recognition:
Budget: Budget will be allocated by the finance department. The finance department is
responsible for allocation of budget in a fair and equitable manner that all employees have
equal opportunity to benefit from the reward. The Budget may be reallocated as
appropriate.

Nomination Process:
Selection Criteria:
Selection criteria must be documented as part of the Employee Reward and Recognition
Program. The Finance department may designate an individual or committee, working in
conjunction with the Human Resources Representative, to develop specific award
standards and selection criteria, and to nominate or select award recipients.
The Effectiveness of policy:
The effectiveness of policy is monitored by the HR team to ensure the policy is applied
fairly.
Review of the policy:
The policy may be reviewed at any time on request of staff or management but will be
reviewed yearly automatically.
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Sample Policy - II

Employee Reward and Recognition Policy for Employees

Purpose: reward and recognition policy is designed to

encourage employees whose performance is outstanding
either individually or through teams that contribute to the
overall objective of the organisation and also to lay down
guidelines regarding” how to reward employees”.
Objective: The objective of reward and recognition policy is to promote motivation in
the workplace and to build up culture that is conducive for achieving organisational
objective and to make employees feel valued and appreciated for their good work done. It
is meant

 To promote reward and recognition of the employees

 To appreciate and recognize value added contribution of the employees.
 To acknowledge individual and team contribution.
 Timely appreciation to foster work quality.
 To award staff appreciation for the good work done

Principle:

Basic principle followed for reward and recognition policy

is mentioned below:

1. To promote Staff appreciation

2. To enhance motivation in the workplace
3. To design an effective Incentive Programme
4. To value the effective work done by rewarding work
5. Consistent reward and incentive scheme with a defined objective.
6. Empowering employees by rewarding performance
7. Reward to nurture a sense of ownership amidst employees.

Eligibility for Reward and Recognition

Following criteria must be fulfilled before an employee
become eligible for reward and recognition

1. Employee must be a regular employee of the company

2. Should be in service of the company for last 6 months

Qualifying outcome for reward and recognition

1. Exhibition of organisational mission and goals while

performing the duty
2. Exceptional contribution in increasing motivation in the
workplace
3. Efficiency in Process and Practice which leads to
rewarding work
4. Exceptional team building skills
5. Innovative approach towards problem solving based on
organisational values
6. Cost reduction which is essential for an effective
incentive programme
7. Increment in revenue generation
8. Excellent customer service
9. Contribution in building team members competencies
10. Excellence in all spheres of work done which results in
Staff appreciation
11. Contribution in employee engagement initiative
12. Contribution in achieving organisational objective by
performing service above normal duty
13. Going out of ways to form positive and inclusive work
environment
14. Exceptional contribution in CSR related activities
15. Developing new work methods that reduce waste
16. Individual possessing highest talent are rewarded
17. Going the extra mile by performing duties when
department is short staffed.
18. Highly efficient in process and practice

Reward and Incentives at the workplace

Reward and incentives are beneficial both for the employee
and the employer. It not only increase motivation in
workplace but also energises employee to work with
proficiency. Generally this question do occupy minds of
managers that how to reward employee? Rewarding
performance is an art. This reward and recognition policy is
designed for employee rewards and recognition programme.
Such Staff appreciation results in increasing employee
efficiency and an increase in sales and productivity. An
effective incentive programme must include both monetary
as well as non monetary incentives. .With rewards and
incentive employer and employee enjoy a positive and
productive work environment. An incentive programme
which recognizes individual achievement in addition to team
performance can provide extra incentive for employees.
Ways or Types of reward & incentives:

Monetary Incentive Reward - Various types of monetary incentive

reward includes Variable pay, bonus, profit sharing and Stock
Option. Details on the same are mentioned below.

Variable Pay: Variable pay can be tied to the performance of the company, any
organisational accomplishment or an individual performance or both. It is given as one
time reward. Still it is one of the motivational programmes for reward and recognition.
Details of variable pay can be referred in Compensation and benefits policy.

Bonuses: Bonus is used to reward individual accomplishment. It is one of the most

commonly used types of incentive. By rewarding performance of an employee for
previous year, bonus gives motivation in workplace.

Profit Sharing: In this money is disbursed by taking a certain percentage of employee

salary. This is credited to employee account at the end of financial year. It is given in
Cash form. This employee reward motivates an employee to work beyond normal duty to
improve upon business performance. However these types of incentive require an
employee to vest certain number of years with the organisation before receiving any
money.

Stock Options: This reward and recognition method is very popular nowadays. In these
types of incentive an employee has the right to buy a specified number of a company’s
share at a fixed price for a specified period of time. The question does arise on how to
reward employees so that they remain motivated for a long time. Stock option is the
answer.

Stock options are authorised by a company’s board of directors and approved by its
shareholders. This employee reward is given by a certain percentage of the company’s
shares outstanding.
Non monetary type of incentive: Non cash reward programme works better than cash as
it promotes improvement in team work, increasing customer satisfaction and motivation
in workplace among other programmes. Reward and recognition has a timing element.
It is must to occur for staff appreciation. if High
rewarding performance continues then reward & incentive can be one of the factor for it.
Both reward & recognition programmes have their place in business. By rewarding
performance business will have an edge in competitive market place. Non monetary
incentive reward employee performance with opportunities other than related to monetary
incentive. It includes flexible work hours, training opportunities and ability to work
 independently. Such programme motivates employee as there is learning of new skills
and pursuing the advance opportunities

The Various types of non monetary rewards &

incentives:

Employee rewards have been divided into following

categories.
Branch Level Reward: This includes Individual level
Reward and on the spot rewards and given for
rewarding work.
Regional level Reward:This includes rewards given to
Best Teams at regional level.
Pan India level Reward: This includes Employee of
the year reward, Invention of the year award, cost
saving strategy of the year, most efficient operations
award, employee engagement practice of the year.

“ON THE SPOT “Reward

Timings
Types Approval
Criterion Level Purpose of the Felicitation
of Rewards Required
Reward
 Going
Company apparels extra mile To
and motivate
Immediate As and when
performing Branch Level and Instantly
Manager/HOD required
work inspire the
beyond employee
own duty

Lunch with HOD /

Senior
Management Team
As and
Any Instantly When
Innovative To required
idea which recognise
has helped employee Immediate
Branch Level
achieving skills held Manager/HOD
the given
task at
hand

Regional Level Rewards

“Team of the region “

It includes “Employee of the year award “, “Invention of the year award”, “Cost saving
strategy of the year Award ”, “Most efficient operations award ”, “Employee
engagement practice award “Best safety practice award”.PAN India level rewards

Timings
Types of Approval
Criterion Level Purpose of the Felicitation
Reward required
Reward

Recognize
commitment
Excellence in
towards setting PAN India
all spheres of PAN India Senior Management Annually
Employee of excellent event
the work done
the year award benchmark by
an individual

To recognize the
Excellent
initiative that
initiative to
Invention of resulted PAN India
improve upon PAN India Senior Management Annually
the year award in improvement event
Process/
in process/
Practice
practice

To recognize the
Cost strategy that PAN India
Cost Saving PAN India Senior Management Annually
reduction , resulted in cost Event
Strategy of the
reduction
year Award
 Improvement
in revenue
generation

Most Efficient
operations Strategy that
award resulted in
To recognize the
tangible
strategy that
benefits to the PAN India
PAN India resulted in Senior Management Annually
company in Event
Operations
terms of
efficiency
operational
efficiency

To recognize
practice that
Going out of
Employee has resulted in
ways to form PAN India
Engagement Improved
inclusive PAN India Senior Management Annually
practice of the productivity Event
work
year Award due to inclusive
environment
work
environment

Process followed for Branch level Reward

Reporting manager recognize the contribution of the employee

Reporting Manager seeks HOD approval on the same

 Approval Received

Award Shared at an event organised at branch level also shared

as and when required in case of LinkedIn recommendation

Process followed for Reward

Reporting Manager Send Team nomination to HOD, (nomination

to be sent in given timeline)

HOD Consult with Departmental committee, Regional committee

takes telephonic round of interview, names of shortlisted
candidates shared with Corporate HR for approval

Nominations sent to Corporate HR for approval if approved

Rewarded in event
Examples

1. Cash award to each zone on being becoming best zone/area in swachta to be INR 1500/ (
Each member may get 200 if 5 members)
2. T Shirts/Caps with Company Logo with ZED so non-monetary award for recognition
3. Certificates to each member which may be prominently displayed in their work areas or a
revolving 5s / Swachh trophy may be presented