Employee rewards, benefits, and perks. Simple concepts, right? In theory, yes. In practice, not so much. I’ve recently noticed that employee rewards, benefits, and perks are being used interchangeably. But they aren’t all the same. Each year the San Francisco Business Times releases an exclusive list of the “Best Places to Work” in the Bay Area. Flipping through the slideshow, you’ll find companies like Salesforce, Robert Half, and our very own Guidewire Software toting their best “perks” - things like monthly wellness credits (perk), PTO for volunteering (benefit), and anniversary awards (employee rewards and employee recognition). Even our friends at Inc are mixing and matching, which gets me thinking, do people know the difference?
Let me be clear, I’m not the perk police, it doesn’t inherently matter what you call these different employee reward ideas or offerings in a casual setting. All the new and different options that companies across the technology sector are offering their employees are amazing - they represent a different way of thinking when it comes to developing and enabling employee success. But names aside, it is important to differentiate between employee rewards, perks, and benefits when you’re designing, budgeting, implementing and measuring the effectiveness and impact of these different options.
First step, let’s clearly define each concept:
- Employee Recognition and Rewards – the act of an employer providing praise and recognition of the employee’s individual contributions whether for achieving a career milestone, exceeding a performance goal, or saying “thank you” for a job well done. While verbal recognition is wonderful and goes a long way, companies will often pair this employee recognition moment with monetary, physical, or experiential rewards for employees to further commemorate the event and reinforce the employee’s positive behavior.
- Employee Benefits – a range of items that serve as incremental compensation, healthcare or wellness options (think 401K plans, PTO, insurance coverage or stock option programs). Benefits are offered to all FTEs, adjusted based on their role and tenure, but not linked to their individual contributions or performance.
- Employee Perks – a wide range of daily or weekly offerings that come in the form of office-specific activities, entertainment, discounts, food and more. Perks, similarly to benefits, are granted to all FTEs and in some cases contracted employees. They are not adjusted based on the employee’s seniority, individual behaviors or contributions to the company’s success.
Employee rewards and employee recognition aren’t offered to every employee and they require a moment in time or behavioral action that triggers their receipt, which makes this category much easier to define and differentiate. Employers must consider their goals when delivering an employee rewards program- what are you hoping to receive from your employees in return? Is the goal to show employee appreciation, increase their performance levels, or drive employee engagement? How about all three?
Research shares that investing in employee rewards and recognition reaps its own major rewards. For example, 60% of best-in-class organizations stated that employee rewards and employee recognition are extremely valuable in driving employee performance. 85% of companies that invest even just 1% of their employee payroll in forms of rewards see improvement in employee engagement. And in the end, those hyper-engaged teams are 21% more profitable. As you can see, recognition and rewards play a significant role in improving current workforce issues. It’s time for employers to realize that employee recognition is a very powerful tool, indeed.
Benefits and perks get a bit muddier because they're often synonymous with each other. And they play noticeably similar roles in the recruiting process. For example, 33% of the workforce has turned down a job position due to the lack of benefits offered. And 92% of employees believe nontraditional perks (ones you’ll see across Silicon Valley like free lunch, on-site yoga classes or flowing kombucha machines) are more likely to support an organization’s recruitment of top-tier talent. Some of my favorite nontraditional perks providers include SnackNation (on-site snacks), Zeel (on-site massages), and ZeroCater (catered meals) if you’re in the market.
Benefits typically supplement the employee’s salary and compensation package and are defined in their employment contract. They often change depending on the employee’s title and position. Because of the employee’s innate interest in comp, as a major differentiator between multiple job offers, we see compensation playing a larger role in early-stage candidate decision making. Perks, on the other hand, are offered more frequently and to everyone in the office. They play a role in building office culture, their main differentiator from benefits, meaning that perks play a much larger role in securing candidates during the final stages of their recruitment cycle when they’re choosing new opportunities based on culture fit.
In summary, employee recognition and rewards, benefits, and perks should be strategically designed and offered in a manner that delivers on your organization’s goals. Employee recognition and rewards are most valuable when recognizing an individual's or team’s contributions and achievements to the company, reinforcing positive behaviors and impacting behavior change. Benefits and perks play a role in the candidate recruiting process, and in building office culture. Your offerings should reflect your company values, culture, and mission. And remember, it’s not just what you offer, but also how you offer these things (how they are positioned internally, championed, and their “why”): a realization that might just have you saying, “oh my!”
If you’re looking to reward and recognize top employees for their achievements with employee rewards that are truly meaningful, click here to check out our experiential gifts for employees.