There are 7 different types of incentives for your employees:

  1. Financial Incentives (cash incentives
  2. Non-Financial Incentives
  3. Performance-Based Incentives
  4. Team-Based Incentives
  5. Goal-Based Incentives
  6. Skill-Based Incentives
  7. Recognition-Based Incentives

In this expert guide, you will learn about each type of incentive for your employees and when you should use each one.

This comprehensive list of incentive types will help you to understand how to motivate and reward your team.

Financial Incentives

This is the most popular type of incentive and the most straightforward.

Financial incentives, like bonuses, discretionary bonuses, raises, or commission-based rewards, incentivize employees to focus on financial goals or revenue targets. We’d recommend not including discretionary bonuses in this area.

Financial incentives are effective for motivating employees to achieve sales goals, increase productivity or complete projects on time.

Everyone likes money, and financial incentives directly reward employees for their hard work.

  The Ultimate Guide to a Sales Incentive Plan

Non-Financial Incentives

Non-financial incentives are rewards that don’t involve money. But that still motivate employees.

These could include recognition awards such as…

  • Titles or plaques
  • Event tickets
  • Gift cards or vouchers
  • Additional vacation time

Non-financial incentives are generally seen as short-term rewards because they are intangibles that have a relatively quick impact.

Recognition based incentives

When considering non-financial incentives, it’s important to focus on how these rewards will help employees reach their goals.

Whether that’s through improved morale or increased productivity, non-financial incentives can provide an extra push for employees to move the company forward.

It is also important to consider how these incentives fit in with the overall culture and values of the organization.

For example, if an organization values sustainability it might focus on offering incentives such as additional vacation time or sustainable products such as organic food or catered lunches.

Non-financial incentives are powerful tools for motivating employees, but it’s important to choose incentives that are in line with organizational values and goals. When used strategically, non-financial rewards can make a meaningful impact on employee morale and performance.

The goal is to create an environment where everyone feels appreciated and motivated to do their best work.

Overall, non-financial incentives can be an effective way to motivate employees and foster a productive and positive workplace.

We take a more in-depth view of these first two options in our article on cash vs non-cash Incentives.

Performance-Based Incentives

Performance-based incentives are rewards designed to incentivize specific actions or results that an employee can control.

For example, an employee might be rewarded with a bonus if they meet certain sales goals or exceed customer satisfaction metrics within a set timeframe.

Performance Based incentives

Performance is often measured by two criteria: quality and quantity. Quality is gauged by how well a job is done (e.g., accuracy, completeness, timeliness) while quantity looks at the amount of work completed in a certain span of time.

An incentive scheme based on performance can be tailored to individual employees to ensure they are motivated to contribute to their full potential. The incentive should also be sufficient enough to motivate employees and reward outstanding performance.

Performance-based incentives can help boost morale, improve employee engagement, and create a culture of excellence in the workplace.

In addition, they can provide a tangible reward for employees who have worked hard and achieved success in their roles.

As an extension of performance-based incentives, we would also include those of team performance. So we’ll touch on that here too.

Team-Based Incentives

Team-based incentives are rewards given to the entire team when they achieve collective goals.

From our experience, these types of incentives help build team morale and encourage collaboration amongst team members as they work towards the same goal.

One thing to be wary of when implementing team-based incentives is to ensure that the rewards are fair and equitable for all members of the team.

This will help incentivize collaboration and prevent any potential resentment between team members. Read more about how to motivate a team to improve performance.

Another important factor to consider when implementing team-based incentives is how to measure success. It could be based on performance metrics, customer satisfaction ratings, or any other criteria that you decide upon.

Be sure to clearly define the criteria used to measure success and display it effectively in a live dashboard, as well as how rewards will be distributed.

This way, team members understand what is expected of them and how they can benefit from working together as a team.

Goal-Based Incentives

Goal-based incentives are rewards given when employees reach specific predetermined goals over a designated period of time.

This type of incentive encourages employees to stay focused in the long term and is particularly useful for driving organizational change initiatives.

Goals can be based on metrics such as meeting sales targets, increasing customer satisfaction, or improving process efficiency. Goals should be measurable, achievable, and have a specific deadline.

Additionally, rewards should be proportional to the difficulty of the goal achieved.

Skill-Based Incentives

Skill-based incentives are rewards given to employees for reaching certain milestones or achieving a level of proficiency in a specific skill.

Skill based incentives

For example, an employee may be rewarded with a bonus once they have achieved a certain level of proficiency in software development. Or a sales team might be rewarded for reaching a certain number of sales in a given month.

These types of incentives can help to encourage employees to develop their skills by giving them tangible rewards for reaching specific milestones.

Recognition-Based Incentives

Recognition-based incentives are rewards used to recognize and celebrate individual achievement or contribution to a group effort.

This type of incentive is designed to motivate employees by rewarding them for their hard work or accomplishments.

For example, a company might recognize outstanding employees with awards such as Employee of the Month or an achievement award at the end of the year.

Recognition based incentives

Recognition-based incentives can also include public acknowledgment of those who have achieved something special, either in print or online.

Furthermore, recognition-based incentives may involve promoting certain employees to higher positions within the organization or granting them access to extra training, mentoring, or educational opportunities.

Incentives that are highly visible, such as special awards ceremonies and featured articles in company publications can be particularly motivating for employees. They can even be for past accomplishments and/or as encouragement for future success.

Such recognition encourages others to strive for similar achievements by highlighting those who have been successful.

Recognition-based incentives can also include one-to-one recognition, such as managers taking the time to thank individual employees for their efforts or providing praise in a team meeting.

One final benefit of recognition-based incentives is that they are often cheaper than other forms of rewards, making them easier for organizations to implement and maintain.

Ultimately, recognition-based incentives are an effective way to create motivation and build morale within a team, thereby fostering team building and collaboration among coworkers.

By implementing such incentives in the workplace, organizations can create a positive work environment that encourages employees to strive for excellence – leading to better performance and higher job satisfaction.

Encouraging Incentives

When everyone is working together toward a common goal and recognizing each other’s contributions, it helps to create an atmosphere of support and camaraderie within the workplace.

Just about all types of incentives can be a great way to motivate employees and keep them engaged in the organization’s mission.

Companies should look to offer a variety of positive incentives, such as an incentive program for top performers, gift cards or discounts to employees that reach their goals, and additional vacation days for hitting milestones.

The good news is, it doesn’t have to be expensive…

Much of the time a simple “thank you” is often enough to make an employee feel appreciated and valued for their work.

Showing employees that they are appreciated, respected, and supported will ultimately lead to higher job satisfaction, better productivity and performance, and more innovation in the workplace.


Incentives are a step towards greater profit and performance and regularly lead to increased sales and service.

Plentive is an incentive program designed with an easy-to-use interface, with potential for automation, and can be built around any industry or department. Contact us now to find out more, or check out our quick 15-minute demonstration

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