Budgeting for Employee Recognition: A Guide to Saving Money?

Setting aside some extra cash for employee recognition may seem like an unnecessary expense, but there is a benefit to budgeting for an award program: employee happiness.

Although it’s often forgotten, recognizing your employees for hard work not only fosters a positive environment, but it also has the potential to save you money. Think about that for a minute. When employees feel good about their job they tend to be more productive and efficient, reducing the likelihood for mistakes or unnecessary absenteeism.

And who doesn’t like receiving a pat on the back? An award program is a great way to nurture employee happiness, not to mention it motivates people to work harder for the possibility of a reward.

“When employees feel that the company takes their interests to heart, then the employees will take company interests to heart,” explains Dr. Noelle Nelson, a psychologist and highly respected author of the book, “Make More Money by Making Your Employees Happy.”

That’s enough of an incentive to start a budget for an employee recognition program, right?

Budget 1-2% of Employee Payroll

Budgeting for employee recognition varies from business to business, but many companies seem to follow a common trend: as the overall potential salary increases for employees, the budget for employee recognition decreases. According to Madison Performance Group, a pioneer in workforce engagement and sales incentive marketing, most businesses should allocate around 1-2% of the aggregate employee payroll potential for an award program.

Gifts that Provide Value

When funds permit, Madison advocates that employers should make the focus of an award program on the gift itself. This makes sense—after all, the whole point of an employee recognition program is to show praise with a memorable gift.

Many employers struggle to find a corporate gift that meets both the budget restrictions of the award program as well as the perceived expectation of value. But is the true value of a gift always in the expensive price tag?

Regardless of whether it’s sentimental or monetary value, sometimes the most valuable gifts you can provide to your employees are the ones that have no price tag at all. Sure, an all-expense-paid vacation to the Bahamas sounds like a great way to get employees excited about their job, but it may be a bit lavish.

Here are a few things you can start doing today that will help foster employee happiness without breaking the bank:

  • Encourage happiness by smiling and laughing
  • Build rapport by acknowledging and greeting employees when you see them
  • Express gratitude by thanking employees in a short email
  • Recognize employees by sharing their accomplishments in front of the team
  • Reinforce hard work by congratulating employees—This can be a fist bump, a high-five, a handshake, or a simple pat on the back


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