A reward is a prize, which an employer gives to his/her employees for performing the job exceptionally. On the other hand, the incentive is a motivational factor, which constantly encourages the employee to do better in their work.
Human Resource Management, uses a strategic approach to manage its workforce in an effective manner. To improve the level of performance, various system or programmes are implemented, such as reward and recognition, incentives and so forth.
Hence, reward system, reward strategy, reward policy, incentive plan, incentive programme, incentive structure, etc. are just the tools of human resource management to regulate the behaviour of employees. So, let us start the discussion on the difference between reward and incentive.
Content: Reward Vs Incentive
|Basis for Comparison||Reward||Incentive|
|Meaning||The reward can be understood as a prize given to someone, so as to recognize an employee's hard work or achievement.||The incentive is anything which motivates, or encourages an employee, to achieve something.|
|What is it?||A tangible item that is given to congratulate and celebrate success or achievement.||Motivational factor designed to tune the desired behavior.|
|Involves||Providing monetary or non-monetary recognition for achieving a goal, or attaining a certain level of skills.||Motivating people to complete targets or level up their performances.|
|Objective||To appreciate and recognize people for the work done.||To motivate employees to achieve something.|
Definition of Reward
In simple words, the reward is the accolade given to the employee for performing a task, rendering a service or taking a responsibility, which can be monetary or non-monetary. It is aimed at recruiting and retaining the kind of employees which the company requires while promoting the behaviour, that contributes effectively to the accomplishment of the organizational goals.
It is like giving him/her something over and above the regular consideration, at the same level, to recognize the efforts.
The concept of fair day’s work has blurred these days, and it is replaced by a competitive remuneration package, which contains novel methods of offering benefits. The reward is a tangible consideration for the services rendered by the employee to the company.
Advantages of the Reward System
- It demonstrates the employee that his/her work and performance is appreciated and recognized.
- It also attracts competent persons working with other organizations and keep the talented ones for the long term.
- It maintains healthy competition amidst employees to achieve the goals.
- It develops a sense of commitment and dedication among employees.
- It boosts the morale of the employees, improves their productivity and efficiency, and also encourages them to maintain quality in their work.
Definition of Incentive
Incentives imply the extraneous persuading factor of stimulating employees. It pulls the strings of employee’s behaviour, directing them to put more efforts into work, so as to match the standard performance level, in the company.
It arises from the need for the employees to be acknowledged and appreciated, for their hard work and dedication. Practically, appreciating the employees when the appreciation is due, satisfies their internal desires. Hence it can be anything which grabs the attention of employees and instigates them to work continuously for achieving it.
It is regarded as the most important determinant of worker’s motivation, which drives them to put more efforts in their work, by encouraging them and increasing their enthusiasm. This is a great way to gain job satisfaction, as it tends to increase the interaction between the employer and employee.
It encompasses various plans proposed by the firm, to encourage employees or teams in timely reaching the targets, such as team incentives, target-based plans, sports awards, profit-sharing plans and skill-based plans.
Key Differences Between Reward and Incentive
The difference between reward and incentive are explained in the points below:
- Reward implies all kinds of monetary return, tangible services, perquisites and benefits which are given to an employee, for their performance and contribution in the organization. In contrast, incentive implies the material and moral system that a company offers with an aim of positively persuading the employees to level up their productivity and improve their performance standards.
- The reward is the actual thing (cash/kind) dispensed to congratulate and celebrate success or achievement. Contrastingly, the incentive is the motivational constituent designed specifically to tune the desired behaviour in employees.
- The basic difference between reward and incentive lies in the time horizon, i.e while incentives are declared prior to the beginning of the work, whereas reward is given after the work is accomplished successfully and satisfactorily.
- While the reward is retrospective in nature, which is given to the employees for their work, performance and achievements. Incentives are forward-looking in nature, which acts as a stimulus, in regulating the behaviour and performance of the employee, to achieve the maximum.
- The reward is all about recognizing the past achievements and pay remuneration and other monetary and non-monetary benefits, as per the employee’s or team’s contribution to the organization. As against, Incentive is a motivational factor which tends to encourage and energize men at work, to perform better in future by providing an opportunity to earn monetary and non-monetary rewards.
- The main aim behind rewarding employees is to appreciate the hard work and commitment of the employees, which can set an example for the others too. As against, the primary objective of providing incentives is to motivate employees to work and achieve the target, in order to attain the benefit in the form of incentive.
Reward and incentive schemes are not just important for employees, but employers too, as it retains and motivates employees, as well as improves their productivity. This is due to the fact that it directs the employee’s capabilities to work efficiently so as to achieve the company’s goals.
Put it another way, if an effective reward and incentive system is absent in an organization, it may negatively influence the work of the employees, indeed they are likely to switch the company which offer better remuneration for their work. In short, it will decrease their performance level, and thus the goals of the organization may not be achieved.