Cash is often used as a reward in employee recognition programs. It is a flexible award and the intent is that it is spent in a way that the employee rewards themselves. On paper this is a good option for both the company and employee - the employee is motivated to earn more by doing the things that benefit the company the most. However, here are 4 reasons why companies lose value when using cash for rewards:

Diminished Motivation - Employees will begin to see the cash reward as part of their compensation. People will do what is expected in order to get paid, but rarely go above and beyond what is expected of them. Therefore cash loses its motivational value.

Short Shelf Life - Cash is easily spent and forgotten, making it hard for the employer to realize any long term value. There is nothing left to remind them of why they were recognized.

Taxable Income - Employees must pay taxes on cash rewards which diminish the reward’s value. Employees aren’t taxed on branded or lifestyle merchandise. In some cases, these can be tax deductible for the company.

No Trophy Value - Cash is often used to pay bills, or as mentioned before, considered part of regular compensation. The employee has nothing tangible to show for his reward. Likewise there is no long term reminder of the reward to continue to generate company loyalty.

An alternative to cash that is just as flexible is a points based program. Employees earn points for meeting and then use them to choose their reward from a selection of merchandise. Points still allow the employee to choose something of value to them for their reward. The company maintains some control of the process to maintain the value of their investment.

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