Employee Incentive Programs: 16 Proven Ideas to Motivate Employees

Keeping employees motivated isn't just a business priority—it's the foundation of a thriving workplace.

The best companies know that a paycheck alone doesn’t inspire greatness. What does? A carefully designed employee incentive program that rewards hard work, encourages growth, and makes employees feel genuinely valued.

This guide will explore 16 employee incentive plans, how they work, and why they're effective. By the end, you’ll be armed with the knowledge you need to transform your workplace into an environment where people aren’t just employees—they’re contributors to your vision.

What Are Incentive Plans?

Employee incentive plans are structured systems that reward employees for achieving specific goals, meeting performance benchmarks, or embodying company values.

On one hand, they drive employee motivation, encouraging behaviors that contribute to company success. On the other, they create measurable outcomes for organizations.

These plans fall into two categories:

• Financial incentive plans: Bonuses, profit sharing, stock ownership plans, etc.
• Non-financial incentive plans: Flexible work schedules, public appreciation, career growth opportunities, etc.

The goal? Align employee satisfaction with the company’s mission, making everyone feel invested in the big picture.

Benefits of Implementing Incentive Plans

Employee incentive plans are strategic tools with far-reaching impacts:

• Boost motivation: 83.6% of employees say they’re motivated to work harder when their contributions are recognized.
• Improve productivity: Organizations with robust incentive programs report a 27% higher performance output compared to those without.
• Enhance retention: Incentive programs make employees feel valued, reducing turnover rates by 31%.
• Support growth: Incentive plans are linked to business growth as they drive employee engagement, directly impacting organizational outcomes. Highly engaged teams have been found to contribute to a 23% higher profitability for businesses over time.

Not-so-fun fact: Gallup's State of the Global Workplace: 2023 Report estimates that disengaged employees worldwide cost the global economy $8.8 trillion annually in lost productivity.

Types of Incentive Plans: 16 Comprehensive Examples

Ready for actionable inspiration? Here’s a roundup of the best employe‍e incentive ideas to consider based on your team’s unique needs.

1. Profit sharing

Ever wonder how to get employees to care about company profits as much as the CEO? A profit sharing bonus might be your answer.

With this employee plan, a portion of your company’s profits is distributed to employees, usually annually or quarterly. The idea is that when everyone has a financial stake in the company’s success, collaboration and performance soar.

Why it works

• Employees see a direct connection between their work and the company’s success.
• Builds a “we’re in this together” mentality that fosters loyalty.

Many successful companies have implemented profit sharing programs as part of their employee incentive strategies, such as Soutwest Airlines, Home Depot, Walgreens, Procter & Gamble, Delta, and more.

Want to learn more about how profit sharing could help your business? Download our free profit sharing template or book a call with one of our experts.

2. Performance-based bonuses

If your team thrives on measurable achievements, a performance bonus is a no-brainer. Set specific goals—like meeting sales targets, reducing error rates, or improving customer satisfaction—and reward those who meet or exceed them.

Why it works

• Incentivizes short-term focus on critical objectives.
• Encourages employees to push their limits and innovate.

Pro tip: Break down bonuses into achievable, tiered goals. Hitting the first milestone is motivation to reach the next.

Free template: Download our Performance Pay Scorecard and guide here.

3. Social recognition programs

Think a “thank you” doesn’t go far? Think again. Publicly recognizing employees for their contributions fosters a culture of appreciation.

Why it works

• Provides immediate positive reinforcement.
• Reinforces desired behaviors.

Pro tip: Social recognition platforms like Bonusly or Kudos make it easy for teams to celebrate wins in real time, fostering an atmosphere of appreciation and camaraderie.

4. Awards/Rewards-based programs

Create award categories like “Innovator of the Month” or “Customer Champion.” Pair these titles with meaningful rewards such as gift cards, extra paid time off (PTO), or access to premium tools.

Why it works

• Awards provide a sense of achievement while motivating employees to perform at their best.

A report by ResearchGate shows that organizations with recognition programs see a 17% increase in productivity and a 21% increase in profitability.

5. Referral bonuses

Your best employees likely know other high-performers, and referral bonuses motivate them to recruit top talent from their networks.

A good example of this incentive is Google—the company offers up to $20,000 for successful referrals, ensuring its teams grow with quality talent.

Why it works

• Referrals cut hiring costs by 50%.
• Accelerates onboarding, saving time and resources while filling roles with top-tier talent.

6. Travel incentives

Few things  employee performance like the promise of travel. Whether it’s an exotic destination, a weekend getaway, or a family-friendly resort, travel incentives create memorable experiences.

Why it works

• Creates lasting memories tied to the company.
• Goes beyond monetary value, providing employees the chance to rest and unwind.
• Helps employees return with renewed energy and ideas.

The Incentive Research Foundation revealed that incentive travel can be more impactful and cost three times less than cash rewards.

7. Remote/Hybrid workplace-friendly incentives

For remote or hybrid teams, traditional incentives may fall flat. Think outside the box—provide stipends for ergonomic chairs, noise-canceling headphones, or even home office décor. Offering subscriptions to mindfulness apps or meal delivery services also goes a long way in showing appreciation.

Why it works

• Shows you value employees’ comfort and efficiency.

A survey by FlexJobs reveals that 63% of employees rate working entirely remotely as one of the most important aspects of their jobs. Additionally, a report by Global Workplace Analytics found that employers can save $11,000 per employee by transitioning to half-time remote work.

8. Training and development programs

Employees want to sharpen their skills and feel confident in their roles. Providing access to workshops, online courses, or industry certifications equips them with the tools to excel in their current positions.

Why it works

• Employees thrive when they feel supported in learning. Offering these programs shows you’re invested in their success, boosting loyalty and engagement.
• Your business benefits, too, as better-trained employees deliver higher-quality results and adapt more quickly to industry changes.

An Axonify study found that 92% of employees believe well-structured training programs positively impact their engagement levels.

9. Employee stock ownership plans (ESOPs)

ESOPs allow employees to own shares in the company, giving them a stake in its financial performance.

Why it works

• Employees make decisions with long-term business goals in mind.
• Encourages a mindset shift from "working for a company" to "building my company."

Businesses with ESOPs report higher engagement and lower turnover, as employees feel directly tied to the organization’s success.

10. Flexible work arrangements

Time is the most precious resource. Flexible work arrangements, like custom schedules or hybrid models, show employees that you respect their time.

Why it works

• Employees with control over their schedules are happier, healthier, and more productive.
• Helps attract top talent, especially in industries with high competition.

A survey by Future Forum found that 80% of workers believe flexibility is the top benefit they seek in a job. This isn’t just a perk—it’s a necessity for retaining today’s workforce.

11. Gifts and gift cards

It’s the little things that count. A thoughtful gift—whether it’s a branded notebook, gourmet snacks, or a gift card to their favorite coffee shop—shows employees that their efforts are seen and appreciated. Personalize these tokens of gratitude to make them even more meaningful.

Why it works

• A small but thoughtful gesture can have an outsized impact on morale and loyalty.

12. Company outings

Want to boost team spirit? Get your employees out of the office. Organize unique outings like bowling nights, wine tastings, or outdoor team challenges. These employee incentive programs work well because a tight-knit team performs better together, and the memories created during these outings foster lasting goodwill.

Why it works

• Encourages collaboration in a relaxed setting.
• Reinforces a sense of belonging.
• They’re fun!

13. Career development opportunities

A promotion is great, but what about helping employees grow their potential to earn it? Career development incentives—like tuition reimbursement, mentorship programs, or leadership training—are a game-changer. They show employees that you’re not just focused on their present roles but invested in their entire career journey.

For example, the Amazon Career Choice program pre-pays 95% of tuition and fees for eligible employees learning new skills for career success.

Why it works

• Boosts retention by giving employees a clear path to advancement.
• Improves your workforce’s skillset, directly benefiting your business.

Pro tip: Partner with local universities or online platforms to offer discounted courses for employees. Pair this with mentorship programs to provide both knowledge and guidance for career advancement.

14. Health and wellness initiatives

Burnout is real. A company that prioritizes health and wellness initiatives will always stand out. But employee well-being goes far beyond a fruit basket in the break room. Wellness incentives show you care about your team’s mental, physical, and emotional health.

Here are some ideas:

• Reimburse gym memberships or offer on-site fitness classes.
• Provide access to mental health resources like therapy sessions or meditation apps.
• Host wellness challenges (e.g., step count competitions with prizes).

Why it works

• Healthy employees are more productive and less likely to take sick days.
• Wellness programs are a proactive way to reduce burnout and stress.

According to a study by the U.S. Chamber of Commerce, 60% of participants agreed that workplace wellness programs reduced their organization’s healthcare costs.

15. Peer-to-peer recognition programs

Sometimes, the most meaningful recognition doesn’t come from the top—it comes from coworkers. With peer-to-peer recognition, employees can nominate their peers for awards or shoutouts. Rewards can be small but impactful: think gift cards, lunch treats, or simple public appreciation.

Why it works

• Fosters a positive and supportive culture.
• Helps employees feel valued by those who see their daily work up close.

Pro Tip: Use digital tools like Slack or Teams channels dedicated to employee recognition, ensuring every “thank you” is visible company-wide.

16. Fringe incentive plans

Fringe benefits, also known as "employee benefits," are non-wage incentives that enhance the overall compensation package. These plans can cover things like health insurance, childcare, and retirement plans, as well as something more simple like extra time off.

A good fringe example would be Patagonia’s childcare program, which provides on-site care for employees’ children, ensuring work-life balance and easing the stress of working parents.

Why it works

• Fringe benefits address essential needs, making employees feel supported in and outside of work.
• Companies with strong fringe benefit offerings stand out in hiring and retention by showing they care about employees’ well-being.

According to studies, 56% of employees would choose employee benefits over a raise.

Designing an Effective Incentive Plan

Ready to create your own employee incentive program? Keep in mind these four key performance indicators:

1. Identify objectives

Start with the big question: What do you want to achieve? Defining your goals gives direction to your incentive plan. Are you trying to boost sales, reduce turnover, or improve customer satisfaction? Each goal requires a unique approach.

For example, if a software company wants to improve customer retention, why not link team bonuses to quarterly satisfaction survey results? This approach will encourage employees to prioritize resolving client issues effectively, leading to more satisfied customers and stronger loyalty over time.

Need inspiration? Here's our guide on the 11 types of employee incentives.

2. Employee feedback

What motivates your team? You won’t know unless you ask. Preferences vary—some value bonus plans, while others might prioritize flexible schedules, extra time off, or career growth opportunities. Surveys, suggestion boxes, or small team discussions are excellent ways to collect honest feedback.

For instance, if a marketing agency got feedback that employees value flexible work schedules more than monetary rewards, they should offer flexible hours as a reward for meeting project deadlines early. This not only energizes the team but also improves overall project delivery timelines.

3. Budgeting

Every employee incentive program comes with a cost, but it should always be seen as an investment, not an expense. The key is to balance your budget with the potential returns.

For most businesses, a good rule of thumb is to allocate 1% to 10% of the employee pay to incentive programs, depending on the goals and size of the organization. This range ensures the program is impactful without straining resources.

For example, if a company’s annual payroll is $1 million, it might dedicate $10,000 to $100,000 for incentives, depending on the complexity and scope of the initiative. Balancing costs with ROI is about finding the sweet spot—spending too little might result in an unengaging program while overspending can cut into profits.

4. Promoting participation

The best plan won’t work if your employees aren’t engaged. Use clear, consistent communication to ensure everyone understands the incentive compensation program, how it works, and what’s in it for them. Use team meetings, emails, or even visual aids like posters in common areas to generate excitement.

For example, a tech company has a referral bonus program to attract new talent. However, participation was slow because employees didn’t fully understand the program.

The company should address this by creating an easy-to-follow compensation plan that explains the reward process. The awareness will grow, and so will participation, helping the company quickly fill key positions with strong candidates.

Want help navigating incentive plans? Our expert team is here to help, book a call here.

Challenges in Incentive Programs

While employee incentive plans can yield remarkable results, they’re not without challenges. Missteps can reduce their impact or even backfire.

Here’s a look at three common pitfalls and actionable solutions to ensure your program stays on track.

1. Misaligned incentives

An incentive program is only effective if it’s meaningful to employees. When rewards fail to align with what motivates your team, participation and enthusiasm can plummet.

For example, offering gift cards might not inspire a sales team that values performance bonuses, or remote employees might feel disconnected from company outings.

Solution: Match rewards to employee preferences. Surveys and feedback sessions are essential tools for uncovering what your team truly values.

2. Fairness concerns

Perceived inequity is one of the biggest risks to incentive plans. If employees feel the system is biased or excludes certain team members, resentment can spread, undermining engagement.

For example, rewarding only top performers without acknowledging team contributions can alienate support staff or employees in non-revenue-generating roles.

Solution: Design programs that ensure equitable opportunities. This doesn’t mean every reward must be identical, but everyone should have a fair chance to participate.

3. Lack of engagement

Even the most effective employee incentive programs will fail if employees aren’t aware of or excited about it. Poor communication is a major culprit.

For example, a company that quietly launches a referral bonus program via email may see minimal participation if employees don’t fully understand how it works or why it benefits them.

Solution: Get creative with your promotions. Use team meetings, engaging visuals, or even short videos to explain the incentive compensation plan and its benefits.

Motivation Made Simple: Start Small, Think Big

Motivating employees isn’t just about boosting numbers—it’s about fostering a culture where everyone feels seen, valued, and driven to succeed. Whether you start with a bonus plan or roll out a company-wide profit sharing program, the key is to stay transparent and aligned with your team’s goals.

Want to take the hassle out of managing an employee incentive program? Explore ShareWillow's profit sharing platform and let us help you streamline your journey to boost employee engagement.

Start rewarding success today—your team will thank you!