“Cash or Credit?” Both, please.

Finding a balance between salary, bonus, recognition and rewards for employees

January means Annual Performance Review time at the job. And Annual Performance Review means I get a raise!! Woo hooo!! This got me thinking about compensation, rewards and recognition as it relates to employee performance. I was mindlessly mulling this over during a lunch by myself when my server came up and asked if I was going to pay by cash or credit. And I thought …


At least, at work and as it relates to performance.

Cash = salary and bonus incentives.

Employees want a fair, competitive wage for the work they perform. Organizations focus on this when trying to attract employees to work for our companies, but seem to forget or diminish its importance when thinking about retention. However, this is just as critical – if not more critical – for making sure to keep the best performers. Organizations should design compensation strategy and ensure the best performers are paid a base salary that makes them want to stay.

  • Avoid narrow salary ranges and maximums. Ranges and maximums are great for starting compensation but counter-productive to retaining employees and measuring performance. No one will come in to work day after day, week after week, year after year to never earn any more than the wage they started out making and continue to produce at a high level. Nothing good can come of telling a long-standing, consistent-performing employee that you can’t pay them more money ever again because of some rigid compensation guideline.
  • Avoid stringent limits to increase percentages. Let’s be honest – a 2% or 3% increase for someone who yielded hundreds of thousands of dollars through sales, savings and/or standard-bearing for your organization is a joke. Stay away from compensation structure that prevents double-digit increases where warranted.

In addition to base salary, many compensation strategies include bonus incentives. A bonus is defined as “money added to wages on a seasonal basis to reward good performance.” Emphasis on “seasonal” and “good performance”.

  • Bonus paid alongside salary for an extended period is not bonus
  • Bonus not tied to specific, measurable performance achievements is not a bonus

Bonus defines the standard for excellent performance and the behaviors employees should emulate and regularly repeat. If your bonus structure doesn’t do this, revise it or call it something else – like allowance, stipend or gift. Otherwise, it will breed confusion and contempt among employees.

Credit = recognition and rewards

Regardless of how much money someone earns, it is still important to be acknowledged for a job well done. Money is important but it isn’t everything. Managers should continue to praise employees for their good work, both privately and publicly.

  • An email that says “good job”
  • A shout-out during a meeting for an individual contribution
  • A certificate, plaque or trophy for reaching goals
  • A day off after spending significant time working on a challenging project or extensive travel for the job

These are just a few examples of recognition and rewards employers can give their employees to acknowledge hard work and contribution. Recognition and rewards do not necessarily have to take a lot of time or money. However, recognition and rewards should make clear to the employee their work is valued, appreciated and relished.

Cash or credit? I want both. And if you manage employees, know they want both, too.

Just remember to find balance between salary, bonus, recognition and rewards for both short-term and long-term success. You cannot lavish praise on an employee but never reward them financially – because all credit must eventually be paid for in cash.


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