How to Plan Your Employee Recognition Budget for Next Year

Whether or not every leader is ready to acknowledge it, your organization’s retention and engagement rates depend on the success of your recognition program. You can examine every scientific review, survey, and study, but they’re all going to be unanimous. Employees want to feel seen and appreciated. 

How much is that going to cost? Like recognition itself, the intention, attention, and care behind it matter more than the price. By the time you finish these tips for planning your employee recognition budget, you’ll see it can even be done for free. 

Assign recognition methods to behaviors, milestones, and more.

The first tip is to decide what individual and team achievements receive recognition, as well as what milestones. There can be no fairness or transparency in the program if there’s no criteria. Knowing this (and ensuring it is relevant) is what motivates participation from employees and, therefore, continued funding from the company.

This also helps establish the basis of the budget. After defining or refining recognition criteria, choose what form of recognition is appropriate. 

Here’s an example:

Budget tools and rewards separately.

If you’re using a peer recognition tool (like HeyTaco 😏), budget this monthly, per user. Choose programs that offer flexible, month-to-month subscriptions, not huge annual packages. The success and cost-efficiency of a program depends on our ability to adjust and switch up when a component or activity doesn’t take off. 

In case this is the first time you’re adding a recognition tool, perform a test launch with a free trial. Do not commit to a platform that doesn’t offer this. 

If you’re relaunching or just starting a recognition program, consider holding back on rewards at first. You may find you don’t need them. If you do introduce rewards, develop a quarterly budget for these. Change the rewards each quarter to keep them enticing and toss out ones employees aren’t striving for. 

For a little inspo, find out what rewards teams that use HeyTaco offer. See which are most successful and why.  

Low-cost employee recognition doesn’t mean low-quality.

If you’re trying to spend as little as possible on recognition and rewards, you’re on the right track. No, seriously–studies show that receivers perceive low-cost gestures as much more valuable than givers do. 

Why? Because feasibility (convenience) feels better than desirability (expense). Prompt, specific recognition that feels deserved always has the right impact. An immediate, enthusiastic shout-out for great performance has a higher impact on morale than a gift card arranged and given a week later.

Make preparedness top of the list, not gift costs. Peer recognition tools are convenient and low-stakes for both givers and receivers. For leaders, be ready to invite an employee for a coffee chat, give them a birthday afternoon off, or drop a virtual taco of gratitude at a moment’s notice. These are higher-quality options than stocking up on branded hoodies and service trophies.

In fact, employee recognition can be effective on NO budget. 

Designing a completely free recognition program is better than none at all. Set your criteria and explore adding these completely free methods:

• Fun and funny paper plate awards for team celebrations
• Weekly shout-outs at meetings for great performance
• A #gratitude channel in Slack where teams give daily thanks
• A physical or virtual employee wall that spotlights individuals
• Personalized notes or emails lauding positive behaviors 

HeyTaco has more employee recognition ideas for your budget.

Increasing engagement without increasing spending isn’t as hard as it sounds, as long as you’re ready to get sincere (and maybe a little silly). If you’d like to give us a try, learn how to build a non-monetary recognition program with HeyTaco first. 

If you want to pull it off without spending a single dime, ever, learn how to give praise that feels natural and never awkward. Sharpen your thank-you note writing skills, and introduce some $0 meaningful rewards!

Bonus: A fast framework for booting up a recognition program (good for all budgets).

Do you want your budget (time, not just money) to go toward a recognition program that achieves specific goals? Consider instituting the three pillars of a strong recognition culture: recognition, rituals, and optionally, rewards. 

Get HeyTaco’s TEMPLE Framework and start building stronger engagement, team cohesion, or company values. 

Employee recognition budget FAQ

How much should you spend on employee recognition?

Many sources, including SHRM, recommend dedicating 1-2% of payroll to the employee recognition program. Others recommend dedicating an amount per employee, with suggested figures sitting between $70 and $200 each annually. 

Ultimately, employee recognition can be done for less and in some cases, for free. With employee recognition programs becoming a must-have and not a nice-to-have, planning and consistency are more important than spending.

What is a good budget for rewards?

Rewards aren’t exactly the same as recognition, yet experts and HR organizations commonly share budget advice identical to a recognition program–1-2% of payroll. 

If you’re including rewards, create the recognition budget first. Decide how much of this will be spent on rewards, as well as what employees will receive rewards for. Incorporate more non-monetary, meaningful rewards to ensure it doesn’t eclipse recognition. 

How do you creatively recognize employees?

Creative forms of recognition are tailored to the personality and interests of the employee. They also align with the company culture. Try handwritten notes, celebrations, flexible work arrangements, and professional opportunities. These are among the most creative, appreciated forms of recognition. 

How often should you recognize employees?

Research shows that engaged, satisfied employees can recall being recognized at least once a week. Making peer recognition part of the team culture helps ensure employees feel seen consistently and frequently. Managers should still aim for weekly recognition through check-ins, shoutouts, and spontaneous feedback.