Impact of Employee Rewards and Recognition on Retention

Most organizations today are constantly struggling to find an effective solution for employee retention that not only results in loss of money, time, and effort but also disrupts the smooth functioning of their organization. In this context, businesses often tend to overlook the importance of having efficient employee rewards and recognition programs in place.

Most organizations are unaware of the deep connection between employee rewards and recognition and retention and bear the cost of their ignorance in the form of loss of good employees.

What is the connection between Employee Recognition and Employee Retention?

It is a common misconception that the employees seek only a good salary, benefits, and other financial incentives from their jobs. Unfortunately, due to this improper understanding, many organizations that offer these financial benefits to their top employees are still not able to retain them.

This is because most high performing employees crave for recognition and respect as much as they seek financial benefits. For such employees, rewards and recognition provide a sense of self-fulfillment which keeps them motivated to give their best performance.

That is why organizations that lack proper rewards and recognition programs for their employees may not be able to retain them for a long time.

As mentioned, employees need to feel valued and appreciated for their contribution to organizational growth. Having a proper employee recognition program provides an assurance of the same and enhances the overall engagement level of the employees:

1. Helps motivate the employees

Being recognized for their efforts, initiatives and skills, makes employees feel motivated to repeat that behavior. The recognition and appreciation they receive also encourages them to further improve their performance to ensure that they are bestowed with greater rewards and recognition.

Being valued for their work by the organization develops a sense of loyalty towards the organization and the thought of leaving the company takes a backseat in their minds.

2. Enhances Employee Happiness

When employees feel assured about the fact that their hard work is not going unnoticed, they tend to feel happier and satisfied with their work. Such employees are willing to take up even the most challenging tasks with a positive mindset and this naturally improves their performance.

Most importantly, happy and satisfied employees are less likely to seek employment opportunities elsewhere.

3. Promotes a Positive Work Culture

When employees feel happy and satisfied in their workplace they tend to develop a positive and friendly attitude. This helps in creating a fun-filled work culture based on mutual trust and understanding. The employees develop a strong sense of team bonding with their peers, juniors, and superiors which makes them reluctant to even consider the idea of leaving the organization and taking up a job with another organization.

The reward program thus helps in improving the overall employee loyalty besides creating a growth-oriented work culture based on healthy competition between peers.

4. Better Relations with Superiors

One of the major reasons for employees leaving an organization is their poor bonding with their superiors. However, when the employees are appropriately recognized and rewarded for their efforts, they feel assured of the support and appreciation of their superiors, even if it is provided behind their backs. This helps the employees to view their superiors from an entirely different and most positive perspective.

On their part, the managers and supervisors are able to better assess the skills and efficiency of the employees and hence are able to appreciate and acknowledge their efforts in a more open manner. This, in turn, helps in establishing a sense of mutual understanding and trust between the employees and their superiors and enables them to share a positive relationship.

5. Increased Customer Satisfaction

When the employees are appreciated and acknowledged for their efforts, they tend to show a greater effort towards improving customer satisfaction levels. The rewards and recognition improve the employee motivation levels which, in turn, results in a significant improvement in their productivity and efficiency in terms of dealing with customers.

Moreover, it also helps in improving the level of trust and camaraderie that the customers share with such employees, which in turn improves business profitability and growth.

Such employees are often treated as the brand ambassadors for the organizations and can help in attracting more customers as well as the top talent for their company and retaining existing ones.


While salary, financial perks and benefits play a vital role in attracting top talent, their retention in the organization depends on the effectiveness of the employee rewards and recognition program to an extent – how their efforts and contribution are recognized and rewarded.

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