How to Budget for Employee Recognition and Rewards

How much should I spend on my employee recognition and rewards budget?

That’s a common question most company leaders or HR professionals will ask themselves while planning the launch of their recognition program. 

It’s critical to have a high-level understanding of the cost of a recognition program if you’re trying to get buy-in from your finance or executive team. But it’s also important to understand how that budget will break down monthly once you have launched your program.

Don’t worry; we’re here to help you with your recognition and rewards program budgeting! At Applauz, we’ve helped hundreds of companies get their recognition programs up and running while staying on budget.

Recognition & Rewards Budgeting 101

Before diving into the more granular details of how your budget will be allocated within your program, let’s start with the basics. How much should you be spending on recognition and rewards programs in general?

Pro Tip: Compensation consultants like David Weaver, author of the 2020 book Pay Matters, suggest 0.5%-1% of payroll as the ideal budget for recognition and rewards.

According to SHRM research, companies that make this level of investment (1% of payroll) are nearly 3X as likely to rate their program as excellent compared to companies that invest less.

Even companies with no formal rewards or recognition programs, or software in place will likely have some informal employee recognition initiatives.

For example:

• Employee celebration activities
• Lunches or outings
• Thank you cards

So whether you plan to launch an official recognition program like Applauz or more casual recognition initiatives, 0.5%-1% of payroll still stands as the industry benchmark.

That said, the amount your company budgets may vary based on what you choose to recognize your employees for. But let’s dive deeper to understand how this budget will be allocated to your leadership each month to celebrate employee accomplishments.

Allocating a monthly budget to managers for recognition

Now that you have a high-level budget, you can start mapping out your recognition and rewards plan.

This is a roadmap of all the different recognition events you will celebrate throughout the year. We wrote a guide on how to get started with your recognition plan; if you’re just getting started, reading it is always a good place to start!

There are many reasons to recognize employees throughout the year. That's why a recognition plan should comprise different recognition events. For example, birthdays, anniversaries, and celebrations of good work. To that end, it's also important that managers have enough budget to give fair rewards for each of these events.

Pro Tip: In our experience, we recommend starting managers with a budget of 20-30$ per month per employee. On Applauz, this is 200 to 300 points per employee per month.

For example, if a manager or leader has a team of 4 employees, this would be $80-120 per month to recognize their team or 800-1200 Applauz Points per manager each month.

This should give them enough budget to recognize each team member monthly for good work and leaves enough budget in the pool to recognize a yearly event like a birthday or work anniversary.

Suggested rewards for each recognition event

Now that you understand the budget per employee for recognition and rewards, we can dive into the question of how much leaders should be "spending" on each specific recognition event.

This is a common question we receive from those just getting started with Applauz. Managers are unsure how many Points to grant for different goals and accomplishments. 

The most common questions we receive:

• How many Points should we give for birthdays?
• How many Points per anniversary milestone?
• How many points for small wins or monthly accomplishments?

These are all really good questions, and here are some general benchmarks you can follow that we recommend for our recognition program. 

Remember: 10 Applauz Points is equivalent to 1$. So, for example, 100 Applauz Points = $10.

Even if you don’t use Applauz, you can use these suggested rewards as a general guideline for how much to spend on celebrating different accomplishments and recognition events.

Final Thoughts: Guidelines Clear the Path to Success

As an HR professional, you know that asking managers to "give more recognition" will not likely produce the results you want. This request needs to be more precise. People need clear steps and instructions to take action, especially with an unfamiliar practice like recognition.

That's why budget guidelines are essential. They help keep guardrails on your recognition initiatives and also help you determine exactly how much to allocate to your leadership each month. In turn, these guidelines will help leaders figure out what rewards to offer for each recognition event.

Clear instructions and accountability for concrete actions make progress much more likely. This way, your company will be much better positioned to grow a culture of appreciation and build a thriving recognition program. It's a win-win.