Early Growth
January 13, 2015

This guest post by David Cheng was originally published on ZenPayroll.

retain employees with incentives

One of the biggest challenges business owners face in a growing economy is retaining their top employees. Numerous studies show that hiring a new employee to replace an existing worker costs about 20% of an employee’s annual salary. This is why so many companies, in particular those in Silicon Valley, highlight the value of incentives as a way to hang on to their best employees. It’s not just good for company morale; it’s good for the bottom line.

At a minimum, perks should help retain employees. The best companies, however, create incentives that embody the company’s culture and inspire employees. We did the research and uncovered 5 tips to make incentives meaningful in your business.



For employees, the recognition is as important as the reward. When you tailor your incentives to match the employees and their contribution, you’ll get an additional boost for the recognition. At ZenPayroll, for example, we offer a free round-trip ticket to anywhere in the world on an employee’s one-year anniversary. Each employee chooses his or her own trip, which makes it special.



While everyone loves getting raises, studies have shown that monetary compensation is not the primary motivating factor for employee morale. According to Dr. Larina Kase, a business psychologist and author of The Confident Leader, “Money can make employees unhappy if they’re not sufficiently compensated, but it has not been shown to lead to motivation, satisfaction or performance.” Instead, consider giving your employees flex time for good work.



While it’s great to reward employees uniquely and personally, it’s also important not to create too many one-off perks. Haphazard rewards are inefficient and can create confusion for employees. That’s why you should create an incentive structure around transparent goals. For example, you can offer flexible vacation days so employees can choose how they want to use them.



As we mentioned, rewarding your employees isn’t just good for morale; it’s also good for the bottom line. That’s why you should measure the ROI for your perks whenever possible.

For example, you can exclude the cost of providing meals to your employees from their wages for federal tax withholding purposes if 1) the meals are furnished on your business premises and 2) they are furnished for your convenience. In addition to tax benefits, paying for employee meals can save businesses money.



So far, we’ve learned how to reward your employees uniquely and productively. But don’t forget that your incentive structure is also a reflection of your company culture. Your perks program is one way to make your company stand out. For example, Mattel allows its employees to take paid time off to spend it with their kids on field trips.

David Cheng leads inbound marketing at ZenPayroll. Prior to this role, David spent more than seven years in finance helping companies raise capital. He is a two-time entrepreneur who is passionate about helping small businesses. Follow him on Twitter @DavidPCheng.

Liked this post? Join our mailing list to get our posts on startups sent directly to your inbox.

Related Posts:

  • How to Make Your Startup A Talent Magnet
  • The Secret to Hiring Top Startup Talent
  • How to Build a Successful Startup Team
Early Growth
January 13, 2015