How To

January 6, 2023

How to reward employees

We look at how companies can reward employees throughout the year with small (and cost-saving) gestures

Rewarding employees is essential for boosting morale and productivity, and ensuring talent sticks around for the long haul. But it doesn’t have to cost much.

For a recent Startup Life newsletter, Kamran Kareem, senior director of total rewards and payroll at trading platform Bitpanda — who previously headed up total rewards at vertical farming company Infarm and restaurant delivery service Delivery Hero — gave his tips for rewarding employees without breaking the bank.

Consider rewards and recognition

There are two ways to recognise someone’s performance — for going the extra mile in a certain project or successfully launching a product. Rewards typically cost money: a cash bonus, an experience, a dinner for two, movie tickets or a box of chocolates and champagne.


Recognition is celebrating someone’s achievements in the public domain. Ways to do this include dishing out medals or certificates to employees in an all-hands meeting, or giving a shout out to them in a "Kudos" channel on Slack, like we do at Bitpanda. Both rewards and recognition are essential for talent retention: who wants to work hard without getting at least a pat on the back in return?

Figure out how you want to reward

You may not always want to — or be able to — reward employees for getting good results or hitting big targets. In early-stage startups that are developing a product and haven’t yet brought it to market, there may be more moments of failure than success: employees build the product, test it, it fails and then they iterate the features that aren’t working. In these moments, an employee’s input (no matter how big) doesn’t necessarily lead to successful output, but it’s still necessary to reward them for their effort.

In a later-stage startup, rewarding employees may not just be based on performance, but on making a positive impact. Consider what your values are as a company and tie that into what you want to reward employees for.

Have a plan

Don’t give rewards out randomly; you need to budget for them, especially if you are trying not to go overboard on costs. Rewards fit into your wider employee offering, alongside benefits and compensation. Lay out how much you want to spend on rewards (companies should set aside at least 1% of their budget) and what things you’ll be offering employees when you’re outlining your overall budget for the year. Revisit the plan on a quarterly basis to adjust for cost according to company needs, and to reflect on what’s working and what’s not.

Be creative

A little goes a long way. If you’re a company that’s struggling to hit business targets right now, giving out cash bonuses is unrealistic. You could instead reward employees with extra stock options — it’s low cost right now, but will be worth something for the employee in the future. For smaller companies, hinge rewards around celebrations and team building: organise team lunches, after-work drinks or a small department party to celebrate a certain milestone. Don’t forget the recognition side of things too. You could send thank you cards to employees or give them extra time off work if they’ve been hustling hard for a project.

For those employees who have really excelled lately, giving them a promotion, including them in their department’s decision-making process or simply inviting them onto bigger projects with more responsibility is a way of saying thank you that helps them develop further in their career.

Avoid rewards which attract tax

Giving retail vouchers or sending fruit and vegetable boxes to employees may sound like a nice idea, but you’ll have to pay a large amount of tax on top. Check out what subsidies the government of the country the employee is based in offers, and take advantage of that. For example, in Germany, companies can subsidise €6.67 for food per employee, per day. That’s €200 per employee without additional social or income tax on top.

On the subject of... rewarding employees

📝 "Symbolic awards" can boost employee morale. Thank you notes, public recognition and certificates are just some of the ways you can demonstrate your appreciation to employees.

🤝🏽 Rewards that aren’t cash. Here are a few ideas.

🧡 Build a reward and recognition program. HR tech company Personio has a guide on how to combine the physical benefits of rewards with the more personal and heartfelt benefits of employee recognition.

🤲  Performance-based rewards. McKinsey outlines how to dish them out fairly.

📈 Formal reward and recognition programs can improve D&I. Here’s how.

Miriam Partington

Miriam Partington is a reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on X and LinkedIn