The Difference Between Prizes and Incentives

The Difference Between Prizes and Incentives

a present is an award given to an employee for performing a task. On the other hand, incentive is a motivating factor that constantly pushes employees to do better in their jobs.

Human Resource Management uses a strategic approach to manage its workforce effectively. To increase the level of performance, various systems or programs are implemented, such as rewards, recognition, incentives and so on.

Hence, reward systems, reward strategies, reward policies, incentive plans, incentive programs, incentive structures, etc., are just human resource management tools to regulate employee behavior. So, let’s start the discussion on the difference between rewards and incentives.

Definition of Gift

In simple words, a reward is an award given to an employee for performing a task, providing a service or taking on a responsibility which can be monetary or non-pecuniary. It aims to recruit and retain the types of employees required by the company while promoting behaviors that contribute effectively to the achievement of company goals.

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It’s like giving him something over and above regular consideration on the same level of recognizing effort. Rewards are a real consideration for the services rendered by the company to employees.

Reward System Advantage

  • It shows employees that their work and performance are valued and recognized.
  • It also attracts competent people to work with other companies and retains talented people for the long term.
  • It maintains a healthy competition among employees to achieve the goals.
  • This develops a sense of commitment and dedication among employees.
  • It boosts employee morale, increases their productivity and efficiency, and also encourages them to maintain quality in their work.

Definition of Incentive

Incentive implies an extra coaxing factor to stimulate spirit employee. It attracts a set of employee behaviors, directing them to put more effort into their work, so that they conform to the standard level of performance in the company.

It arises from the need for employees to be recognized and rewarded for their hard work and dedication. Practically, rewarding employees when the award is at the right time, satisfies their internal desires. Therefore it can be anything that catches the attention of employees and makes them to work continuously to achieve it.

It is considered to be the most important determinant of workers’ motivation which drives them to put more effort in their work by encouraging them and increasing their enthusiasm. This is a great way to get job satisfaction, as it tends to increase the interaction between boss and employee.

It includes various plans proposed by companies to encourage employees or teams to reach targets on time, such as team incentives, target-based plans, sports rewards, profit-sharing plans, and skills-based plans.

Difference Between Reward and Incentive

  1. Rewards imply all kinds of monetary returns, tangible services, rewards and benefits provided to employees, for their performance and contribution in the company. In contrast, incentives imply a material and moral system that companies offer with the aim of positively convincing employees to increase their productivity and raise their performance standards.
  2. A gift is an actual thing (usually in the form of money) that is given to congratulate and celebrate a success or achievement. In contrast, incentives are constituents of motivation specifically designed to match the desired behavior in employees.
  3. The basic difference between rewards and incentives lies in the time horizon, i.e. incentives are declared before the start of the work, whereas Rewards are awarded after the work is completed successfully and satisfactorily.
  4. Rewards are retrospective given to employees for their work, performance and achievements. Incentives are forward-looking, which act as a stimulus, in regulating employee behavior and performance, to achieve maximum.
  5. Rewards are all about recognizing past achievements and paying remuneration and other monetary and non-monetary benefits according to the contribution of the employee or team to the company. On the contrary, Incentives are motivational factors that tend to encourage and energize employees at work to perform better in the future by providing opportunities to earn monetary and non-monetary Rewards.
  6. The main purpose behind giving gifts to employees is to reward the hard work and commitment of employees who can set an example for others as well. On the contrary, the main purpose of providing incentives is to motivate employees to work and achieve targets, to get benefits in the form of incentives.

Red Thread | Reward and incentive schemes are important not only for employees, but also for employers, as they retain and motivate employees and increase their productivity. This is due to the fact that it directs the ability of employees to work efficiently to achieve company goals.

In other words, if an effective reward and incentive system is not in place in a company, it can negatively affect employees’ work, even they are more likely to switch companies that offer better wages for their work. In short, it will lower their performance level and thus the company’s goals may not be achieved.