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Rewards vs Recognition: What the Data Tells Us

Zoe Brankin
Zoe Brankin
April 14, 2022
7 min read

According to McKinsey’s research, when it comes to Rewards vs Recognition, rather than Rewards and Recognition, employees are more motivated by non-financial incentives, such as praise and leadership, than the three highest-rated financial incentives at work. That’s right: recognition is more effective than cash bonuses.

In other words, a simple expression of thanks could mean more to your employees than a fancy designer shop gift card or even a pay rise. Great news for SMEs working on a tight budget. But it’s not that simple.

Gallup polling has shown that employees who don’t receive recognition are twice as likely to say they’ll quit within the next year. Being recognised at work is key to team motivation and retention. So what can employers do to recognise and reward the efforts of their employees?  

It all starts with comprehensive rewards and recognition schemes, which means getting to know the difference between recognition and rewards—and learning how to use them to boost team morale and your bottom line.

Rewards vs Recognition: What are the key differences? 

When it comes to acknowledging an employee’s behaviour, many companies have found themselves merging rewards and recognition as if they were inseparable. We are here to tell you why this doesn’t need to be the case. Mo’s software combines both for an effective employee engagement strategy. 

But let’s start by focusing on the meaning of rewards and recognition and exploring their differences.

Rewards are tangible, while recognition is intangible

Rewards are usually tangible, like a pay rise or a bonus.

Employee recognition tends to be intangible — the praise and approval of the people you work with.

Rewards are transactional, while recognition is relational

A management team usually agrees upon rewards. They tend to come with conditions. For example, if an employee reaches a specified sales target, they get a specified monetary bonus.

Recognition isn’t transactional. It’s based on emotion, human connection, and the buzz we get from feeling valued and appreciated. Essentially, rewards attract people to an organisation, but recognition is actually what helps keep them there.

Rewards tend to be fixed, while recognition is more flexible

Because we have to factor rewards into the company budget, they have to be planned. You’d probably get short shrift from the guys in finance if you dished out a bunch of cash prizes without prior approval.

Recognition costs nothing, so you can be more flexible in how you choose to award it. There is no need to seek a budget to simply post how well someone is doing on a specific project on a Slack channel. Because recognition isn’t a costly exercise, it tends to be an employee-led initiative. 

Employee engagement platforms such as Mo are an excellent way for coworkers to publicly share and recognise how well their peers are doing daily, weekly or monthly. They also have the opportunity to share whatever it is that matters to them in their working life, whether it be a work milestone or an anniversary.

Rewards are linked to long-term goals and achievements, while recognition can be offered anytime

Rewards are an incentive for employees to reach a significant, specified goal. These goals tend towards the long-term by their very nature, so you don’t find yourself handing out rewards every week of the year.

Employee recognition can be used to fill the lengthy gap between rewards. Managers and team members can offer recognition regularly and spontaneously, ensuring that employees never go too long without having their work appreciated.  

Why are recognition and rewards important?

Reward and recognition programs provide valuable benefits to workplaces by showing employees their hard work and efforts are appreciated. If managers regularly note the positive things that employees have done – whether it’s hitting their targets, smashing a goal sooner than expected or lending a helping hand on a project – employees feel motivated to keep up the good work.

It improves employee engagement

Employees who are receiving genuine recognition for their contributions are going to feel engaged with their work. Other employees may also feel more engaged as a result!

It boosts productivity

Taking a few minutes out of your day to congratulate and reward outstanding work will make it easier for your employees to produce more of it. According to research, 69% of employees say they would work harder if they felt appreciated at work.

It improves morale and happiness

Until recently, being happy at work was laughable at best. Companies didn’t care about their employees’ morale, happiness or mental health – the paycheck was enough. Recognition and rewards can be a great way to boost morale and improve workplace happiness to help make the work experience as enjoyable as possible.

It reduces turnover

Employee turnover is costly and retention is key to cutting down those costs and being able to grow. Recognition can have a significant impact on employee retention and reduce voluntary turnover. Proper employee recognition (not just handing out gift cards and calling it a day) should cut down on the amount of negative turnover where your employees leave abruptly with a negative review on a job site.

Rewards vs Recognition: Examples

Want some ideas for your rewards and recognition scheme? Take a look at the following examples:


  • A monetary bonus
  • A pay rise or promotion
  • A few extra days of annual leave
  • Tickets to a sporting or entertainment event
  • A gift card for your employee’s favourite store
  • Foodie treats at the office or a slap-up lunch


  • An award at a company-wide celebration
  • An Employee of the Month award
  • Spontaneous, verbal praise for a job well done
  • A personalised email to say thank you
  • An employee shout-out in your next meeting
  • Peer-to-peer recognition

You need to choose the ones you think will be best for your employees as a business. A little thought always goes a long way, and if you want your recognition scheme to be effective, you need to understand what your employees want and what you can realistically deliver.

How to start your employee rewards and recognition program

The type of employee recognition program you will implement in your company will depend on many factors such as your budget, the number of employees you currently employ, the values of your company and your company culture. 

We have said it before, and we will say it again – there is no one-size-fits-all approach to rewards and recognition. If you want it to be successful, align it with your employee’s needs. To help you along, we are here to share some tips on starting your employee rewards and recognition program.

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Combine reward and recognition

The best employee rewards and recognition programs do exactly as the name suggests—they combine tangible rewards with intangible recognition over months and years.

Remember that you can have recognition without a reward, but not vice versa. Then work to offer regular recognition punctuated by rewards your team members will appreciate.  

Identify the behaviours and actions you want to see

Which behaviours and actions are worthy of recognition and reward? Having a clear idea of what you’re looking out for will prompt you to offer recognition and rewards when the time comes.

Make it timely

Offer verbal praise whenever you see the actions or behaviour you’re encouraging. It saves you time writing a note or an email, and it reduces the risk that you’ll forget to offer recognition altogether.

Do it regularly…

It may not come naturally at first, but recognition should be a spontaneous part of your management style. Offer praise and thanks regularly to ensure your employees never feel unappreciated. When you give recognition at random times, it’s truly authentic because it’s not related to a quarterly award or scheduled event. 

…But highlight milestones too

Check your diary (or your rewards and recognition platform such as Mo) for team birthdays and milestones, then use these as an opportunity for rewards or recognition.

Be fair

It’s easy to spot big achievements—like winning new business or the end of a complex company project.

But it’s important to recognise the hard work of employees performing less high-profile tasks—and those working remotely too.  

Make your rewards and recognition programs fair by acknowledging both high fliers and underdogs, neither of which you could do without.

Be genuine

No copy-and-paste emails here, thank you very much. When praising an employee, create your note from scratch and be specific about what your employee has achieved.

You’re looking to create that real, emotional connection. A standardised email just won’t cut it.


There’ll be someone in your team who loves being the centre of attention (we’re looking at you, Jim, in sales). And someone who deems standing up in front of the whole company as their own personal hell. So adapt rewards and recognition to suit each individual.

Create a company-wide culture

Recognition doesn’t have to come from the top down. Peer-to-peer recognition is another really powerful motivator.

Give your team the right tools and encouragement to highlight the hard work and achievements of the people they work alongside.

Reward vs Recognition: Key Takeaways

  • Recognition holds more weight than financial incentives, as it can significantly impact employee morale and retention.
  • Understanding the differences between rewards (tangible) and recognition (intangible) is crucial for effective employee engagement.
  • Implementing a comprehensive rewards and recognition program requires combining both tangible rewards and intangible recognition, tailored to individual employee preferences and organisational culture.

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