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Impact of Employee Rewards and Recognition on Retention

Most organizations today are constantly struggling to find an effective solution for employee retention. Employee turnover results in loss of money, time, and effort and disrupts the smooth functioning of the organization. So, organizations should assess the impact of employee rewards and recognition on retention and put appropriate programs in place.

Most organizations are often unaware of the deep connection between employee rewards and recognition and retention.

What is the Connection between Employee Recognition and Employee Retention?

Awards Event

It is a common misconception that employees seek only good salaries, benefits, and other financial incentives from their jobs.

Hence, many organizations focus only on offering financial benefits for their top performers but are still not able to retain them.

This is because most high-performing employees crave 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.

Employee Recognition at a Global Tech Company

That is why organizations without proper rewards and recognition programs may not be able to retain them for long.

As mentioned, employees need to feel valued and appreciated for their contribution to organizational growth.

A proper employee recognition program enhances the overall engagement levels of employees:

Here is why employee rewards and recognition have a significant impact on employee retention:

1. Motivates Employees

2. Enhances Employee Happiness

3. Promotes a Positive Work Culture

4. Creates Better Relations with Superiors

5. Increases Customer Satisfaction

Impact of Employee Rewards and Recognition on Retention

1. Motivates Employees

Early Bird

Being recognized for their efforts, initiatives, and skills, makes employees feel motivated to repeat that behavior.

This encourages them to further improve their performance to ensure that so that they can get more rewards and recognition.

So, being valued for their work by the organization develops a sense of loyalty among the employees towards the organization.

Hence, such loyal employees are less likely to leave the organization for other opportunities.

2. Enhances Employee Happiness

Social Recognition as a Multiplier for Employee Recognition?

When employees feel that their hard work is not going unnoticed, they tend to feel happier and satisfied at work.

So, they become more willing to take up challenging tasks with a positive mindset and can raise their performance levels.

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

3. Promotes a Positive Work Culture

Integrating Employee Recognition with the Organizational Culture

When employees feel happy and satisfied in their workplace, they tend to develop a positive and friendly work environment.

So, it helps in creating a fun-filled work culture based on mutual trust and understanding.

Employees develop a strong sense of team bonding and comfort. 

Such employees feel a lesser need to leave the organization and take up a job with another organization.

The rewards program thus helps in improving employee loyalty and creating a positive work culture with healthy competition between peers.

4. Creates Better Relations with Superiors

Peer-to-Peer Recognition versus Manager Recognition

One of the major reasons for employees leaving an organization is their poor bonding with their superiors.

However, when employees are recognized for their efforts, they feel assured of the support and appreciation of their superiors.

Therefore, it helps the employees to view their superiors from an entirely different and more positive perspective.

So, supervisors can better utilize the skills and productivity of employees and appreciate them openly. 

Also, it can help in creating better mutual understanding and trust between employees and their superiors.

5. Increases Customer Satisfaction

Decide On The Extent Of Customer Involvement

When employees are appreciated for their work, they tend to show greater effort towards improving customer satisfaction levels. 

Rewards and recognition result in a significant improvement in their performance and efficiency while dealing with customers.

Moreover, it helps improve the trust and camaraderie of customers with employees, which leads to higher business growth and profitability.

Hence, such employees are often treated as brand ambassadors for the organizations and can help in attracting more customers. 

They can also help in attracting top talent for their organizations and retaining existing ones.


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

Sagar Chaudhuri

Lead author: Sagar Chaudhuri, the Co-Founder and CEO of HiFives. He is an HR Tech Evangelist with over 25 years of experience in the corporate world and entrepreneurship. In the past, Sagar has worked with companies such as Genpact, Infosys, and ICICI Bank, in leadership roles. He has an engineering degree from IIT Kharagpur and an MBA from IIM Lucknow. Connect on LinkedIn

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HiFives is a global employee rewards, recognition and engagement SaaS platform that enables organizations to digitize, automate and transform their employee experience. It is used by 100+ large enterprises, small businesses and startups in manufacturing, retail, technology, financial services and media, across 25+ countries.