Incentivising staff the smart (and legal) way

Done right, employee incentives can play a significant role in attracting and retaining talented employees and keeping them focused and engaged. Our corporate partner Ellis Whittam advises on how this can be done in the best way possible. 

As well as making employees feel valued, incentives also serve to promote particular behaviours or levels of performance that are necessary for the organisation’s success.

However, incentives can also be problematic. Depending on what is incentivised, employers can encourage teamwork and cooperation or damage it. It’s also easy to unwittingly emphasise the wrong behaviours. For example, if your aim is to increase productivity, you have to be careful not to unintentionally promote a lesser standard of work. Of course, there are also legal pitfalls to avoid.

There are a number of things to keep in mind to ensure an incentive scheme has the desired effect.

  1. Be fair

One sure-fire way to invite problems is to apply incentives unequally. The first question you should always ask yourself is “do the rules of this incentive scheme put a particular group of staff at a disadvantage?”. While you may wish to set certain eligibility requirements to ensure that you reward those who deserve it, it’s important that any conditions placed on entitlement to rewards are not discriminatory.

For example, if you’re incentivising attendance, you must ensure that you don’t discriminate against those who are absent due to pregnancy or health reasons. This will help to avoid claims for possible discrimination at a time when you are trying to incentivise staff and create a positive and motivating working environment.

  1. Set clear rules

It’s important that the rules of any incentive scheme are clear, unambiguous and communicated to everybody. This will avoid any suggestion that anyone has been treated differently. You should be clear as to what employees will receive and when in order to avoid issues arising out of miscommunication.

When setting rules, you must ensure that incentive targets are based on objective, measurable criteria as opposed to your own subjective view, as perceived favouritism may result in demoralising other members of staff and therefore have the opposite effect to what you’re trying to achieve.

  1. Be realistic

While you may feel obliged to offer lavish rewards, you should be realistic about what is viable for your organisation. Staff perks don’t have to break the bank; recognition incentives, such as simply thanking employees, sending a personal note of praise or announcing an accomplishment at a team meeting can go a long way.

If you’re looking to incentivise performance, allowing employees to finish half an hour early if they hit target may be just as effective as compensation initiatives. If you’re looking to promote teamwork, providing lunch for employees is a great way to show your appreciation for hard work and is also an excellent opportunity for bonding.

  1. Think about the bigger picture

Investing in incentives may only keep employees motivated for so long. If it’s clear that the occasional bonus or treat is the extent of the rewards for their hard work, employees may become disengaged. Beyond these ad-hoc incentives, you should also consider career progression opportunities and be clear about the path to get there. For many employees, this can count for a lot.

Ask yourself:

  • Have you given employees the tools, resources and opportunities to progress?
  • Do employees understand their career pathways?
  • Are you investing in training and development?

Not only can these measures improve retention but working towards a clear goal can be an effective way of enhancing productivity.

  1. Avoid creating implied terms

If rewards become the norm, they can become seen as entitlements, and as such, lose their ability to motivate employees. What’s more, allowing incentives to become expected can also mean that these intended perks actually become implied terms.

These are terms that aren’t set out in a written contract but are understood to exist through custom and practice. For example, if you have paid employees a bonus every year for many years, this may, over time, have become a contractual term. In practice, this can be difficult to establish and will be up to an Employment Tribunal to decide; however, it’s definitely something to be mindful of and it’s always a good idea to set out in writing that these incentives are discretionary.

Need support?

For advice on setting up a fair and motivating incentive scheme, contact 0845 226 8393, ask for the Partnerships Legal Team and quote your ACEVO membership number.

Photo by Marvin Meyer on Unsplash

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