Employee Retention & Benefits

How to Reward Employees When You Can’t Give Raises

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It’s a hard truth that most HR leaders and managers face at some point in their careers: Sometimes there just isn’t money in the budget to give a well-deserving employee or team member the raise they deserve.

So when the time comes to sit down with a high-performer for an end-of-the-year performance review, sometimes there’s just nothing you can do.

… or is there?

Mikaela Kiner, founder and CEO of Uniquely HR, firmly believes that money isn’t the only way to recognize and reward employees. Whether your budget won’t allow for raises or you simply want to add no- or low-financial rewards to your compensation package, here are five thoughtful ways to reward employees when you can’t give them a pay bump.

1. Make it Meaningful

Believe it or not, several studies over the years have consistently confirmed that money isn’t the only form of recognition for employees, or even the most preferred. Once employees are paid competitive wages — particularly if they can reach the $75,000 “happiness barrier” — workplace recognition has a greater impact on employee loyalty, retention and productivity.

“Non-financial rewards can be very meaningful and sometimes even more rewarding than financial ones,” says Kiner. “Rewards like company-sponsored experiences or mission-driven charitable donations may be more motivational to employees than money. In fact, I still remember a handwritten card I got early in my career from a VP. The fact that he selected me and took time personally to thank me meant much more than a small bonus or gift certificate ever could have.”

Here are a few ideas for meaningful gifts that can be low-cost or free:

  • Handwritten cards expressing appreciation
  • Small donation to a nonprofit of their choice
  • Experiences like a local food tour, art class or wine tasting
  • A personalized book selection
  • Time off or flex time after a busy period is always popular!

[Related: What is a Merit Increase and Why Does it Matter?]

2. Make It Personal

One of the most important ways to make sure your non-financial recognition is a hit with employees is to make sure it’s as personalized as it can be. Whenever possible, provide employees with a choice about how they’d like to be recognized.

“The best and most creative ideas will undoubtedly come from the people you want to reward,” says Kiner. “One size does not fit all when it comes to recognition, and each employee may be motivated by something very different, so survey your employees and make sure they have a range of options to choose from.”

One word of warning from Kiner? Be careful with gimmicks, which can all-too-often come across as disingenuous: “I knew an IT team that passed around a stuffed penguin as a monthly prize and it was warmly received by each department. But gimmicks only work when they’re grassroots ideas — if you try to create a gimmick from the top down, it may fall flat.”

3. Make It Fair

As you brainstorm new ways to show appreciation for employees who go above and beyond, make sure you’re building a clear path for achieving this kind of recognition. Employees should know exactly what they need to do in order to be recognized for their work.

Kiner explains further: “Like every other kind of reward, non-financial recognition needs to have a methodology and clear criteria that explains who you’re rewarding and why. If the award is meant to be motivational, people need to know what the goal is and how to achieve it.”

4. Borrow From Other Budgets

In situations where it’s not possible to use your compensation budget to give someone a long-term raise, consider tapping into other benefits to arrange for exceptional forms of recognition. For example, employees who are highly motivated by learning and growth or who want to position themselves for a promotion in the future may be more than happy to receive an opportunity to continue their studies or pursue an educational opportunity using the development budget.

“Offering an employee training or development opportunities outside of work is a great alternative to a pay raise as you’re helping them progress in their career,” says Kiner. “Consider offering to pay for a class, certificate, workshop or conference with the development budget, or arrange for one-on-one coaching, mentoring or leadership programs.”

[Related: 3 Strategies for Engaging Your Superstar Employees That Don’t Involve Perks]

If you’re restricted by a tight budget, don’t assume you can’t recognize your hard-working employees. Brainstorming authentic rewards will go a long way towards showing employees that you see and appreciate their hard work.

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