Should You Incentivise Your Benefits?

  • Updated on: 25 Apr 2023
  • Published on: 26 Dec 2019
Should You Incentivise Your Benefits?

Most organisations today are justifiably focused on sourcing and retaining top talent. With the popular belief that incentives or bonuses are the right way to go about increasing productivity, organisations may be failing to generate that crucial RoI from their talent pool. Some of the popular incentives are bonuses, health insurance, benefits for commuting employees and extra vacation days, all of which sound very exciting at first. A formal process, or system, to measure the productivity outcomes and their profit margins is surprisingly lacking in many organisations. Of course, this makes it significantly challenging to set a structured incentive plan in place. Another often occurring issue is one when the plan isn’t clear to employees, which usually happens with the discretionary model which could lead to them being confused and in turn demotivated.

When structured and executed the right way, incentives go a long way in improving the overall productivity of the organisation and yield a better return on investment. Different employees seek specific incentives and respond differently and because of that, companies must come up with a unique system where each employee feels recognized for his/her work. There are several ways of looking at incentive models and if they work:

Increase in Sales

One of the most important questions to ask is if incentivised benefits would lead to a more effective increase in sales and client numbers. According to a study conducted by Harvard Business School, monetary incentives do work in most cases when they are properly administered to motivate and reward workers. Another result which can be seen from the study is that employees respond better to quarterly bonuses compared to annual bonuses, especially for sales people who usually work on a commission. Due to short term incentives, employees in sales also work beyond their quota which goes to say that incentives may increase the sales of the company when executed properly. 

However, there are a few areas a company can go wrong with their incentive plan for sales employees – for example, if it is solely based on making sales because products/services sold at a loss would not turn out to be the best precedent for a bonus.   

Motivation and Turnover  

As an employee, one would be happy to know that their work is appreciated and recognized by their employer. Putting a monetary value for these recognitions are perhaps one of the highest forms of motivators out there. Sure, this is materialistic but contrary to popular belief, most people enjoy the bonus and tend to work even harder to keep it going. Appreciation alone is enough to boost morale and mayb  even attract prospective employees from other areas which would inevitably lead to better overall performance. There are certain instances where an employee could feel demotivated to work because of an incentive plan for instance, when an employee just misses their threshold to gain a bonus, the employee would feel frustrated and may even feel demotivated the next time.

What To Remember

While organisations may want to embark on incentivising benefits, they’d do well to keep the following in mind too while they’re at it:

#1 Micro-Management

Having that constant feeling of being on a leash at work is something the new age workforce is much more intolerant of than any in the past. They’d rather have work independence, even if it comes with more stringent follow ups and penalties. Organisations are increasingly evolving in this direction, and the results are coming in backing up this model. Multiple studies report employees report being more productive at the end of a workday where their own methods of work were encouraged and they were free to work as per their requirements. 

#2 The Healthcare Question

A healthcare plan being offered as an incentive is unlikely to go down well with your workforce for a variety of reasons. Due to ethical, and even cultural sensitivities, healthcare can be one of those items many would consider essential. Further, an incentive plan here may mean that certain folks may healthcare benefits while others may be held back. Such a scenario is likely to negatively impact team dynamics and job satisfaction levels. On the other hand, if healthcare benefits are offered on a more universal level, it’s value can often be underrated – since it impacts multiple other aspects of the employees’ lives – such as their financial wellness.

The Conflicts Associated With benefits plans

There are times when incentive plans may backfire and turn out to be a problem. Employees might find themselves in a very competitive environment where they’re all competing against each other for a limited share of reward which could turn into a very hostile environment to work in, even if the incentive plan is outlined perfectly. 

Sometimes an incentive plan might also lead to office malpractices, especially if there is a loophole to be exploited. 

Taking a step back for a broader view, however, it’s reasonable to conclude that the pros outweigh the cons here. Incentivising your benefits with a well structured incentive plan is the best way to go about providing employees with the recognition and appreciation they deserve, while also locking in their loyalty and increasing overall company performance. 


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