Best Practice: How Much to Spend on Recognition

This article is written to help you determine how to budget for total recognition or spot recognition programs in your organization. Knowing that every company has its own needs based on size, profits, culture, etc., the following should serve as guidelines to help you decide what's best for your company. 

Option 1: Percentage of Payroll

One way to determine how much to spend on your spot recognition programs is to take a certain percentage of your annual payroll. 

From a study conducted by WorldAtWork: 

"While some organizations spend as much as 10% of payroll on employee recognition, the average budget for employee recognition is 2% of payroll, and the median amount is 1%. For most organizations, a budget of 1-2% of payroll allows you to reward significant accomplishments with manager discretionary awards, quarterly or year-end awards for outstanding achievers, or employee nominated awards. Perhaps the budget also includes some awards for safety or productivity achievements."

Option 2: Pay Per Employee

Another option to create your budget amount is to calculate by headcount. If you know you'll be spending a certain average amount of money on each employee, you can simply multiply that amount by the number of employees you have. According to a study conducted by Next Level Performance, a multi-industry average of cost-per-employee spending was $31. 

According to the trends we're noticing for users on their Awardco platform, the average amount of money spent on spot reward programs comes to about $100 per employee. That number is based off a $50 per employee per annum amount on the low end, and $150 per employee per annum amount on the high end.

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