One of the biggest challenges business owners face in a growing economy is retaining their top employees. Studies have shown that it costs about 20% of an employee’s annual salary to replace the worker. This is why so many companies in Silicon Valley, for example, highlight their incentives to retain their best employees. It’s not just good for company morale; it’s good for the bottom line.


At a minimum, perks should help retain employees. The best companies, however, create incentives that embody the company’s culture and inspire employees. We did the research and uncovered 5 tips to make incentives meaningful in your business.

1. Make it personal

For employees, the recognition is as important as the reward. When you tailor your incentives to match the employees and their contribution, you’ll get an additional boost for the recognition.  At Gusto (formerly ZenPayroll), for example, we offer a free round-trip ticket to anywhere in the world at an employee’s 1-year anniversary. Each employee gets to choose their own trip, which makes it special.

2. Don’t just make it about money

While everyone loves getting raises, studies have shown that monetary compensation is not the primary motivating factor for employee morale. According to Dr. Larina Kase, a business psychologist and author of The Confident Leader: “Money can make employees unhappy if they’re not sufficiently compensated, but it has not been shown to lead to motivation, satisfaction or performance.” Instead, consider giving your employee flex time for good work.

hiring your first employee

3. Institutionalize your incentives

While it’s great to reward your employees uniquely and personally, it’s also important not to create too many one-off perks. Haphazard rewards are inefficient and can create confusion for your employees. Thats why you should create an incentive structure around transparent goals. For example, you can offer flexible vacation days so employees have the choice on how to use them.

4. Measure it

As we mentioned, rewarding your employees isn’t just good for morale; it’s good for the bottom line. That’s why you should measure the ROI for your perks whenever possible.

For example, providing meals does not count against employee income if 1) they are furnished on your business premises and 2) they are furnished for your convenience. In addition to tax benefits, there is a positive ROI to employee meals.

Check out this post for more information on how free meals can save your company money.

5. Don’t forget your culture

So far, we’ve learned how to reward your employees uniquely and productively. But don’t forget your incentive structure is also a reflection of your company culture. Your perks program is one way to make your company stand out. For example, toy company Mattel allows its employees to take paid time off to spend it with their kids on field trips.

David Cheng
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