Reward Management: Best Practice Guide


Reward management is the introduction of policies and strategies that rewards every employee within the business fairly and consistently across the board. Rewarding employees for outstanding work makes them feel valued and can prove to be a powerful motivational tool that boosts productivity. The most successful reward management programmes provide employees with opportunities to elevate themselves and allow businesses to recognise good workers.

Rewards can come in many forms, with the most effective being those which support your business’s overall strategy, and purpose, culture and performance, and employee requirements. If you are thinking about implementing a reward management scheme, you should give serious consideration as to how you are going to manage it. What rewards will your employees appreciate – will these rewards benefit your employees financially, add to their lifestyle or improve their lives? Will the rewards benefit your company culture and boost its performance? Are you recognising and responding to changes in reward expectations of employees?

A compelling reward management programme promotes a healthy work-life balance that allows your employees to feel at and perform at their best. It can also contribute to a thriving business culture and foster a compassionate environment and caring community. Whilst pay and benefits are significant, research has identified that non-financial rewards can be just as incentivising for employees.


The law on pay and reward

A key aspect of reward management is being able to determine who should be rewarded. How do you go about choosing those who have contributed to a successful project or group goal?

In all pay and reward policies, all employers within the UK must meet strict legal requirements, such as the National Minimum Wage and equal pay, as well as reporting on the chief executive pay ratio and gender pay gap.

The National Minimum Wage applies to all employees and workers over 16 years of age. And although not a legal requirement, more than 7,000 businesses have signed up to the voluntary Living Wage.

Equal pay revolves around sex discrimination and gives the right for men and women to be paid the same for the same, or equivalent, work. Despite this legislation, there still remains huge gender pay differences. This is reflected in the requirement for larger organisations to annually report the size of their gender pay gap.

UK employment legislation also demands businesses provide certain workplace benefits, such as paid leave or pension schemes.

Additionally, businesses must pay their employees in accordance with any contractual agreements. A contract between you and your employee is legally binding and therefore its terms must be upheld by both sides.


What is reward management?

Reward management is a strategic approach to incentivising your workforce to improve performance, engagement and morale:

  • It rewards employees according to a business’s values and that they are prepared, or are able, to fund
  • It rewards employees for the value they create and contributes to employee wellbeing
  • Rewards the things that convey the right message about what is important in terms of behaviours and outcomes within a business
  • It helps to contribute to a strong, positive company culture
  • It strengthens your EVP (employee value proposition) – your EVP is what sets you apart from other employers (your competitors) and helps you attract top talent to your organisation
  • It can help motivate employees and confirm their commitment to the business and engagement within it
  • Help to retain top talented individuals to your business
  • It increases productivity
  • It helps you to build a strong reputation – this can be a key way to engage employees, contribute to a positive reputation and have a significant influence on your clients.


What do we mean by ‘reward’?

The easiest way to separate rewards is to split them into two categories: intrinsic and extrinsic. Intrinsic awards are encompassed by things such as awards, praise, and public recognition, which give a sense of achievement but are not monetised. Whilst extrinsic rewards are physically given and can involve value such as a bonus or paid holiday, for example.

Within that, they can be further divided into three sub-categories: benefits, perks, and rewards.


Benefits tend to be built into the employee’s salary; these include pensions that they can claim after reaching a certain age. Newer elements such as paid leave to adopt a pet are being introduced by some organisations, as are non-financial rewards including flexible working. Recognition through an “employee of the month” award, and opportunities for personal and career development are all good examples of other types of rewards.


Traditionally perks are seen as little “treats” that can make working life more enjoyable. These range from donut and coffee hump day to dress-down Fridays. Previously thought of as “fringe” perks, they are now gaining in popularity in businesses and starting to count for more with employees.

Many employees also wish to improve their lot in life, and those companies who are switched on to such things are starting to recognise this. Forward thinking companies are now beginning to include making time allowances to learn new languages, join fitness classes, or cycle-to-work programmes. It probably hasn’t escaped your notice that these types of perks are mutually beneficial to you as an employer. Happier, healthier employees are likely to contribute more to an organisation’s culture by living better lives both inside and outside their working environment.


Rewards give you a chance to promote productivity in such a way that meshes with your business’s values and culture. Instead of providing financial rewards or perhaps an additional day’s holiday for excellent work, think about offering other incentives that advance teamwork, or consideration for others within the workplace, as well as those incentives that encourage quantity and quality of work.


Creating an employee reward scheme

First, you should start by asking yourself two questions: where do we want our reward practices to be in a few years’ time? and how do we intend to get there? By being able to determine what your reward process will look like several years down the line, it also shows you the way in which the vision will be realised. A reward strategy defines what your business wants to achieve in the longer term, to its development and how it will implement reward policies. It also underpins the basis upon which your employees will be valued and rewarded.

Your business objectives should also be measured by long, medium, and short term goals and be able to respond rapidly to a changing and fluctuating market.

Other aspects to consider:

  • Multiple reward systems – if you select a single method of reward, it may not work well for all employees. Different methods appeal to different people. This is particularly apparent at a generational level, and it also limits the opportunities for employees to achieve. Multiple reward systems can create additional levels of achievement and recognition and give your employees a reason to try to reach their full potential, whatever their age. Reward systems that deliver a mix of financial and non-financial provisions with pay and other benefits are known as “total reward” programmes.
  • Design advice – an important consideration when creating a competitive reward scheme is to understand how other reward schemes within your industry look and how they work. This can be particularly important when attracting and recruiting top talent and making sure they join your business rather than your that of your competitors. That said, it is very difficult to obtain and compile reward data from other businesses, unless they openly agree to share it. However, there are a number of companies that provide reward scheme design services which can be tailored to your industry’s needs.


The components of a reward management system

  • Set reward objectives and criteria with goal setting
  • Review your current reward policies and practices by highlighting key reward issues and problems that need addressing
  • Measure reward effectiveness – decide what to measure (data, where from, how gathered), specify measures with reference to reward goals and success criteria, collect and analyse data
  • Evaluate reward outcomes – this provides you with a defined process for continuing evaluation
  • Develop future reward directions and practices – this gives you a clear understanding of what needs to be achieved and why, which provides the basis for future review and evaluation processes
  • Implement new or improved reward management scheme


Employee reward ideas

  • Saying “thank you” – whilst this strictly isn’t part of an established reward scheme, the power of a simple thank you should never be underestimated. It can mean the world to an employee and create a real sense of respect that many companies lack. You should never shy away from thanking hard-working employees when they have done a good job.
  • Celebrating success via email – an email sent company-wide, perhaps in a newsletter style, is great for highlighting employee achievements. These can connect different departments that are not usually aware of the other’s work and promote a sense of community within the workplace. The best successes to highlight are those which benefit the company as a whole, particularly if they have helped fulfil your business’s mission statement or epitomise a core value. This will encourage other employees to do the same and build a tangible ethos for your business going forward.
  • Employee of the month – this can work particularly well if the employee of the month is voted for by other employees. This presents a positive reward in front of the workforce and is a fantastic way to emphasise achievement and good work.
  • Company awards – you might decide to host an annual or bi-annual awards evening based on employee votes, which can be a fun way for individuals to gain recognition. It is a widely known fact that employees who are recognised for their work by their employers and their colleagues are the most productive and happiest.
  • Long service – long service awards can reward loyalty to the business and show appreciation for an employee’s dedication. The reward does not necessarily need to be expensive, perhaps a meal in a pleasant restaurant, for example, would be unique and requires little effort from those tasked with arranging it.


Evaluating reward effectiveness

Unfortunately, there is no silver bullet set of metrics that every business can apply to improve its reward management practices. Evaluating reward effectiveness typically involves researching and gathering information and evidence on your existing reward policies. Together with collating information on industry trends, external reward practices, and concepts. By using this information, you will be able to make an assessment on the effectiveness and identify any reward issues before deciding on a course of action.


Need assistance?

Our HR specialists advise employers on all aspects of employee engagement and management, including development and implementation of reward schemes. For guidance on reviewing and enhancing your organisation’s approach to employee rewards, speak to our experts today.


Reward management FAQs

What are the types of reward management?

Rewards can either be tangible, such as money or material objects, or intangible and more achievement based, such as praising employees, giving them an award, or public recognition. The Oscars are a splendid example of this.

Why is reward management important?

Typically, businesses are always switched on when it comes to policies surrounding employees’ lack of performance or failure to hit targets. Having a reward management programme in place helps to balance that and prevent a negative atmosphere resulting in a downturn in productivity and an uptick in employee turnover.

What are the two types of rewards?

Rewards generally fall into either intrinsic or extrinsic categories. An intrinsic reward recognises an employee’s success through awards or praise, and an extrinsic reward focuses on things that have a monetary value, such as a bonus. It is sometimes referred to as either tangible or intangible, or financial or non-financial, but the lexicon is interchangeable.

Why is performance and reward management important?

Reward management helps to boost employee engagement and productivity by recognising and rewarding employees. When employees feel valued, it improves wellbeing and helps with retaining skilled and talented members of staff.

Last updated: 13 April 2021


Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.

She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.

Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals

About DavidsonMorris

As employer solutions lawyers, DavidsonMorris offers a complete and cost-effective capability to meet employers’ needs across UK immigration and employment law, HR and global mobility.

Led by Anne Morris, one of the UK’s preeminent immigration lawyers, and with rankings in The Legal 500 and Chambers & Partners, we’re a multi-disciplinary team helping organisations to meet their people objectives, while reducing legal risk and nurturing workforce relations.

Legal Disclaimer

The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct at the time of writing, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.

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