Cashing in on inventive and tailored reward solutions is paying dividends for some employers. Annie Hayes reports on reward schemes that applaud the individual.

Looking at public sector pay, it might be fair to conclude that a one-size fits all approach to reward is a recipe for disaster. There has been a spate of industrial action and threatened stoppages in response to Gordon Brown’s cap on pay awards, so it would seem that some individuals would prefer a meritocracy where effort and performance is applauded.

Recognising the best, however, doesn’t always mean parting with huge amounts of cash or expending Goldman Sachs-type bonuses. Findings from the 2007 Chartered Institute of Personnel and Development (CIPD) reward survey showed that a form of recognition that has cash value, such as retail vouchers, is more likely to be used in the private sector and arguably can be just as valued.

Arron Taylor, business development director at Pareto Law, an assessment, placement and training organisation and winner of the Sunday Times 2005 Best Companies to work for in the small business category, talks about Pareto’s belief in recognising the individual: “You’ve got to have fun at work; we believe that people are more likely to perform if they are recognised for their achievements.”

Pareto certainly put its money where its mouth is, with a number of awards designed to reward excellent performance. The Pareto appreciation reward runs across the whole company, with staff voting every month for a deserved winner, whilst the Paremier (a play on Pareto and premiere) league, also monthly, is judged on key performance indicators. And it goes on with awards being distributed within functions – sales person of the month, account manager of the month – you get the picture, but it doesn’t stop there.

Exceptional rewards

The layers are mind-boggling: “Every six months an employee can qualify for one of two holidays – a summer holiday of typically four or five days, and a winter holiday – usually skiing,” explains Taylor, who says the system works because it’s based on “looking for exceptional people to achieve exceptional things”.

It’s clear that the beauty of the reward structure at Pareto is that it fits the demographics – Taylor admits that, aged just 34, he’s the oldest in the sales team with the typical worker being a 20-something. The holidays, retail vouchers and meals out that can all be won appeal to this age range.

Mike Morgan, managing director of Peoplevalue, providers of flexible, employee motivation, membership and customer loyalty schemes, says that tailoring rewards to the workforce is crucial, and emphasises the importance of an all inclusive approach:

“It is important that corporations engage with every level of workforce. Rewarding a sales executive for a new contract does little or nothing for the pre-sales consultant or secretary who worked half the night to get the successful proposal in on time. Recognising these unsung heroes within your organisation creates a really motivated workforce who feel appreciated by their employer and part of a winning team.”

Morgan, whose firm supplies reward solutions to corporate heavyweights including BP, the RAC, Norwich Union and npower, says that in his opinion it is actually becoming increasingly more important to offer a modern culturally diverse workforce the opportunity to achieve recognition outside normal pay processes:

“More and more organisations are adopting non-cash reward cultures where behaviour and team work is commonly recognised. Cash has historically been the approach of choice by UK corporations and has been supported by perceived employee preference. Even while most employees, when asked for a preference, would choose cash, when they are asked how they feel after receiving a specific gift (non-cash reward) or the equivalent financial value in their pay cheque, they routinely report feeling better about the gift.

“By allowing the employee to select a gift as a reward it strengthens the bond between them and their employer, provides a constant reminder of their achievement and gives them ‘bragging rights’ within the workplace.”

These ‘bragging rights’ are all well and good but what’s the cost? Morgan remarks: “Modern reward solutions provide excellent accounting and reporting. This enables the corporation to manage reward budgets effectively and ensure that they are being applied fairly. Like any employee reward, the gift is considered ‘a benefit in kind’ and is taxable.

“In every instant of reward solutions I have been involved in, the tax element has been paid by the employer. This is very important as you do not want on one hand to recognise behaviour and then on the other, tax them for the privilege. Importantly, the perceived value of a non-cash reward can have as much as three times that of the equivalent cash reward.”

Cost-effective approach

HR consultant Sandra Beale says that, in reality, these types of reward schemes can actually be more cost-effective than those where a one-size fits all approach is adopted: “A one-size fits all reward may not suit the needs of certain individuals and may not be cost-effective for the organisation. If they are paying for a benefit that is not used, then this is a waste of money.”

Beale warns, however, that there can be cost implications for flexible benefits including software and time elements.

Of course, tailoring rewards can backfire if communication falters and Beale believes that it’s essential to consult employees about the rewards they value: “By consulting with staff, there is more likely to be acceptance of what is ultimately implemented. They feel valued for having been asked and this ultimately knocks on as improved employee engagement and motivation.”

Commenting on the 2007 CIPD reward survey, Charles Cotton, the CIPD’s reward adviser, agrees that reward is more than a top-down process: “It involves organisations examining what rewards will be valued by their existing and potential staff, what will attract an individual to the organisation, what will keep them there and what will engage them.”

And that really is what it’s all about. Whether you go the extra mile, as Pareto has, is up to personal taste and demographics. Clearly, however, workers across the age-range and cultural mix have the appetite for individual reward structures to drive them forward, to motivate their performance and incentivise them to beat the competition – their colleagues.