Employee Reward Point System vs. Traditional Rewards: What Works Best?

While many businesses have historically relied on traditional employee reward systems (e.g. annual bonuses), many are now considering point-based reward systems as a worthy alternative. A point system provides a platform for frequent and immediate recognition so that employees can keep earning their rewards throughout the year rather than waiting for specific milestones.

That said, a point-based system is also hardly a panacea, as there are quite a few cases in which the traditional rewards program for employees works better. Now, what would those be? 

In this article, we’re answering this question and more – we’ll explore both employee reward systems in-depth, examine what differentiates them, and assess the practicalities of each so that you can decide which approach may work best for your company.

Why Rewarding Employees Can Make a Lasting Impact

Regular, meaningful rewards can shift an employee’s view of their workplace from “just a job” to “a place where I’m appreciated.” Thus, when employees are acknowledged for their efforts, they tend to show higher commitment and productivity. At the other end of the spectrum, we may find teams that undervalue recognition – and will almost inevitably see lower morale and higher turnover rates.

A recognition-focused culture means having a positive feedback loop – employees feel motivated to keep contributing, their performance positively impacts the business, the business keeps further motivating employees, and so on.

What Is a Traditional Employee Reward System?

A traditional reward system generally focuses on occasional formal recognition, rewarding employees for specific achievements, loyalty, or outstanding contributions. These systems often include awards like:

• Long-Service Awards: Celebrating years of service with a company, such as at the 5-, 10-, or 20-year marks.
• Annual or Biannual Bonuses: Provided to employees based on performance reviews, often tied to individual, team, or company-wide achievements.
• Employee of the Month/Year Programs: Acknowledging an individual’s efforts or exceptional contributions.
• Special Recognition for Milestone Projects: Rewarding completion of specific tasks or projects that required significant effort.
• Gifts or Vouchers: Occasionally provided, typically around holidays or during significant personal milestones.

These systems usually have a rather rigid structure and are typically controlled by the HR department. The employee reward cycles are set to encourage long-term loyalty, celebrating achievements at defined intervals rather than providing consistent feedback. 

However, while effective in many respects, traditional systems can feel somewhat distant or not too relevant, as they don’t necessarily account for day-to-day achievements or “small wins.”

What Is a Modern Employee Point Reward System?

A point-based reward system, in contrast, means both frequent and personalized recognition through granting points for specific contributions. Employees can accumulate these points and later redeem them for rewards of their choice. Features of a modern point-based system include:

1. Instant Feedback: Managers, and sometimes even peers, can award points to employees in real time for specific achievements.
2. Customizable Rewards: Employees can select rewards that appeal to them, which can range from merchandise and gift cards to unique experiences or charitable donations.
3. Frequent Recognition Opportunities: Because points are earned on a regular basis, the system recognizes not only large accomplishments but also everyday contributions.
4. Transparency and Trackability: Most point systems allow employees to view their progress and track how their contributions are being rewarded.

This structure is believed to be a more modern approach to recognition, particularly popular with younger generations who value frequent and immediate feedback. This way, recognition becomes part of the daily workflow, which has its perks but also flaws (more on them later).

Why Digital Point-Based Rewards Are Becoming Popular

Several factors contribute to the growing popularity of point-based systems, particularly in remote or hybrid workplaces where traditional methods may not be feasible. Here are a few reasons why an employee reward point system is being adopted more and more:

Timeliness and Frequency

Point-based systems allow for immediate recognition, which research shows is more effective for motivation than delayed rewards. Small achievements are often overlooked in traditional systems, but point-based systems let managers reward these very consistently.

More Flexibility

With point systems, employees can choose their rewards themselves (albeit from a specific range of options), making the reward process feel more personal. Whether they prefer redeeming points for a product, an experience, or even charity donations, employees feel they have greater control.

Much More Feasible For Remote Teams

In a remote setting, traditional rewards can be challenging to implement. In contrast, digital points and digital rewards for employees can be easily awarded no matter the location.

Cost Management

Rather than spending a large sum on a single award, point-based systems can spread recognition over time, which helps the upper management to allocate their resources more flexibly.

More Opportunities for Data Collection

With digital systems, companies can gather data on recognition patterns and determine which rewards are most popular. These insights will later help to refine the system so that it is never out of touch with what employees want.

Traditional vs. Point-Based Reward Systems: Key Differences

Now, let’s let’s look at the main distinctions between these two systems in the following table:

Which System Would Work Best for Your Business?

When choosing between these systems, always think about your company’s context – employee demographics, organizational goals, etc.:

• Company Size and Structure: Traditional systems may be effective in smaller, close-knit teams where long-term loyalty is more prevalent. For larger organizations, especially those with distributed teams, point-based systems provide the flexibility to recognize employees more dynamically.
• Employee Preferences: Younger employees tend to appreciate point-based systems due to the real-time feedback and choices they offer. However, in some industries or organizations with older demographics, traditional recognition may hold more weight.
• Budget Constraints: Point-based systems allow more granular control over spending. Awarding points more frequently and in smaller increments means you can avoid large payouts.
• Organizational Culture: If your company prioritizes formal, milestone-based recognition, a traditional model might better suit your culture. On the other hand, if a more collaborative, everyday recognition culture is your goal, a point-based system should be your choice.

Bonus Insight: Blending Both Systems for Highest Engagement

After some soul-searching, some companies find that a balanced approach can offer the best of both worlds. Combining traditional rewards for major achievements with point-based recognition for daily contributions can create a well-rounded system that can also resonate even with the most diverse workforce. So here are a few suggestions for implementing a hybrid system:

• Use Points for Day-to-Day Recognition: Reserve point-based recognition for frequent achievements, allowing employees to earn points on a regular basis.
• Save Traditional Rewards for Major Milestones: For significant accomplishments like long service, promotions, or key project completions, incorporate traditional rewards.
• Promote Manager and Peer Recognition: Encourage managers and employees alike to award points, reinforcing a culture of shared appreciation and teamwork.
• Never Stop Gathering Feedback: Regularly survey employees to gauge satisfaction with the system and adjust it based on their feedback. 

Conclusion

The benefits of a point reward system for employee recognition are clear – it offers more flexibility, immediacy, and personalization than any traditional system. Still, from our experience, we find that a hybrid approach might serve as the most optimal solution, as it combines the best features of both systems into one – long-term and big with immediate and small.Ultimately, it’s all about nurturing a workplace culture where employees feel valued, appreciated, and satisfied. If you feel that the task of setting up a truly functional recognition system is too big to tackle on your own, consider reaching out to employee recognition experts like BrandScape. We will take all the responsibility, leaving you only to reap the rewards.

WRITTEN BY

Matt Hegemier

A 30 year industry veteran experienced in assisting clients by adding structure and process around the procurement and distribution of branded apparel, commercial printing, promotional products and office supplies to manage brand integrity while decreasing organizational marketing product, labor and facilities expenses.