Employee recognition is the foundation of excellent company culture. When employees are recognized for their efforts, they feel valued and share a sense of belonging with the organization. 

According to World at Work, the average budget for employee recognition is 2% of payroll, with the median amount being 1%. 

The question remains: how can companies recognize and reward their employees with a limited budget? 

In this blog post, we’ll answer that question and reveal some of the biggest cost inflators for R&R practices. 

Employee Recognition Cost Inflators 

When companies are approached by Recognition and Reward (R&R) solution providers, the first question that comes to mind is how much will the implementation of employee recognition programs cost? 

Indeed, investing in EX is a proven high-impact HR practice that translates into dreamlike workforce results: increased productivity, engagement, and employee retention. 

The question of whether is it worth the investment has been answered with a roaring YES many times over. 

A scientific research paper from the Journal of Organizational Computing and Electronic Commerce investigated the causal link between EX and employee turnover. It found that a powerful EX decreased voluntary turnover by 29% and decreased involuntary turnover by 40%. 

In 2022, the Harvard Business Review observed three years of in-depth employee and financial data from a company with over 1000 locations across the US. 

The results found if a worksite would improve the EX of its staff and move from the bottom quartile to the top quartile of company EX, its revenue would increase by more than 50%.

So what are the price inflators that keep organizations from investing?

Having a grip on less efficient pricing practices from major R&R vendors helps HR buyers and heads of total rewards pinpoint what are the most expensive aspects of implementing R&R programs. 

And more importantly, how to reap the full benefits of an enterprise-ready solution for their organization without having to pay extra because of the cost inflators. 

One of the largest drivers of R&R pricing is the practice of having markups. 

Markups are added percentages to the cost of a product or service that typically cover the overhead costs of the product or service, but can add an additional cost of mediating the transaction, i.e. profit for the platform provider. 

In the context of employee rewards, when platforms that offer rewards in return for points use markups, they make a profit every time an employee claims a reward. 

This means that the redeemable items in the reward catalog are actually more expensive on the platform than on a major online marketplace, such as Amazon or eBay. 

In practice, this means that redeeming rewards will be more expensive. 

In one blog post, we found an example of the same product that cost 32% more on the one R&R platform than on Amazon. 

In case you were wondering, it’s an Apple iPad. 

More expensive rewards in the reward catalog mean more expensive employee reward programs. To make things worse, exaggerated practices may discourage employees from using the R&R platform. 

After all, why would somebody get a product there if it’s 30% cheaper on Amazon? 

If companies want to have a cost-effective system for recognizing employees, markups have to go.

Cost-effective Ways of Recognizing Employees 

Introduce a Reward Catalog with No Markups 

When it comes to employee rewards, the phrases “cost-effective” and “reward markups” do not go hand in hand. As explained above, having markups on products in your reward catalog effectively increases the price of every item in it. 

That does not fare well with employees. 

When employees want to redeem a product they like, they use the reward points they are awarded for their effort at the workspace. 

Typically, companies have dedicated budgets that determine how much money they can spend on monetary rewards per employee every year. 

For example, let’s say that’s $100 per employee. If an R&R solution provider has a 20% markup on every product, employees are effectively getting $80 for monetary rewards. This is a loss no matter how you put it. To make things worse, some R&R solution providers have a time limit on how long employees can hold on to their points, which additionally limits employees’ reward experience. 

In this situation, employees can’t stack points and save up for more expensive, high-value items (that cost more on the platform than on online vendors they would typically use). If a company wants to be cost-effective with its monetary employee reward programs, they have to choose a vendor without any markups on prices. 

Large R&R vendors with hundreds of enterprise clients have markups engraved in their business practices. While their client portfolio and the number of logos on their website are impressive, their size makes them slow to react. 

Instead, look to smaller R&R tech providers that guarantee customized, deep integration of their solution but without markups. 

No-markup reward catalogs ensure employees get the most out of their reward-redeeming experience and effectively save dozens of thousands of dollars for employee monetary reward programs. 

Image: JobPts rewards catalog with various redeeming options, integrated with Amazon’s stock but with no markups.

This is a make-or-break difference for companies with thousands of employees with a limited recognition budget. 

Create Spotlight Recognition Programs 

Wanting to get recognized for your hard work is a fundamental human need. When we try our best, we want people to notice. 

Especially our company leaders and colleagues we look up to. 

An engagement study published by Psychometrics investigated the state of employee engagement in Canadian workspaces and surveyed 368 HR professionals. 58% of HR answered that leaders giving more praise would improve employee engagement. 

This recommendation ranked above providing learning and development opportunities (56.4%) and helping find solutions for problems (38.9%). 

There has to be a tangible connection between company leaders and employees for increased engagement. Recognition makes that connection happen. 

Deloitte agrees that giving recognition in various ways, including high-effort initiatives, is a powerful force for engagement. 

One of the most meaningful recognitions is, without a doubt, the employee spotlight program. When leadership shows public appreciation of an individual’s effort, they encourage the right behavior in the workspace. Spotlighted employees become role models for others. 

More importantly, a public dedication to celebrating employee success creates a thriving company culture where employees and leaders are connected and appreciate each other. 

In terms of budgeting, employee spotlight programs are one of the most flexible and cost-efficient ways of recognizing employees. 

R&R platforms rely on employee social feeds to increase recognition visibility and give other employees the means to comment, share and celebrate each other’s achievements. Companies don’t have to bust the bank to budget their employees’ spotlight program. 

Its greatest value isn’t the monetary reward, but the act of being praised and noticed by company heads and leaders. 

However, program design and quality of integration are critical for its success. The R&R platform must be customizable, meaning it allows a high level of personalization and company branding, so it looks and feels familiar to its users. It has to add a personal flair for spotlighted employees. 

Second, it has to be smoothly integrated with other core HR tech the company is using. R&R platforms have to complement the existing HR tech stack, instead of being a separate solution that makes recognition practices more complicated. Shallow, rushed integration makes managing employee recognition programs an HR nightmare. 

Finally, the social feed has increased visibility and empower as many employees to participate in the celebration of the spotlighted employee. 

Recognize Employees with Branded Items 

Compared to other monetary rewards, branded items, and company swag are ideal for recognizing employees when you’re on a limited budget. The sentimental value that branded gifts deliver far outweighs their production and shipping costs, but we’ll talk about the latter in a bit. 

Branded gifts are effective at showing appreciation to employees because they’re able to add a personal, identifiable flair to the gift and capture the company culture. Ultimately, the employee feels proud to be a part of the organization. 

When people think about company swag, the first things that come to mind are usually items like branded cups, t-shirts, tote bags, pens, and duffel bags. 

However, it’s not necessarily about what the item is, but rather what kind of experience it provides. With high-quality, well-thought, branded swag, companies can show empathy and gratitude in critical moments. 

They can be pragmatic, creative, and impress their employees. 

Promotional Products Association International studied the impact promotional products have on making a connection between companies and users. They found that 68% of people who receive a promotional product feel a stronger connection to the company that gave it to them. 

The survey also found that 48.7% of respondents kept promotional products for longer than five years. Product usefulness is cited as the most common reason for keeping the product (according to 75.4% of people). One more notable reason for keeping a product is because it reminds people of an event or an experience (according to 38.4%). 

That’s when the cultural impact sinks in, and employees feel a strong morale boost.

In the context of flexibility, people-centered companies use branded items to recognize employees on many occasions, such as employment anniversaries, cultural events, or birthdays. 

When considering branded gifts, companies sometimes hesitate because of the perceived logistical challenges. It’s time-consuming to design gifts, plan the storage, and handle delivery to every single employee. 

This is a missed opportunity to dazzle employees. 

In fact, holistic R&R platforms, such as JobPts save time in sourcing handling logistics, and warehousing the branded items, so HR doesn’t have to dedicate much of their time to deliver a successful reward initiative. 

Instead of wondering how to stretch the limited recognition budget, companies can include branded swag as part of their R&R offering and create a wholesome reward experience for their valued employees. 

Celebrate the Moments that Matter 

Today, people-centered enterprises have adopted the concept of Moments that Matter (MTM) to understand the most critical moments in their employee journeys. 

According to Gartner, more than half (57%) of HR professionals are interested in identifying employee Moments that Matter. 

MTMs have a significant impact on employee experience, as they also include critical moments that happen in one’s private life, such as the birth of a child, buying your own home, getting married, etc. 

When companies make an effort to celebrate employees’ MTMs, they effectively show they care about them and their personal wellbeing. 

MTMs can be categorized into these 3 categories:

• Specific moments, i.e., work and life events, hold immense subjective meaning in an employee’s life.
• Ongoing moments, i.e., the employee’s continued relationship with their organization such as their work anniversaries or promotions.
• Designed moments, i.e., planned events or initiatives that affect employee experiences, such as team buildings or specific events.

Of course, it would be ludicrous to assume a company can reward every single employee whenever they have an MTM. 

Nobody has infinite resources. 

However, recognizing MTMs has little to do with money and everything to do with care. It’s about showing up for your employees, validating their success, and letting them know you’re happy for them. 

The main challenge for celebrating MTMs isn’t having a huge budget to fund it; the challenge is having a solution on top of your current core HR system that helps HR set up MTMs that are connected to the company and its employees, and automate them. 

For instance, here is a framework for automated MTM identification and delivery via an R&R platform JobPts. We can’t stretch how important it is to integrate the MTM recognition solution on top of the existing HCM, instead of deploying a standalone tool for MTM discovery. 

This ensures HR and line managers can track every MTM and never miss an opportunity to recognize them. Regardless if you’re operating on a limited budget for recognition, the company has a flexible R&R system in place that empowers leaders to recognize employees and score cultural gains. 

Use Peer-to-Peer Recognition Programs

Never underestimate the positive impact that peer-to-peer recognition can have on a workforce. Employees’ ability to cooperate and communicate efficiently relies on their relationships as coworkers. 

Naturally, every employee wants to feel valued by their peers. This is expressed best through peer-to-peer recognition. 

In fact, there is a body of research that suggests that peer-to-peer recognition is instrumental in developing a positive and supportive work environment.

For instance, a survey from Deloitte reported that organizations with a strong culture of peer recognition have 28.6% lower employee stress and 18.5% higher levels of employee engagement compared to their counterparts. In terms of cost, peer-to-peer recognition programs are the most cost-efficient recognition programs because they don’t need allocated reward budgets. 

Their main costs are related to implementation and design. In other words, after a company adopts a solution for employee recognition and designs custom programs, the employees are all set to send peer-to-peer recognition to each other. 

It goes to show that companies do not need excessive reward budgets to cultivate an outstanding workspace culture. 

With the latest developments in recognition technology, virtual peer recognition is expected to drive outstanding workforce engagement results. 

Understanding how to recognize blue-collar workers virtually is a direct competitive advantage. 

Recognition and Reward Programs Make a Difference 

The claim that you need a huge budget to have successful employee recognition and reward initiatives is factually inaccurate. Throwing expensive rewards at employees doesn’t guarantee cultural alignment, nor does it encourage employees to celebrate each other’s success selflessly. 

The truth is, you can deliver an exceptional recognition experience to your employees with a limited budget, as long as the programs you’re relying on are custom-built for the needs of your workforce and are aligned with the values of your business. 

It’s better to have R&R programs that are designed with your employees in mind than generic recognition practices that have a modest impact despite their exaggerated budget. 

In terms of low-budget recognition success, there are three angles that have to be covered: 

• In-depth integration; the ability of the R&R platform provider to understand the core HR tech environment of their client, and successfully transfer all HR data, so there are no post-integration headaches for the client. 
• Customizable solution; the R&R solution has to be customizable for the client, so they can include their own unique branding and massaging to the recognition platform, to magnify the cultural imprint whenever employees use the solution to send and receive recognition. 
• Adoption support; after the solution is implemented, the client has to have adoption support, both in terms of features that sustain adoption, and a dedicated customer success team that will provide insight and help design the best monetary and non-monetary recognition programs that are aligned with their client’s budget. 

If you want to understand more about the role of recognition in the overall Employee Experience, the best place to start your journey is to download the Navigating the Era of Employee Experience whitepaper. 

It provides a deep view of the theory of ‌Employee Experience, developing EX trends, and valuable insight for HCM buyers, such as SuccessFactors and Oracle HCM users. 

Conclusion

When thinking about the budget for employee recognition, it’s easy to get sidetracked and feel like your options are very limited. However, that is not the case. In this blog post, we’ve talked about four different cost-effective ways to recognize employees:

• Introducing a reward catalog with no markups
• Creating a spotlight recognition program
• Recognizing employees with branded gifts and company swag
• Celebrating Moments that Matter

People often forget that some of the most meaningful and memorable recognition experiences are not monetary by nature. Focus your resources on deploying an R&R platform that will help track the cultural impact of your monetary and non-monetary employee recognition initiatives and create recognition programs that are aligned with your values and budget.