In a world altered drastically by the effects of the COVID-19 pandemic and the cost of living crisis (among other things), it’s difficult to argue that money doesn’t make the world go round.  However, in those moments where our society saw its darkest days, one thing was made abundantly clear due to the heroic work of our healthcare and infrastructure workers: People make the world go round.

The Great Resignation

Many employers were made aware of this fact during the period marked as ‘The Great Resignation’. This saw swarms of people across the globe quitting their jobs as a result of stagnating wages due to inflation. Other reasons for quitting include hostile working conditions, lack of benefits and lack of opportunities for progression. Many workers felt underappreciated and had little motivation to continue their jobs. How should managers better incentivise their employees?

The Psychology of Rewards Schemes

Many believe that cash is a great incentive for workers. Whilst it is without a doubt an incentive for many at some point in their career, not everyone is motivated by money. Social psychologist Maslow’s hierarchy of needs found that once workers’ deficit needs (like food, shelter, wages) are met, they derive their motivation from more personal growth needs (like belonging, self-esteem and self-actualisation). These less tangible, psychological desires are still necessary for even the most hardworking workers to feel valued. Enter rewards schemes that are personalised to the workforce's needs and desires. 

Another reason why money might be of little motivation, particularly during a cost of living crisis, is that high inflation rates result in lower purchasing power for consumers.

Rewards & Incentives Personalisation 

Non-cash rewards offer companies an opportunity to offer a more personalised incentive to their workers that meets their particular needs. Moreover, studies have shown that when employers try to inspire desired behaviour from employees, non-cash incentives offer a better result than cash rewards.

A Wichita State University study asked participants to choose between a TV, a cruise and cash reward, all of the same value. Almost ⅔ of the respondents choose cash.

However, when asked if they would be satisfied with a bonus of one of the three items mentioned, the TV and cruise were picked over cash regularly. Reasons for this included: 

• Justification: Money was deemed the most important choice (perhaps as a necessity for things like paying bills). Despite it being the least satisfying option. Non cash rewards allow employees to experience new things without money leaving their pocket, giving them justification for working for it.
• Social reinforcement: Non-cash incentives are more visible and help employees receive external validation from friends, family, etc.
• Lack of differentiation: Cash incentives can be perceived as “extra salary”, similar to working overtime and become lumped in with other funds and lose their effect.
• Value. Cash has a fixed value, but the value of non-cash incentives can be subjective meaning if an employee works hard for an award, they decide its value.

Which is better? Cash or Rewards?  

Ultimately, that depends on your business however, employee reward schemes are essential for effective management, now more than ever because they help keep workers satisfied in their jobs and fulfill their needs for accomplishment and feeling valued by their employers. 

Loyalty Works - The Rewards Specialists

At Loyalty Works, we recognise that businesses and their employees differ from place to place so we take care in understanding your company values and cultures to ensure your company and those within it feel acknowledged and appreciated.

To understand more about how Loyalty Works can create bespoke employee reward schemes for your business, contact us today on [email protected] or 01138878620