Industry News and Ideas

Cash vs. Tangible awards

Recognition programs are designed to motivate and reward people and to reinforce positive behavior. Often times the question comes pops up: which is a better motivator, cash or tangible awards? While cash may seem like the most desired or easy to use, we know that using cash as incentives has serious drawbacks. Here are some points to remember when looking at incentive programs:

Using cash as a bonus system leads to a sense of entitlement. Employees who receive cash one year expect the same year after year. Rather than encouraging better performance from the employees, cash becomes an expected role in the pay structure. If the cash bonus is taken away, you can destroy company morale and de-motivate employees.

Cash bonuses are considered income. Cash is quickly deposited into the checking account and is used for the next month’s bills. Cash is quickly forgotten, and often times recipients do not remember why they received the extra cash OR where they spent the cash.

Cash has no lasting effect or “trophy” value. Look in anyone’s office and you will find awards, certificates, plaques, etc… people like public recognition. Tangible awards leave a lasting impression and make the employee feel valued.

Cash is fully taxable- Program participants receive 1099 forms for any program earnings. Cash is taxed at 100% is based on actual earnings. Merchandise is only taxed at a percentage, taking into account the administrative cost subtracted from the earnings.