Why Companies Should Use An Employee Point Reward System (And 9 Best Practices)

Showing your employees some love can be simple and inexpensive. You don't have to book a company retreat or throw a holiday party in a luxury hotel. Of course, if you want to do those things, then great. But there's another effective way to honor your employees every day for their small and significant contributions to your business.

A points-based reward and recognition system makes it easy for peers and managers to acknowledge each other frequently and consistently. This guide shares how to set up an employee points rewards system, some best practices to consider, and even some math to keep your reward budget under control.

What Is An Employee Point Reward System? 

An employee points reward system is a form of recognition where workers receive points for their hard work, dedication, and achievements within the company. These points can be accumulated and exchanged for tangible rewards such as gift cards, merchandise, monetary incentives, or even extra vacation days.

Companies can adopt a manual approach to employee points by keeping a running tally of how many points each person has to give and how many they've earned. But a digital solution like Nectar is far more convenient, trustworthy, and efficient.

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Do you want to see a point system in action? Check out how our client Statista Inc. uses Nectar points to gamify tasks and build a better company culture.

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Examples Of How Employees Can Earn Points  

Your employees can earn points in multiple ways to exchange prizes. These might include:

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Points For Praise  

In this model, managers and peers deliver messages of praise to each other, attaching points to public recognition.

Example: Manager Sami awards 25 points to their direct report, Fran, for delivering timely project updates.

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Points For Employee Awards 

Periodic awards such as Employee of the Month are the perfect opportunity to distribute points alongside the honor of a certificate or trophy.

Example: Customer service professional Vanessa is recognized as Employee of the Month for always going the extra mile in her support calls. She is awarded 500 points in addition to her award.

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Points For Completing Challenges  

Workplace challenges, such as participating in a buddy program or hitting a sales target, can also be rewarded with points. This encourages employees to go above and beyond their normal duties and strive for excellence.

Example: Construction supervisor Max earns 100 points for completing his annual PPE safety training refresher.

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Points For Meeting Milestones  

Milestones such as birthdays or work anniversaries are a time for celebration. Employees who receive points on these special occasions can exchange them for personal rewards that are meaningful to them.

‍Example: On Sarah's 30th birthday, she receives 200 points from her team to put towards a spa day.

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What Are The Benefits Of Introducing Employee Points? 

Rewarding employees with points goes beyond the paycheck to establish a culture of recognition among your workers. There are numerous benefits for individual employees and the overall organization when you start sharing points:

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Improved Productivity  

Praising coworkers is a powerful way to boost morale and productivity in your organization. When you deliver points to an employee, it sends a message that they're doing great work, incentivizing them to keep up the good behavior.

Nectar’s survey of 800 full-time US employees revealed that 77.9% of employees would be more productive if they were recognized more frequently. This speaks volumes: a small message of appreciation can result in greater outcomes for your business.

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Stronger Connections With Peers 

A fair and transparent employee reward point system is a catalyst for building camaraderie and deep connections among team members. Nectar’s workplace connections survey reveals that 69.5% of employees would feel happier if they experienced this.

When coworkers notice each other's accomplishments and exchange points, it creates a bond of positivity that may not have existed otherwise. This can lead to improved organizational collaboration, communication, and teamwork. It can inspire some healthy competition, too, as coworkers jostle to complete a challenge ahead of their team.

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Increased Retention Rates 

If the Great Resignation taught us anything, it’s that employees don’t just think or talk about leaving; they’ll actually do it. High turnover rates can accelerate recruitment costs, cause disruption among teams, and weaken your employer brand.

But all these issues can be mitigated by appreciating your existing employees and treating them as valuable team members. Nectar's survey reveals that 93.5% of employees would stay at a company for five years if the culture were great, and implementing points rewards is an easy way to create an environment where your workers want to remain.

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Meaningful Rewards 

Your employees are individuals with unique preferences, interests, and hobbies. They deserve the opportunity to choose rewards that align with their personalities rather than receiving basic gifts that don't suit them.

Points allow them to do just that. Whether they want a monetary reward such as a gift card for their favorite restaurant, tickets to a sports game, or a new set of hair straighteners, employees can choose meaningful rewards to spend their points on and feel appreciated.

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More Frequent Rewards

The more frequently we recognize our employees' stellar contributions, the better. But too often, there's a significant time lapse between workers' positive actions and the praise they receive. 

Our Nectar survey results found that 51% of employees receive monthly, quarterly, or yearly recognition at work, meaning that half your staff lacks consistent and timely praise. Increasing this to weekly praise is easy when you employ a points system. Points-based rewards are quick and easy to dish out, ensuring employees receive the consistent recognition they deserve.

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Measurable Data 

Verbal on-the-spot praise is great; we definitely encourage it. But the problem with informal recognition is it’s hard to measure and improve. By adopting a points-based reward system, you can track:

• Who is receiving points: Individual points scores can help you pinpoint high performers and also spotlight if your rewards program is becoming a popularity contest. 
• Who is not engaging with your recognition platform: If your managers aren't using their monthly points allocation, you can encourage greater leadership participation. 
• How your budget is spent: If points are typically earned through challenges and milestones rather than praise, you may need to improve awareness of peer recognition. 
• Which employee actions are being recognized: This data can reveal trends in your workplace around what behaviors or achievements are most valued and rewarded. It also helps you identify areas that need more effective employee recognition to improve productivity or morale.

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Low Maintenance 

Setting up an effective rewards system isn't the only way to recognize hard work. But it accompanies other recognition vehicles, such as service awards or praising team members in meetings. The beauty of points-based rewards is that once you've set up your system, it's pretty effortless to sprinkle points on employees throughout the week while significantly impacting their experience and engagement levels. 

There's no awards ceremony to organize, no announcement to pen, and no certificates to print. Automating your employee recognition program with a digital points system can save time and effort while skyrocketing employee morale. It's a win-win.

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How Much Are Employee Point Rewards Worth?

While it would be nice to dish out endless points to your employees as a gesture of appreciation, we do need to stay grounded by remembering the monetary value behind each point. Giving points doesn't cost employers a cent, but when employees are ready to redeem their accumulated points for rewards, companies need to be prepared with a sufficient budget.

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What's The Best Conversion Of Points To Dollars When Using A Point-Based Reward System?

Depending on which tool you use to run your rewards program, you may run across a few different point conversion options. There are no firm rules to follow, but here are some options you may see:

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1:1 

When one point equals one dollar, it's easy for employees to understand how much the recognition they receive is worth—5 points is $5, 10 points is $10, etc. But tying the value of your points so closely to the dollar system can reduce the act of gratitude to a mere transaction.

For example, saying, "Thanks for what you do, here's $1," might mean that your recognition appears less thoughtful than if you gave points that were not so obviously linked to a monetary equivalent. A 1:1 ratio can quickly exhaust your budget if employees regularly earn points.

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10:1

When $1 is the equivalent of ten points, this is often far enough removed from the dollar but motivating enough that employees don't require a truckload of points before they obtain a good reward.

We use the 10:1 ratio at Nectar, and it's a sweet spot that works well for our employees and clients.

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100:1 

When 100 points equal a dollar, each point is worth a single cent. Much like the 1:1 example, it's easy for employees to determine how much monetary value you place on their efforts. Also, receiving points in cents can feel demotivating because saving up for a reward takes a significant amount of time.

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9 Best Practices When Implementing An Employee Point System

Before your team members start gifting points to each other, it pays to put some prep work into your reward system. Consider the following tips and best practices:

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1. Define Goals For Your Point System 

Why is your organization interested in giving reward points to employees? This is the most critical question you can ask before launching your points program. Understanding your motivation and setting goals for your initiative ensures it aligns with and supports overall business objectives. Here are some goals to consider:

• Increasing employee engagement: By rewarding positive actions, you can reinforce desirable behaviors and organizational values. 
• Boosting morale and motivation: Recognizing hard work can enhance employee satisfaction.  
• Improving productivity: Reward programs can incentivize employees to perform at their best, increasing overall productivity.
• Fostering a positive company culture: Regular recognition can help create a workplace environment of appreciation and support. 

When setting your goals, use the SMART method to make them specific,  measurable, achievable, relevant, and time-bound. Adopting this model ensures you choose related metrics to track the success of your points-based rewards system. For example, if you aim to use points rewards to improve engagement, you might track employee engagement rates using pulse survey scores before and after introducing the system.

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2. Consider Budget

Budget is a key consideration when implementing an employee reward point system. Since points have a direct monetary value, employers naturally want to know how much budget to set aside.

Nectar Tip: We encourage our administrators to start with a tighter budget and then expand, especially once the budget is in the hands of your team. It's often easier to give more money at a later date vs. taking it away due to overspending. Reducing your budget after the fact can be a real morale buster.

Part of planning a sensible rewards budget is predicting how many points your employees will give and redeem each month. As a guide, Nectar clients typically give away an average of 60% of their monthly points allowances each month. However, we also encourage our clients to budget accordingly for birthdays, work anniversaries, and periodic employee awards throughout the year.

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Example Of A Yearly Points Budget

Here’s an example of how you might forecast your budget if your company has 100 employees.

• Monthly allowance = $5
• Birthday bonus = $50
• Work anniversary bonus = $25
• Average $ amount per employee award given = $20
• Expected number of awards = 50

We’ll save you on the math: (100*5*12)+(100*50)+(100*25)+(50*20) = $14,500/year for full points redemption. But as we expect an average of 60% points redemption, we can project an annual budget of $8,700 (60% of 14,500.)

Of course, this is just an example, and nothing is set in stone. If you need to rein in your costs and use a tighter budget or invest more to help you achieve your goals faster, an employee points reward system is flexible. Employers should always have complete control over how much of the reward budget is allocated and available.

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3. Customize Budget For Specific Individuals

An effective employee points system should be inclusive, enabling workers at every level to give and receive praise and points. That said, there may be instances where you want to customize the budget for specific individuals.

For example, it might make sense for a CEO or general manager to have more points to award their direct reports and people across the organization. According to Nectar's survey, 40% of employees feel that recognition from managers has more impact on them than any other group. So, it would be a shame to limit the sphere of recognition and the influence those manager points can have.

To address this, we make it easy to set up customized budgets for senior leaders or specific managers to have more points to share than other employees. We have three options to help you develop a manager budget that makes sense for your team:

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Flat Rate Manager Budget

All managers are given a flat rate across the board. In an ideal world, this rate is more than a regular employee with no direct reports would have. For example, you give your employees 50 points a month, while managers get 100 points a month.

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Variable Manager Budget

Based on each manager's direct reports, they'll get a flat rate and a budget for each direct report. For example, managers may get 50 points monthly plus 50 points for every direct report. In this instance, a manager with ten direct reports would receive 550 points, while a manager with five direct reports would receive 300 points.

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Customized Manager Budget

At Nectar, we realize that some employees may be considered "managers" but don't necessarily have direct reports. For instance, the company CEO is an important figure, but they may not have that many people under them. Still, we know that employees want to be recognized by executives. You can give these employees a custom budget so they have more points to share with employees across the organization.

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4. Clarify How To Give Points

A well-communicated points-based system is more likely to be successful and drive the desired behaviors that align with company values.

Point systems like Nectar are easy to understand, but companies should set some expectations around points. By default, employees can attach the number of points they feel comfortable sharing. Nectar has some guardrails you can set up to ensure employees aren't sending too many points to the same person, but we don't set strict guidelines about what behaviors are worth what. If our clients have thoughts about this, we encourage them to communicate them early and often.

Choose a communication method that works for your organization—whether it's email blasts, Slack messages, or posters around the office—and use this medium consistently. Some key information to share includes:

• How points work: Define what a point is and how to redeem them for various types of rewards. 
• The types of behavior that deserve points: Explain which positive behaviors you want to reward and the suggested points awarded for each type of behavior. For example, giving a successful presentation could earn 50 points, while consistently arriving early to work could earn 10 points.
• The value of your points: Clarify how much they’re worth in terms of monetary value. 
• Important dates or deadlines: Share when new points will be issued, when they expire, and any other critical dates. 
• When employees can give points: Should employees recognize each other in real-time or periodically when points replenish? ‍
• Why giving points is important: Remind your team of the business objectives you’re trying to support by introducing this system.

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5. Connect Points With Valuable Praise 

Reward points are enticing and an excellent motivator. They appeal to our desire for tangible rewards and encourage employees to strive for outstanding performance. However, a points system will be even more powerful when it incorporates other motivators like praise.

Maximize the impact of your rewards system by awarding points alongside a personalized note or recognition message that shows appreciation for the employee's contribution. This acknowledgment creates an emotional connection between the points and the positive behavior, making them more meaningful.

An example message could be, "Helen, thank you so much for helping out our department this month. Your work on our recent project has been exemplary, and we couldn't have hit our deadline without your commitment. Here's 50 points for your hard work."

By coupling points with valuable praise, we can ensure that these positive behaviors become ingrained within our company culture so we see them more regularly.

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6. Include Guardrails In Your Points-Based Rewards Program

It’s human nature to have stronger relationships with some coworkers than others. Our social connections data tells us that 76.13% of employees have a close relationship at work, so it's tempting to give all our points to that person. Perhaps we know our friend is saving for a specific reward, or we just want to give them a mental boost that month.

While understandable, an employee points system isn't designed exclusively for work besties; it's a powerful tool for strengthening connections across the entire organization. So, consider placing some guardrails around point allocation to encourage equal recognition and limit over-giving. For example:

• Limit how many points an employee can give per month: This ensures everyone has a fair chance to receive points.
• Prevent people from giving their points to a single person: While this may seem harmless, workplace silos can develop if one team consistently gives each other all their points while neglecting an adjacent team of hard workers. ‍
• Encourage variety in point allocation: Instead of allowing employees to give all their monthly points at once, encourage them to spread their recognition throughout the month.

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7. Encourage Consistent Rewards With A Point Reset

A new points system has great novelty value. Everyone is excited to participate and reward their teammates with praise and corresponding points. But after a while, stagnation can set in. People are busy and forget they have a bulging sack of points to share with their peers.

Get around this by employing a "use it or lose it" rule, which motivates everyone to allocate their remaining points before the month's end. This periodic reset encourages consistent recognition and avoids anyone hoarding their points until the end of the year. Additionally, this practice keeps point values consistent with monetary value and ensures your budget stays under control.

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8. Collect Employee Feedback On Your Points System

Is your points system a raging success? It's essential to continually listen to your team and improve the points system to meet their needs. By doing so, you can ensure that your employee points reward system remains effective and meaningful in driving positive behaviors and results within your organization.

Survey your employees to collect regular feedback on the following:

• What they like about the system
• What improvements they suggest
• Whether the points process is fair
• If anything needs further clarification

Analyzing this data and taking action to address any concerns will keep your points system fresh, relevant, and impactful for everyone involved.

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9. Give One-Off Company-Wide Points 

Points systems undoubtedly focus on individual performance by rewarding employee dedication and excellence. But sometimes, we want to elevate the collective hard work of a team or even the entire organization. For example, you may wish to distribute group or company-wide points in the following scenarios: 

• To accompany an end-of-year or end-of-quarter bonus 
• To highlight that an internal team has exceeded its targets 
• To celebrate an internal company holiday such as a summer shutdown 
• To celebrate Employee Appreciation Day 
• To promote a new piece of company swag you want employees to get 
• To award a special shoutout from a C-suite member to motivate the entire staff

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Implement A Winning Employee Point Reward System With Nectar 

Points are central to Nectar’s approach to rewards and recognition. Our suite of Recognition, Challenges, and Milestones tools makes it easy for companies to:

• Acknowledge their coworkers for their regular and outstanding contributions. 
• Incentivize employees to complete challenging tasks related to wellness, company training, onboarding, employer branding activities, and more. 
• Remember employees’ special occasions such as birthdays and work anniversaries. These are all automated, so there's no risk of missing an important date.

Once employees have stacked up some points, they can redeem them using our Rewards tool, which provides access to a wide selection of treats. Employees can choose from Amazon products, gift cards, charity donations, company swag, or customizable rewards set up by their employer.

Start motivating your employees with the promise of turning points into prizes. Book a Nectar demo today.