Holiday bonuses don't build staff loyalty

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By: Wise Marketer Staff |

Posted on December 28, 2009

Holiday cash bonuses are set to become a thing of the past, in the US at least, with the future of staff motivation and loyalty lying in performance-related incentives, according to employee rewards specialist, I Love Rewards.

The company's research suggests that holiday cash bonuses, while they have been tried and tested, have generally proven to have no signficant return on investment.

"Holiday cash bonuses are no longer an effective way to engage your employees because they are not perceived as a reward, or even an effective form of recognition," explained Razor Suleman, CEO for I Love Rewards.

There are two possible reasons for the lack of return on holiday cash bonuses. First, if every employee receives the bonus, it is not personal and does not distinguish a valuable employee from a less valuable one. Second, cash bonuses do not tend to inspire employees to perform consistently, at best producing a small burst of enthusiasm around the time of the bonus payment.

The idea that holiday cash bonuses do not necessarily create a motivated workforce is supported by a study by which reported that 50% of companies have eliminated holiday cash bonuses because employees now feel "entitled to them". This feeling of entitlement to a reward removes much of the point of the reward: the ability to engender greater employee loyalty and motivation for the coming year.

In addition, Suleman points out that holiday cash bonuses cannot be expected to significantly impact employee behaviour or attitudes because they are not associated with any specific positive action, so there is no incentive for employees to repeat any particular desired behaviour.

Suleman offers three suggestions for companies that want to engender greater employee loyalty by providing more meaningful recognition and rewards:

  1. Take advantage of the value of recognition, which always drives employee motivation and engagement.
  2. Recognise employees with rewards that are meaningful to them. An immediate reward tied to performance and recognised publicly will satisfy their need for recognition and, in turn, drive performance for the company.
  3. Employee recognition programmes based on systems such as that offered by I Love Rewards allows employees to accumulate reward points based on recognition that they've earned personally. They can then redeem their points for brand-name products, which provides not only a relevant reward of their choice but another positive point of engagement (first they receive recognition with points, and then later the reward itself).

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