Employee Incentive Definition


Employee incentives take many forms. They are different kinds of rewards that managers and organizations offer to employees to solicit the desired level of performance. Without rewards, employees are only motivated by their intrinsic desire to perform and by their compensation and benefits. Through incentives, employers go above and beyond offering standard employment benefits, seeking to motivate all workers.

Tangible or Intangible

An employee incentive is either tangible or intangible. A tangible incentive is something you can touch, such as an insulated coffee mug. An intangible incentive is a financial reward or something abstract, such as an employee feeling proud of being selected as the employee of the month.


An incentive may not be a tangible or intangible award defined in an incentive program. An employee might view a manager's actions as incentives to give the best possible performance. A dynamic manager focuses on building relationships with employees, getting them to perform through considerate actions. For example, a manager might treat employees as valued people, showing respect always and sometimes singling them out for undivided attention to share ideas or discuss problems. This manager wins employee loyalty and gets performance results without offering a reward. (

Improving Individual Performance

An incentive must elicit some improvement in an individual's performance. Study the types of performance improvements most needed by reviewing an employee's latest performance appraisal. For example, an employee might need to smile more while servicing customers at the bank teller station. Choose incentives that will motivate an individual to perform better. A manager might offer an early departure on a Friday afternoon for a bank teller who smiles more for a whole week. This is an incentive that matters to an employee, but it does not have to be offered as a regular incentive for that individual or for a group of workers.

Costs Versus Benefits

Employers choose an employee incentive after first considering costs versus benefits of offering it to workers for performance improvement. A company that plans to invest in sending top performers on a cruise faces a major travel expense. It will only be worth it to the company if the financial gains achieved by these top performers' performance are greater than the associated travel expenses.

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