Point Incentive vs. Cash Incentive

By Benefit One USA, Inc. Jan 25, 2018

Point Incentive vs. Cash Incentive

We all are well-aware of the importance of incentives, whether we are working with an organization or are an organization in itself. Incentives and Rewards are the motivational forces in every organization for the employees. Incentives always motivate & excite the employees to work harder and improve their performances. 

There may be personal needs of employees to win the incentives. So, every employee waits for this opportunity to get that extra thing apart from the salary. Now, the question arises that what is the benefit of companies in giving rewards & incentives to employees?

The answer to this is that a highly motivated work-force improves the overall turnover of a company and this is what every company wants at the end of the day. So, Incentives and rewards are the best to encourage the employees to go that extra mile to achieve the set targets. Implementing incentives is again a big challenge for the HR department of the organization. The reason behind this is that these incentives if not planned properly can even go against the company. So, these should be planned & implemented with utmost attention.

Earlier only “CASH Incentives” were given to the employees but with the changing time and changing needs of the people “POINT Incentives” came into place. Incentives are of two types:

Point-based Incentives are the incentives that are credited to the winners account in the form of points which can be redeemed whenever he/ she wants.

And, Cash Incentives are the one’s which are given to the winning employee in the form of bonus etc.

Various studies have been timely conducted to conclude which type of incentive works the best but there is still confusion between the two types.

A report By McKinsey, “Motivating People; Getting Beyond Money” has proved that non-cash incentives & rewards as the most effective motivational forces in every organization as compares to the main three highly prioritized motivators i.e. cash bonuses, increased basic pay & stock options. The below chart describes pictorially the conclusion of the study conducted:

Now, let us further understand the benefits of the two types of incentives:

  • Effectiveness
    It is generally found that the incentives in the form of cash when given to the employees are generally spent by them on their daily needs which lessons the effect of incentive very soon. Whereas, when an employee buys something out of the collected points, that thing keeps on motivating him/ her to again collect more points and purchase something desired. So, it has a long-lasting effect.
  • Data Tracking
    As we all know that cash incentives are given on achieving a set target & only the stellar performers are awarded the same. The data is tracked manually by the Team-leaders which is a little tricky & tedious work. But, it is totally opposite in the case of point-based incentives. The performance of every employee can be tracked easily at every step, hence making the tracking of data really easy for the high-end officials.
  • Non-partial
    As we all know the performance is tracked manually by the team-leaders, there are good chances of human-errors as well as favoritism. Whereas the points of the employees are tracked by the software which results in the honest winner. So, here also, point-based incentives tend to be more useful.
  • More frequency of Campaign Implementation
    When it comes cash incentives, we all know that there are fewer opportunities for the same as the incentive carries good amount & it is not easy for the company to set a budget for the same, time & now. But, there is no such problem when you implement point-based incentives for the employees. As, for every good reason like punctuality, timely-work submissions, helpfulness can be rewarded with a point and there is no such big investment required. So, overall point-based incentives have more benefits as compared to the cash-incentives.

After reading the whole article, you might have known by now the benefits of point-based incentives over the age-old cash incentives. So, try and implement the same in your organization & see yourself the positive outcome.

Source: McKinsey, November 2009 ( https://www.mckinsey.com/business-functions/organization/our-insights/motivating-people-getting-beyond-money )

Posted in Employee Incentives, Employee Rewards