The history of employee reward schemes and the science behind them

Some of the earliest indicators of recognition for workers actually date back to Roman and Greek times. A prime example would be the Olympics – a legacy that remarkably continues into the current era. Though the rewards for the Olympics have never been financial, they have demonstrated that value can exist in many forms beyond the monetary.

Moving into more recent history, The Fair Labour Standards Act in 1937 was one of the most important bills put into law for workers. The bill gave us a federal minimum wage and a 40-hour working week on the back of union pressure. That’s right – without the unions we wouldn’t have the weekends we have now!

A lot of the ‘work perk’ incentives that exist these days originated in the 50s – quality gifts, company cars, luxury holidays, private secretaries, and so much more. If we fast-forward to the 90s, then we start to see companies offer stock as a means of attracting and retaining talent. It transpired that the stocks were often tied up in these companies. It was a shrewd move to ensure that any eventual payout was tied to company success.

So what is the science behind the success (or failure in some cases) of workplace perks and employee reward schemes?

Drive-Reduction Theory

According to Clark Hull’s theory, two people may act differently in the same situation based solely on the types of incentives offered to them. Nowadays, an employee that can’t drive would find a company car pretty useless. Equally, another employee may not know the first thing about the stock market.

Hull’s theory essentially focuses on how motivation originates from biological needs or drives, which makes understanding the individual even more crucial. Though from a decade ago now, a study from Forbes indicates that organisations that give regular thanks to their employees far outperform those that do not.

Findings of the study found that 87% of the recognition programmes focus on tenure, but is this a flawed way of rewarding? Does this actually reward performance? This is not to say tenure is unworthy of reward, but a performance-based approach may be more beneficial overall.

Go beyond the gift-cards

A gift-card is nice, but studies show that the majority of people prefer to receive tangible and meaningful benefits when it comes to rewards. The notion of flexibility and time off are more valuable than many of us may realise, and in essence, these are entities that a hefty wage packet cannot necessarily buy.

We are fortunate enough to live in an era of remote and hybrid working, where employees have far more agency in their working lives. With the right employee rewards system in place, this sense of agency can be further enhanced. If we consider benefits considering the ‘carrot-and-stick’ method, company cars and shares in stocks may still be considered necessary ‘carrots’ in some workplaces.

That said, we are fortunate to encompass a wonderful digital era in which we can keep track of our finances, our mental health, and our physical health through our smartphone screens. A solid benefit package accounts for the modern worker with an array of varied benefits. As times evolve, let’s hope it continues doing so.