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Extrinsic rewards
Extrinsic rewards are a piece of carrot on a stick that helps to achieve better performance. They can be in the form of rewards, money, gifts, or are based on individual efforts.
While these types of rewards do tend to increase productivity in most circumstances, they also influence an employee's attitude and willingness to perform.
What are extrinsic rewards, with an example?
Extrinsic rewards refer to external incentives given to employees, such as bonuses, gift cards, pay raises, or public recognition. For example, a sales executive may receive a performance bonus for exceeding quarterly targets. This reward motivates behavior by offering a visible and desirable outcome.
What are examples of extrinsic rewards in the workplace?
The common examples of extrinsic rewards for employees in the workplace are:
- Pay
- Bonuses
- Performance-based rewards
- Sales commissions
- Gift cards
- Travel reimbursement
- Health insurance
- Retirement benefits
- Promotion
- Praise and recognition
- Incentives and bonuses
What is the difference between intrinsic and extrinsic rewards in HRM?
In Human Resource Management (HRM), intrinsic rewards are internally driven, such as a sense of achievement, job satisfaction, or personal growth.
In contrast, extrinsic rewards are externally driven, like salary, perks, or awards.
While intrinsic rewards appeal to an employee’s emotional and psychological needs, extrinsic rewards and motivation often drive short-term performance and goal-oriented behavior. An effective HR strategy leverages both intrinsic and extrinsic rewards to foster sustained engagement and productivity.
What are the 4 types of extrinsic factors?
The four main types of extrinsic rewards factors include:
- Monetary rewards – Bonuses, salary hikes, stock options, etc.
- Tangible non-monetary rewards – Gift cards, gadgets, merchandise, etc.
- Social recognition – Public praise, certificates, Wall of Fame shoutouts.
- Promotional benefits – Promotions, role-based perks, or exclusive opportunities.
These factors, when used effectively, contribute to employee satisfaction, retention, and performance.
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Why are extrinsic rewards important?
People have a natural tendency to do things that they enjoy and get rewarded for. In the workplace, extrinsic rewards can be used to encourage employees to perform their duties more efficiently.
Here are some of the benefits of extrinsic rewards in the workplace are:
- Boosts employee motivation: Extrinsic rewards are often used as incentives to motivate employees to perform better or maintain high standards. They can also be used as a punishment for poor performance by withholding rewards from workers who don't meet their targets.
- Improves Employee retention: Extrinsic rewards such as bonuses or salary increases can be used to retain valuable employees who might otherwise leave for another company offering better pay or benefits.
- Build teamwork: Extrinsic rewards help build teamwork among employees because they allow them to work together towards common goals. When people work together with shared goals, they tend to develop stronger relationships with each other as well as stronger commitment towards achieving those goals successfully.
- Helps in performance improvement: Employees who feel motivated by extrinsic rewards will be more likely to improve their performance over time than those who don't receive any external motivation at all.
- Increases employee productivity: They increase employee productivity because employees have something to work toward achieving such as raises, promotions and bonuses. When employees know that their hard work will result in something positive such as a raise or promotion, they tend to work harder so that they can reach their goals faster so that they can receive their reward sooner rather than later.
When should extrinsic rewards be used in the workplace?
Extrinsic rewards should be used when you have a specific goal in mind that you know your employees will find rewarding. They are particularly useful in the short-term for motivating employees to work towards one specific organizational goal. For example, offering additional money if an employee meets a sales quota is an example of extrinsic rewards used in the workplace.
Employee pulse surveys:
These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).
One-on-one meetings:
Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.
eNPS:
eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.
Based on the responses, employees can be placed in three different categories:
- Promoters
Employees who have responded positively or agreed. - Detractors
Employees who have reacted negatively or disagreed. - Passives
Employees who have stayed neutral with their responses.
How does extrinsic reward work?
Extrinsic reward works on the carrot and stick appproach. It is doing what you do with the aim of achieving something that you are hoping to receive. It is an external reward system. It is not you feeling motivated and going out and doing what you need to do. It is motivation that comes from something added on to you already doing the work.
What are the different types of extrinsic rewards?
There are two main types of extrinsic rewards that help to improve employee motivation:
- Monetary rewards: These include money, bonuses, and raises. Money is a powerful motivator and can be used to reward both individual performance and team performance.
- Non monetary rewards: These include praise, public recognition, and awards such as trophies or plaques. Public recognition can be an effective way to reward employees for their efforts because it encourages others to follow their example and reinforces the importance of their work.
How can Empuls help?
Empuls by Xoxoday offers a comprehensive extrinsic rewards ecosystem that empowers organizations to motivate, recognize, and retain employees meaningfully:
- Automated rewards workflows: Spot, nomination-based, milestone, and peer-to-peer recognition with global scalability.
- 10M+ reward options: Gift cards, merchandise, travel, experiences, and more across 100+ countries.
- Integrated Swag & Gifting: Custom-branded swag, automated dispatch, and milestone-based celebration kits.
- Wall of Fame & TV Mode: Socially showcase achievements and boost peer visibility.
- Sales Incentives & Wellness Rewards: Tie extrinsic rewards to business outcomes and personal well-being.
- AI-powered personalization: Smart nudges, recognition gap insights, and award recommendations to ensure fairness and inclusivity.
Empuls bridges the gap between extrinsic rewards and motivation, making it easy for HR teams and managers to deliver recognition that resonates and retains.
