How to Budget for Employee Recognition: A Practical Guide

Investing in employee recognition delivers far more than a feel-good moment. When done well, it boosts morale, reinforces your company values, and strengthens a competitive edge in attracting and retaining top talent. Yet, many HR professionals and business leaders find it challenging to establish the right budget for their recognition programs.

This article will break down how to approach employee recognition budgeting, with insights on effective allocation and ensuring you get the most from your investment.

Determining Your ‘Why’

Before setting a budget, define what you aim to achieve. Are your primary goals to:

• Improve employee engagement scores?
• Reduce turnover rates?
• Attract new talent with a reputation as a great place to work?
• Incentivize specific behaviors aligned with company values?

Your goals will inform the type of recognition program you design and the level of investment required to meet your objectives.

Budgeting Recommendations

While there’s no one-size-fits-all budget, here are industry recommendations to consider:

• SHRM: The Society for Human Resource Management recommends budgeting at least 1% of total payroll for employee recognition.
• O.C. Tanner: A global leader in employee recognition solutions, O.C. Tanner suggests spending $200-$350 per employee per year on various forms of recognition to see meaningful results.
• Aon: Human resources consulting firm Aon recommends a range of 0.25%-3% of your total HR budget.

Factors Affecting Budget

These base percentages are a starting point. Your ideal budget will vary due to factors such as:

• Company Size: Larger companies generally dedicate a smaller percentage of payroll due to economies of scale in offering recognition programs.
• Industry: Competitive industries may need to prioritize higher budgets to showcase a vibrant company culture and attract top recruits.
• Remote Culture: Companies with remote or hybrid workforces may need to budget additional recognition components like virtual experiences or gifts to promote connection and appreciation.

Breaking Down Your Budget

Here’s an example of how your recognition budget might be allocated:

• Celebrations: Company-wide celebrations or dedicated team events to mark successes and wins.
• Formal Recognition Platform (if applicable): Software solutions to facilitate nominations, points programs, and awards redemption.
• Experiential Rewards: Gifts, vouchers, events, or opportunities for professional development and growth.
• Milestone Awards: Anniversaries and notable achievements.
• Everyday Appreciation: Budget for managers to show appreciation with smaller gestures like thank-you notes, gifts, or team treats.

Maximizing Your ROI

Effective recognition is more than the budget alone. To get the most value:

• Prioritize Meaning: Awards and gifts should align with company values and resonate with employees.
• Timeliness: Recognition’s impact is greatest when provided in proximity to the achievement or behavior.
• Inclusivity: Design your program to ensure it’s accessible and recognizes diverse contributions across your workforce.

Employee recognition isn’t an expense –  it’s an investment in your people and the long-term health of your business. A dedicated budget paired with meaningful recognition will have a powerful impact on engagement, culture, and your company’s overall reputation as a fantastic place to work. Contact Award Maven to explore more on award programs and anything “award”!