Building a Recognition Budget

Is there anything more disappointing than earning a performance award only to discover that it’s not anything you want? 

One could argue that yes, there is. Being the employer paying for an award that doesn’t achieve its intended purpose of rewarding, engaging, and satisfying high-performing talent is disappointing indeed.

Keep that in mind when setting the budget for an employee recognition and rewards program that will inspire your workforce and differentiate your organization. 

Companies who choose reward products, services, and experiences primarily because they fit within target cost ranges set their programs up for failure. Instead, establish a recognition strategy, create meaning, and then look for reward and incentive options that satisfy those goals. 

The result is a recognition budget that allows you to invest in motivating and retaining high-performing employees, rather than simply being “the cost of doing business.”

Here’s how your organization can develop a recognition budget for your engagement program that invests rather than merely spends.

Do Your Research

Ask, listen, and survey. What do your employees consider valuable as recognition? It’s not always something with direct monetary value. Ask direct and open-ended questions to inspire suggestions and feedback. You’ll get better information on what matters to your team. Choose personalized recognition and rewards for your employees and build your recognition budget around that.

Set a Budget Percentage

The Society of Human Resource Management (SHRM) benchmarks the average rewards and recognition budget at 2% of payroll, with a median of 1%. Companies that spend at least 1% are three times more likely to achieve a successful reward and recognition program.

For example, if you have 1,000 employees with an average payroll cost of $40 million annually, 1% of the payroll cost would equal $400,000 yearly for your recognition program. Dividing that by the average number of workdays in a year (5 per week x 52 weeks = 260), you would be investing just $1.54 per employee per day to maintain a happy, motivated workplace.

Is it worth it? The numbers don’t lie. The cost of replacing a lost employee ranges from one-third to two times their annual salary. If the hypothetical company above, with 1,000 employees and a $40 million annual payroll, experienced even a 5% turnover each year, it could face average annual replacement costs between $650,000 to $4 million.

And these days, with the Great Resignation, Quiet Quitting, and other hangovers from the pandemic, many companies would be delighted to have just a 5% turnover.

That $400,000 recognition budget is looking better every moment.

Work with the Professionals at Xceleration

Rewarding employees for their contributions is highly beneficial to your bottom line and critical to the success of your business. Companies that conduct well-structured recognition programs are 12X more likely to experience successful business outcomes.

The professionals at Xceleration are skilled in making teams feel motivated, inspired, and appreciated. We’ve even created a patented, web-based recognition platform, RewardStation®,  used worldwide to provide employee recognition solutions.

Still have questions about your recognition budget? Get in touch with our team today to learn more about how Xceleration can help you get the results you need in your workplace.

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