7 Top Benefits of Employee Recognition That Transform Workplaces

Saying thank you to someone at work is more than good manners. This simple act has the ability to elevate a colleague’s mood and make them love their job just that little bit more.

But the benefits don’t stop there. When companies commit to a structured recognition system, they uncover a wealth of business opportunities, including lowering employee turnover, boosting profitability, and improving customer loyalty. Our data-packed guide discusses the importance of employee recognition, along with plenty of recognition and reward examples to get you started. 

What is employee recognition?

Employee recognition is the act of showing appreciation to an organization’s workers. When people give their time and energy to a company, they deserve to receive fair praise and acknowledgment for their contributions. 

Recognition sits on a spectrum. It can mean everything from a high five or a passing thank you in the office corridor to honoring an employee at a lavish corporate awards ceremony. However you choose to recognize your employees, it can have a lasting impact on the recognition recipient; as Cara Cunniff, a workplace emotional culture specialist, describes: 

“I’ll never forget early in my career when a simple, genuine ‘thank you’ completely shifted my perspective. It wasn’t a grand gesture—just an honest moment of recognition for hard work. But that moment made me feel truly seen and valued and stuck with me.”

7 key benefits of employee recognition

Explaining what makes employee recognition important can be a hard sell to the C-suite. After all, if you’re already paying your workers an attractive salary and employee benefits, your company’s leaders may not understand the value of committing to a deliberate recognition program, too.

But down on the ground, companies will see tangible benefits when they give frequent recognition to their employees, including: 

1. Boosting employee morale and employee happiness

It’s human nature for people to crave recognition for the things they do. Maslow’s Hierarchy of Needs—a pyramid that explains human motivation—includes the Esteem Needs level, which highlights the importance of recognition and respect. 

Essentially, when employees feel valued, they are likely to be happier at work. Gallup reports a direct link between workers being recognized and absenteeism rates decreasing by 78%. Even better, instances of employee burnout are also down 80%. 

2. Enhancing employee engagement 

When employees are appreciated by those around them, it follows that they’re more likely to engage with their work, their team, and the overall organization. 

Companies with highly integrated recognition experiences experience employee engagement rates 784% greater than those with weak or non-existent recognition cultures, according to O.C. Tanner’s research. That’s a substantial return on your investment. Yet, unfortunately, only 21% of companies fall into this bracket. The remaining 4 in 5 companies are missing a serious trick. 

3. Increased productivity and profitability

Another fantastic side-effect of having happy, engaged workers is employee performance tends to improve, too, as your people are willing to put the extra effort in. Think efficiencies, high-quality output, and a positive impact on your bottom line. In fact, Gallup research highlights that organizations with highly engaged employees are 23% more profitable than those where disengagement is a problem. 

4. Fostering a positive company culture 

A strong recognition program doesn’t just make employees feel good—it shapes the entire company culture. When employees consistently receive meaningful recognition, it reinforces shared values and creates an environment where people feel genuinely connected to their work.

O.C. Tanner highlights that thriving workplace cultures are 648% more likely to exist in companies where recognition is deeply integrated. This means organizations that prioritize employee appreciation don’t just see short-term benefits—they create workplaces where employees grow over the long term.

5. Improving employee retention and reducing turnover

Recognition is an excellent employee retention strategy, too. When managers and leaders create an atmosphere where it’s “normal” for praise to be flying back and forth within and across teams, it follows that employees aren’t in a hurry to move on. They feel loved, included, and want to keep progressing within rather than outside of the organization. 

O.C. Tanner cites “employee sense of appreciation” as one of the top six talent magnets that determine employee decisions to join, engage with, and remain in a place of work. It’s no surprise, then, that attrition is 29% down in workplace cultures with highly integrated recognition programs. 

6. Aligning employees with company goals and values 

Such programs are powerful tools for aligning individual contributions with broader organizational goals. 

Imagine a company that prioritizes sustainability as a core value. If an employee takes the initiative to reduce office waste by implementing a new recycling program or suggests an eco-friendly packaging alternative, recognizing that effort sends a strong message: Sustainability is something the company actively rewards and encourages.

7. Elevating customer satisfaction and business outcomes

Employees with high job satisfaction have a direct impact on customer satisfaction and business performance. They’re more likely to provide exceptional service, go the extra mile for customers, and take pride in their work. 

And customers will pick up on their sentiment too. McKinsey’s research finds that a quarter of consumers give weight to how companies treat their employees as part of their buying decisions. 

4 types of employee recognition that work

Recognition isn’t one-size-fits-all. There are numerous ways to appreciate and motivate employees, including the following four models: 

Peer-to-peer recognition vs. manager-led recognition 

Recognition has traditionally flowed down from manager to employee. Few would dare congratulate their own boss for doing a great job in case they offended their hierarchical superior. But the modern approach isn’t confined to specific departments or seniority levels; instead, it allows praise to flow throughout the entire organization. This might look like: 

• A sales rep congratulating a marketing teammate for a successful campaign
• A junior developer thanking a senior engineer for mentoring them on a project 
• An HR manager praising an IT specialist for their assistance with an employee issue

Public vs. private recognition

Public recognition, also known as social recognition, is all about giving glory and shining a spotlight on employee accomplishments. Mohammed Asfar, an online fitness and nutrition coach, shares one idea: 

“We implemented a kudos channel in our team chat, and it’s amazing to see how much positivity it brings.”

This might include: 

• Promoting your “Employee of the Month” winner within your store or on your website or social media pages 
• Praising a high-achieving employee in a company all-hands or town hall presentation 
• Highlighting employee excellence in a company Slack channel, newsletter, or bulletin board

Private recognition is for those employees who prefer a meaningful exchange without the pressure of an audience. Some private recognition vehicles include: 

• A personalized thank you email from a manager to their team member 
• A handwritten note or card expressing appreciation for an individual’s effort 
• A one-on-one meeting where an employee is verbally praised for their work and contributions

Formal programs vs. informal moments of employee appreciation 

A formal program is structured and intentional. Ideally, it should be rolled out alongside an employee recognition policy that describes the types of behavior you should recognize, the frequency in which you should reward them, and what types of rewards are linked to specific types of recognition. 

Some examples of formal programs are: 

• A points-based system where employees can redeem rewards for meeting certain objectives or milestones
• An employer-funded rewards account where employees can choose their own gift cards or experiences 
• A tiered recognition program where different levels of achievement are reflected by different types of rewards

Informal moments of employee appreciation are more spontaneous and don’t need to follow a formal structure. They’re about saying “thanks” in the moment, no matter how small the gesture. This might include: 

• A manager dropping by an employee’s desk to say well done on a project  
• A colleague bringing back coffee or lunch for someone who stayed late to finish an important task
• An impromptu team celebration, like an afternoon ice cream break or finishing an hour early at the end of a stressful week 

Achievement-based vs. value-based recognition

Achievement-based recognition is great for celebrating milestones and big wins and can be a fantastic motivator. For example, you might recognize a team member for: 

• Smashing a sales target
• Wrapping up a project before the deadline
• Achieving a personal milestone, like completing a training course or certification

Value-based recognition acknowledges employees who exemplify company culture and embody the organization’s core values in their day-to-day work. This might include: 

• Thinking outside of the box to solve a problem
• Demonstrating leadership by mentoring and supporting team members
• Embodying resilience and maintaining morale during company changes or challenges

How to build an effective employee recognition program in 5 steps

You’re probably (hopefully) already recognizing your employees in some shape or form. Creating a program with more structure ensures every employee has the chance to receive recognition for their hard work. Here’s how to build yours: 

1. Select your recognition budget 

Recognition doesn’t need to be expensive. At its core, a simple message of gratitude is entirely free. So, if your company can’t currently afford to tie financial incentives to your recognition program, then that’s ok. You might set up a free Kudos Wall in your staff room, where you attach Post-It notes of praise next to photos of your team members. Alternatively, you might share your employees’ contributions on social media to give them a rosy glow with no financial impact to the business. 

But if you can afford to combine recognition with a rewards component, your program will gain more traction. Leaders, managers, and peers will be keen to give and receive praise and will work harder to earn it. 

Work closely with your finance teams to understand how much budget you can set aside for this. Consider: 

• How much you’ll spend on recognition per month or year 
• How much you’ll allocate to each department
• The cost of appropriate rewards you’ll attach to certain types of recognition; for example, employee of the month awards

2. Set goals in line with organizational values 

A recognition program is a fantastic opportunity to reinforce company values. When you notice an employee living and breathing these values in their daily work, you’ll recognize them and encourage others to do the same. 

Go through your company mission statement and have some high-level chats about what you’d like to accomplish here. Some ideas: 

• Innovation: Recognizing employees who come up with creative solutions to problems
• Teamwork: Acknowledging a team’s successful collaboration on a project 
• Customer service: Thanking an employee for going above and beyond to satisfy a customer 

3. Tailor recognition to employee preferences 

Employees are individuals, and they won’t all want to receive recognition in the same way. Introverts may prefer private praise to public shoutouts, for example, and neurodivergent employees may struggle with the unpredictability of surprise recognition. 

Other employees would find the recognition more authentic if it was delivered in front of others. Chris Robbins, a Human-Centric Leadership Coach, details one employee experience: “I recently recognized a team member for their hard work during a project wrap-up meeting, and it really boosted their confidence.” 

To create a recognition program that accommodates your employees’ unique preferences, survey them beforehand to better understand their needs. Ask questions like: 

• How would you like to be recognized?
• What kind of rewards do you prefer?
• Do you prefer public or private recognition?

4. Use tools for seamless employee recognition

Running a manual employee recognition program is possible, but like anything else, digital technology takes the legwork out of it. 

Employee recognition tools exist to streamline the process for managers and automate elements like rewards allocation, budget tracking, and payroll connection. 

5. Get creative with your employee recognition ideas 

There are limitless ways to recognize and reward employees for their hard work. The best ideas mesh well with your individual workers and align with your workplace culture. Some ideas include: 

• A personalized thank you note from the CEO 
• Additional paid time off 
• Team lunches or happy hours 
• Employee of the month parking spot 
• Gift cards to local businesses 
• Personalized, engraved awards 
• Feature in a company newsletter or on social media
• Tickets to a sporting event or concert 
• Work from home days 
• Donations to a charity of the employee’s choice in their name 

Boost engagement and productivity with employee recognition

Benepass offers an enticing employer-funded Rewards and Recognition program your employees will love engaging with. Employers provide a monetary reward to their employees, who can decide how and when to spend it. Here’s how it works: 

• You’ll define what type of recognition “event” qualifies for a reward; for example, birthdays, work anniversaries, career milestones, career achievements, or employee awards. 
• We’ll code your unique policy into the Benepass platform. 
• We’ll connect Benepass to your payroll system to automate enrollment. 
• You’ll join Benepass and let your employees know about your new recognition system. 

Here are some real-life examples of how employees have benefited from the Benepass R&R platform: 

• Mary, 27, from Tallahassee, Florida, receives an annual birthday gift from her employer to support her wellness. She uses the money to pay for a massage from her favorite masseuse. 
• Arjun, 51, from Hyderabad, India, received an anniversary gift for completing 20 years with the company. To celebrate, he took his family to his favorite restaurant in the city.
• Cole, 38, from Denver, Colorado, won salesperson of the quarter. He used his Benepass R&R funds to buy tickets to an NBA game. 

Ready to create a recognition-rich environment your workers will thrive in? Book a free Benepass demo to check out our platform, or connect with a benefits specialist on sales@getbenepass.com.