What are Extrinsic Rewards?
Extrinsic rewards are designed for people who find motivation and respond better to rewards provided by a third party, typically management. Extrinsic rewards, such as promotions or gifts, are more tangible and usually relate to an employee's status or have monetary value. Extrinsic and intrinsic rewards both have significant benefits when used correctly, so here are some examples of workplace rewards.
Examples of Extrinsic Rewards in the workplace
1. Job benefits and flexible working arrangements
Offering additional benefits to the job, such as flextime, job rotations, shorter workweeks, exciting projects, unlimited vacation time, and work from home policies, is the first extrinsic reward. According to one survey, 88% of workers consider flexible hours when looking for a job, and 80% of them prioritise remote work options and vacation time.
Providing a comprehensive benefits package is another effective incentive. Aside from salary, benefits may include a company car, comprehensive health insurance, and matching contributions to a pension plan. Since they have access to special perks that not all employers provide, better benefits are often valued by employees even more than a pay raise. This makes them an efficient means of rewarding top talent by retaining them.
2. Corporate gifts
A gift is a temporary incentive that is typically given to the entire workforce as a sign of recognition or appreciation for employee achievement. Most likely, you've already received corporate gifts like branded pens or notebooks, food items, or gift cards. Digital rewards, like virtual gift cards for online shopping, are another option for giving out rewards. Gifts are best used to commemorate minor accomplishments or seasonal holidays.
A bonus is a lump sum, short-term monetary reward that is usually given out once a year. The appraisal process varies by organisation, as some offer fixed bonuses after a certain period of employment. Others may base the incentive on job performance, which is a more subjective form of evaluation.
4. Pay raises or promotions
Pay raises and promotions are frequently combined; however, not all wage increases are accompanied by a promotion. Wage increases, like bonuses, are given after a certain period of time for an outstanding change in performance or a set of new skills.
Employees who want to advance in responsibility and seniority must win the managers' endorsement and trust in order to do so. Because of this, in order for employees to feel motivated and put in the extra effort, they need to be aware that opportunities for advancement are within their grasp.
5. Profit-sharing plans
Employee profit-sharing plans (EPSPs) are effective incentives because they link employees directly to the profits of their company. Each employee receives a portion of the quarterly or annual earnings based on a set percentage, which is typically between 2.5 and 7.5 percent. Profit-sharing encourages employees to adopt a collectivist mindset in order to contribute to the overall success of the company, rather than focusing solely on their individual, immediate goals.