Many employees welcome the recognition they receive in the form of monetary rewards, and employers who implement employee reward programs usually do so as an expression of appreciation for their most valuable resource -- human capital. Employee reward programs come with disadvantages as well, but eliminating the programs isn't the solution. Careful planning and implementation of rewards prevent programs from becoming the source of workplace conflict rather than well-deserved employee recognition.
One of the biggest disadvantages to having an employee reward program is how employees perceive certain rewards -- and, in the case of highly compensated executives -- how the general public perceives them. Many people expressed outrage about corporate greed when American International Group Inc. executives received bonuses worth nearly £65 million in 2010 after a government bailout. Employee reward programs that receive the most scrutiny are usually within organisations perceived most likely to also grant golden parachutes. During times of high unemployment rates, public criticism of employee reward programs for executives is elevated.
Based on the size of your workforce, your organisation's compensation structure and industry, some employee reward programs can be cost-prohibitive. Many employers hand out seasonal rewards such as local grocers' £16 gift cards to the entire workforce and reward upper-level employees with substantial bonuses in the thousands of dollars. This type of employee reward program fosters elitism and a divided workforce. Simply because an employee is part of the production team making double the minimum wage doesn't mean she isn't entitled to the same substantial bonus amount as a department director. Organizational success requires the contributions of all employees. Another disadvantage of employee reward programs is that they may not demonstrate the company's commitment to workplace equity.
Organizations that implement rewards programs that increase year after year risk employees believing they are entitled to ever-increasing bonuses and rewards for simply doing their jobs. Human resources best practices definition of employee rewards is more closely aligned with rewarding employees who make remarkable contributions to the organisation's success. When employees consistently meet performance expectations without going the extra step or demonstrating commitment, loyalty and motivation, they do not always deserve a reward. Informal recognition such as an executive's handwritten note of appreciation often can be more effective than a monetary reward. It also has the potential of minimising, and eventually eliminating, employees' sense of entitlement.
Developing an employee rewards program to improve employee retention can be problematic, particularly because many employees cite ineffective leadership as the reason for resigning. An employee rewards program with the intent of motivating workers and reducing turnover can be costly and counterproductive. Employees who are disengaged or have low morale are more likely to choose satisfying working relationships and challenging work assignments over monetary rewards. An employee rewards program that bribes employees ultimately will fail, and the company will have very little to show for its efforts except evidence of poorly spent human resources funds.