Though non-monetary rewards are impactful, providing monetary rewards, such as salary hikes and bonuses, and other performance-based rewards to employees, works the best to retain employees, especially in times of inflation and economic downturns, according to a recent study by global employee engagement platform Advantage Club.
Employees who received monetary incentives had an attrition level of just 5 per cent in 2022, compared to an average rate of 16 per cent across all companies covered in the study.
As per the Rewards & Recognition Trends Report 2023, attrition among employees who are not given any kind of reward stands at 38 per cent. However, attrition in employees who receive monetary rewards comes down to 5 per cent, an 87 per cent reduction. Additionally, attrition among employees who receive non-monetary rewards stood at 11 per cent from 38 per cent (a 71 per cent reduction).
Employees were more likely to remain in their current jobs that offered performance-based monetary rewards. According to the study, a combination of both monetary and non-monetary rewards can effectively reduce attrition to a negligible level.
The favoured option
The study found that monetary rewards are the favoured method of reward and recognition (R&R) among employees, with 52 per cent of employees receiving monetary rewards compared to 24 per cent receiving non-monetary rewards.
However, the study also found that 24 per cent of employees receive no rewards at all.
The allocation of budget towards R&R varies considerably among companies and is influenced by multiple factors such as industry competitiveness and firm priorities.
Some companies prioritise the recognition of top performers and align R&R practices with their cultural values. In highly competitive industries with high employee turnover rates, companies often allocate a larger budget towards R&R activities.
According to the study, companies typically spend around 2-5 per cent of their total payroll on R&R and mostly have four types of rewards: Day-to-Day, Formal, Informal, and Approval-Based.
Attrition across industries
Based on the research findings, the business processing outsourcing (BPO) sector experiences the highest level of attrition at 40 per cent, while the logistics sector has the lowest average attrition rate of just 4 per cent. Other industries, such as agriculture and automotive, also have relatively low attrition rates of 7 per cent and 8 per cent, respectively.
Overall, the study indicates that the average attrition rate in India is 16 per cent. However, certain sectors experience an excessively high attrition rate of over 30 per cent, which is a cause for concern.
“The study highlights the importance of recognising and rewarding employee performance, particularly with monetary incentives, to foster a work culture of engagement and loyalty. Organisations can reduce attrition, and boost employee morale and productivity by investing in rewards and recognition programmes,” said Sourabh Deorah, Co-Founder and CEO, Advantage Club.
Advantage Club conducted the comprehensive study revealing insights into the impact of reward and recognition on attrition in India in 2022. The report analysed rewarding behaviours in over 100 companies and covered one million employees.