How to set up an employee rewards program: a step-by-step guide

An employee rewards program gives people something of value for good work, for living your values or for reaching a milestone. Most businesses reward staff in some way already. A program turns those scattered gestures into something consistent, fair and visible.

This guide walks through how to set one up in eight steps, from deciding what it is for to checking whether it works. It suits HR teams starting from scratch and teams replacing an informal mix of gift cards, team lunches and annual awards.

Step 1: Decide what the program is for

Start with the problem you want to solve. Common goals include:

Making recognition consistent across teams and managers.
Reinforcing your values with real examples.
Keeping good people, especially in roles that are hard to fill.
Recognising frontline and shift staff who rarely see head office.
Bringing service awards, thank-yous and incentives into one place.

Choose one or two goals. They will guide every other decision and give you something to measure.

Step 2: Set a budget

Work out what you spend on rewards today, including gift cards, awards nights, long service gifts and team events. Many businesses find the total is higher than they expected, and that it is spread across many budgets with no record of what it achieved.

Then decide what the program will cost each year. Split it between:

Everyday recognition, such as small rewards for a job well done.
Milestones, such as work anniversaries.
Awards and nominations, such as monthly or quarterly winners.
Running costs, including the platform and the time to manage it.

A modest budget spent consistently usually does more than a large one spent once a year. Our older post on employee rewards on a small budget has ideas if money is tight.

Step 3: Choose what you will reward

Decide which actions and moments earn a reward. A good program mixes:

Peer recognition: colleagues thanking each other, with a small reward attached.
Manager recognition: managers rewarding specific work.
Nominations: staff nominate colleagues for an award in a category, such as customer service or teamwork, and a manager approves.
Milestones: work anniversaries and other set moments.
Targets: rewards for reaching a measurable goal.

Link each type to your values where you can. “Thanks for helping the night shift catch up on orders, a great example of looking after each other” teaches more than “great job”.

Step 4: Choose the rewards

Most programs now use points. People earn points for recognition, nominations and milestones, watch their balance grow and spend it when they choose. Points can be redeemed for:

Gift cards from retailers people use.
Items from a rewards catalogue you choose.
Cash, where your program allows it.

Choice is what makes points work. One person saves for something big, another spends on groceries, another on a night out. Our post on why letting people choose matters explains the thinking.

Decide whether points expire. An expiry date encourages people to redeem, while no expiry feels more generous. Either can work, as long as the rule is clear.

Rewards to staff can have tax consequences for the business. Before launch, check how your rewards will be treated with your accountant or tax adviser.

Step 5: Set approvals and rules

Decide who can give rewards and who approves them:

Peer recognition often needs no approval, but may have a monthly allowance.
Manager rewards may be approved automatically up to a limit.
Nominations usually need a manager or panel to approve.
Milestone awards can be automatic once dates are loaded.

Write the rules down and keep them short. People need to know how they can earn, what they can earn and what happens when they do.

Step 6: Get managers on board

Managers make or break a rewards program. If they do not use it, staff will not either.

Before launch:

Show managers how to give recognition in a minute or two.
Explain the budget they can use and the rules.
Give them examples of good recognition messages.
Ask senior leaders to give the first few rewards themselves.

Step 7: Launch it properly

A launch is your chance to show staff that the program is real. A good launch includes:

A clear message from a senior leader about why the program exists.
A short guide to how it works, with screenshots.
A first wave of recognition in the opening week, so people see it in action.
Sign on with the tools people already use, so there is no new password to remember.

Follow up in the first month with reminders, examples of great recognition and the first award winners.

Step 8: Measure and improve

After three months, look at:

How many staff have given and received recognition.
Which teams use the program and which do not.
How many points have been redeemed, and on what.
What staff say in surveys and conversations.

Low use in one team usually points to one manager who needs help. Unredeemed points often mean the catalogue needs better choices. Fix those first. For a wider view, our post on the three pillars of employee engagement puts rewards in context.

Putting it together

A successful employee rewards program has a clear purpose, a budget spent consistently, a mix of recognition types, rewards people choose, simple rules, managers who use it and regular checks. Start small, launch well and improve it from what you learn.

RewardCo’s Recognition module brings peer thanks, nominations, milestones and points rewards together in a program site in your brand, with single sign-on through Microsoft Entra ID (Azure AD). Weighing up recognition platforms? See how RewardCo compares.

Planning an employee rewards program? Book a demo.