How To Create A Useful Employee Recognition And Rewards Policy

Recognizing individual workers for their commitment to your company is a simple yet powerful way to improve their employee experience. But what does recognition actually mean? It can be a broad concept and look entirely different from one organization to the next.

Some leaders may think they're doing a great job acknowledging their employees by dropping the occasional "thank you" in their direction. Other organizations have a fully formed recognition program set up as a vehicle to give and receive praise.

This guide reveals how employers can design an employee recognition policy so every worker understands how to share and earn praise. You'll learn the benefits of designing a policy, what to include, and explore a sample policy to use as a starting point.

What Is An Employee Recognition Policy?

An employee recognition policy is a formal framework that guides your organization's employees, managers, and leaders on how to share fair, equitable, and engaging feedback. Your policy document will outline the following as a bare minimum:

• Who is eligible to give and receive recognition
• The types of behaviors you wish to recognize
• Your ideal recognition frequency
• How to reward positive behaviors

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8 Benefits Of A Recognition And Rewards Policy

Tangible benefits are available for those who lay the groundwork and take a consistent approach to recognition. Here's why you should draft a formal policy document:

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1. Ensure Recognition Is Authentic

Nectar's recognition survey of full-time employees found that 87% feel meaningful recognition impacts their job satisfaction. The key word here is meaningful—employee satisfaction is only achieved when they believe in the authenticity of your message.

A well-crafted policy can provide examples of authentic recognition that resonates with your workers. For example:

• Don’t say: “Thanks, Vera, great job today.”
• Do say: “Thanks, Vera, for taking the time to follow up with an update. Our success on this project hinges on keeping to deadlines, and your commitment ensures that we’re right on track.” 

By outlining the difference between authentic and inauthentic recognition, you're providing a template that anyone in your organization can use to be specific, detailed, and meaningful.

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2. Increase Employee Motivation

A well-designed recognition program has the potential to skyrocket employee morale. Nectar's survey revealed that 83.6% of employees feel recognition affects their motivation to succeed at work. When your team members receive praise for a specific task or activity, they feel motivated to show up every day and strive for excellence in their work.

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3. Drive Productivity

Motivation goes hand in hand with employee productivity. Workers who want to do a great job and are recognized for doing so will naturally become more efficient. This correlates with our research, which found that 77.9% of employees would be more productive if they were recognized more frequently.

A clear recognition and reward program policy creates a culture of productivity by outlining the behaviors and actions you wish to value and reward within your organization.

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4. Boost Engagement

Employee engagement is a significant issue in the modern workplace—Gallup’s research highlights that only 33% of US employees are engaged, down from 36% in 2020. At the same time, 17% of the US workforce is actively disengaged, contributing to recent trends like quiet quitting and the Great Resignation that have stamped their mark on the post-pandemic climate.

Regular recognition can turn the tide on disengagement by adding context and value to your employees’ everyday tasks and workflows. When this happens, 81.9% of employees agree that recognition for their contributions improves their engagement.

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5. Ensure Retention

No one wants to work for a company that doesn’t appreciate their commitment. Compensation and benefits only go so far, and employees who don’t feel respected or valued by their employers will leave. On the flip side, 71% of employees would be less likely to leave their employer if they were recognized more frequently.

Consider the impact that simple praise could have on your employee turnover rate and recruitment costs. This starts with creating a recognition policy and sharing it with your team. This step is also a vital employer branding exercise, demonstrating to your employees that you're equally committed to them as they are to you.

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6. Build Excellent Manager-Employee Relationships

When we asked employees who they receive praise from, managers stood out as highly influential. 40% of employees shared that managers have the most impact on them recognition-wise, which was higher than both peers and executives.

Strong relationships between managers and employees are critical to the employee experience. Gallup research finds that managers account for a 70% variance in employee engagement scores, with further studies from McKinsey suggesting that a third of people blame "uncaring leaders" when quitting their roles.

A robust recognition policy can be a game-changer for your manager-employee relationships. Your policy should include multiple examples of how managers can frame and deliver praise. It acts as a training tool for leaders who must communicate the importance of recognition to their teams.

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7. Strengthen Team Bonds

Top-down praise isn’t the only type of recognition to focus on in your organization. Nectar’s Workplace Connections survey examined the importance of friendships at work, with 69.5% of employees stating they would feel happier if they had a deep connection with a colleague.

Appreciating team members for their daily contributions is an integral part of relationship-building. Yet, sadly, 63% of employees we surveyed admitted they would like their colleagues to say "thank you" more.

Your peer recognition program will outline how colleagues can share praise and the specific ways to do so. Even better, if you include challenges and employee recognition awards within your program, team members can spur each other on to achieve greatness.

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8. Create Clear Guidance On AI

As the conversation on artificial intelligence continues to grow in the workplace, some companies have been tempted to lean on artificial intelligence to speed up the practice of recognition. Some will use AI to generate recognition ideas or check the grammar in their message of gratitude. Others use it to draft and send entire messages to employees, with the result feeling hollow. 53% of people don't believe that AI would produce meaningful employee recognition, which is worth weighing if you're considering using the technology this way.

Artificial intelligence is still somewhat new, and employers must adapt on the fly to harness it without compromising their reputations and company cultures. Providing clear guidelines on how you expect employees, managers, and leaders to use artificial intelligence to deliver recognition is critical here. This is an area of your policy you'll need to review frequently in the coming months as the technology advances rapidly.

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What To Include In Your Employee Recognition Policy

Your employee recognition policy is customizable to suit your organization's size, goals, and business activities. Many recognition policies build from the following core elements:

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1. Purpose And Objectives

Clearly articulate the reasons for implementing your recognition program so everyone can keep them top of mind as they praise their colleagues. You might aim to boost morale, increase engagement, or improve overall performance. Whatever your goals (and it's fine to have more than one), share details about what success would look like to you.

Example: Imagine you've set up a recognition program to increase employee retention. You might measure success by tracking turnover or tenure rates over a set period, such as one, three, or five years.

2. Definition Of Your Recognition Program

Early in your policy document, clearly define your recognition program and how it works. For example, are you using dedicated recognition software like Nectar or pinning employee photos on a recognition wall? In either case, describe the mechanics of your program. Do you use a points-based system, nominations, or exchange messages of appreciation with each other? Consider the different types of recognition available and how they might suit (or not) your organization's policy:

• Formal recognition: Scheduled awards such as Employee of the Month, annual performance awards, or service milestone achievements. This recognition type might rely on a nomination and voting process, which should always be transparent and easy to understand. 
• Informal recognition: All staff members can give and receive regular acknowledgments, such as encouraging notes, shoutouts in meetings, gift certificates, or small tokens of appreciation.
• Peer-to-peer recognition: In a positive company culture, all employees recognize their teammates, colleagues from different departments, and managers and leaders to foster a culture of peer appreciation across all levels.

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3. Eligibility Criteria

Equitable recognition hinges on offering an inclusive program. All employees, regardless of rank, role, work location, or employment status, should be eligible to participate in your recognition program. But, there might be some workers you choose to leave out because they don't work enough hours, or the program wouldn't make sense for them.

Consider how each of these groups might be perceived differently in your recognition program:

• Part-time employees
• Remote workers
• Interns 
• Contractors and freelancers

If you leave out a group from your formal recognition program, finding ways for them to feel valued and appreciated at work is important. A contractor may not be a part of your typical program, but there may be another way to ensure they feel the love. For example, you could gather great feedback you get on their work and share it during your one-on-one meetings with them.

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4. Recognizable Behaviors

Your policy should provide an exhaustive list of the types of work and behavior you want to encourage in your organization. Consider the activities or attributes that add the most value to your business and align with your company's values and goals. These might include employees who go the extra mile with their:

• Diligence
• Positive attitude 
• Creativity and innovation 
• Teamwork and collaboration 
• Customer service 
• Exceptional problem-solving abilities
• Leadership skills
• Punctual and reliable attendance
• Effective communication

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5. Examples Of Quality Praise And Appreciation

In addition to providing a list of behaviors worthy of recognition, providing examples of quality praise and appreciation is also helpful. This ensures the recipient receives specific, detailed, and meaningful feedback. A useful recognition recipe includes the following ingredients:

• The person’s name 
• An expression of gratitude 
• Details of the specific act or employee performance you want to recognize 
• An explanation of how it supports your company's values 
• The result of their contribution 
• A wrap-up motivating them to keep up the great work

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Here’s what this looks like in practice:

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"Hi Alex, I am grateful for your exceptional dedication and hard work on the recent _____ project. Your ability to lead the team through unexpected challenges, maintaining focus and positivity, was remarkable. This reflects our company's values of resilience and teamwork. You set a high standard for what we can achieve together.

Your efforts have substantially impacted our company's reputation and success. I encourage you to continue embracing challenges with this incredible drive and enthusiasm. Thank you once again for your outstanding contribution. Keep up the great work."

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Meaningful praise should come from the heart. If you plan to use artificial intelligence to craft recognition messages, use your policy to create clear guidelines about using technology. For example:

• Only use AI to check and enhance messages you’ve already created 
• Don’t feed sensitive or confidential information into any AI tool 
• Always review and approve AI-generated messages before sending them to individual employees 
• Never use AI to create multiple messages for more than one employee

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6. Recognition Awards

If you use employee awards, define:

• How often these occur
• How many employees will receive recognition; for example, one employee per company, department, location, etc.
• How you will honor the award winner 
• Who nominates deserving employees to receive the award, how nominations are reviewed, and who makes the final decision 
• What employees need to do to be nominated

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7. Employee Rewards Policy

Rewards can take many forms, and your policy should clearly outline the available employee rewards for each level of recognition. For example:

• Monetary rewards such as bonuses or gift cards 
• Non-monetary reward options such as extra time off, a day working from home, or tickets to an event 
• Social recognition, such as employee spotlights in newsletters or on the company website 
• Rewards that align with your organization's core values, such as eco-friendly gifts or donations to a charity of the employee's choice.

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Highlight the extent to which personalized gifts are possible or appropriate. For example, if gift cards are available, note whether employees can choose the retailer.

Lastly, you want to note the tax implications of rewards. Employees may need to pay taxes on items like gift cards, so you want to mention that in accordance with the guidelines your tax professional gives.

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8. Implementation Plan

Communication is a massive part of your recognition program's success. Your employees must understand how it works and trust in the process for it to be effective. Your policy can support here by outlining:

• How you plan to communicate your program to all employees, including how it works, recognition criteria, and how to participate 
• How new starters will learn about your program so they can hit the ground running and receive appreciation from day one 
• How managers receive training on giving and receiving employee feedback 
• How all staff receive training on how to use your reward and recognition software (if applicable)

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9. Feedback And Evaluation

Your recognition plan should be a living document that evolves with your organization's needs. Regularly reviewing and updating it ensures your program continues to drive employee engagement while supporting a positive company culture. Include details in your policy about:

• How regularly you plan to review and modify your program based on participation rates, engagement rates, progress toward your organizational goals, and any changes in company performance or culture
• Who is responsible for the evaluation process, including tracking and reporting on program success
• How employees can provide suggestions or feedback on the program
• How you'll communicate updates and improvements to the program to all employees

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10. Legal Compliance And Ethical Considerations

Use your policy to maintain high ethical standards throughout your organization, ensuring fairness, transparency, and respect for all participants.

Always verify that your program complies with all relevant laws and regulations, including the tax implications of cash rewards. Detail this information in your policy to make it accessible to your employees.

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Download Nectar's Employee Recognition Policy Template

Ready to create your company's recognition policy? This workbook is designed to keep your policy aligned with the organization's goals and values, ensure inclusivity, and effectively motivate and engage employees. Feel free to copy and paste sections from it and use the questions to reflect on your recognition goals.

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Build A Stellar Employee Recognition Program With Nectar

Nectar’s rewards and recognition platform provides a customizable framework to suit your organization. We offer the following features designed to motivate and incentivize your employees:

• Recognition: Employees send shoutouts and Nectar points to each other. Recognition-givers highlight the specific company values that their peers have exhibited, and praise them publicly in the Nectar feed. 
• Rewards: Employees redeem their accumulated points for a range of rewards such as Amazon products, company swag, charity donations, custom rewards like concert tickets, or gift cards for a variety of merchants, including Paypal. 
• Challenges: Employers set up regular incentives related to wellness, company training, branding, or anything else linked to your company culture. Employees earn points when they complete the challenge. 
• Awards: Leaders can set up Employee of the Month, Rookie of the Year, Team Player awards, or any other celebrations in Nectar. Attach points and a personalized message to the award and distribute it to the worthy recipient. 
• Anniversaries: Plug in your employees’ birthdays and work anniversary dates, and allow Nectar to do the rest. Your team members will receive a celebratory message and Nectar points on these important dates without you having to remember a thing.

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Ready to put your employee recognition policy into action? Arrange a free Nectar demo today to build a stellar recognition program.