Reward - Definition, Importance, Types & Example

Published in Human Resources Terms by MBA Skool Team

What is Reward?

Reward is an incentive plan to reinforce the desirable behavior of workers or employers and in return for their service to the organization. Rewards can be monetary in the form of salary or non monetary in the form of awards for some special services to the company or simply giving an employee a work which he enjoys doing. The primary objective of organizations in giving rewards is to attract, maintain and retain efficient, high performing and motivated employees.

Importance of Rewards

There can be various types of rewards an organization can give its employees like money, grade, performance based incentive or performance pay, increment, gift cards, recognition or awards, profit sharing, holiday packages, medical coverage, promotion, bonuses etc.

They are given mainly to appreciate the performance of employees and to motivate them. This is because motivated workers lead to higher productivity and the organization as a whole prospers.

On the other hand if workers are unmotivated they can lead to the failure of the organization by disrupting and de-motivating other workers as well. Rewards are considered separate from salary but they may be monetary and have a cost to company. They are generally aligned to organizational goals, when an employee helps the organization to achieve any of its organizational goals he/she is rewarded.

Types of Rewards in HRM

Rewards can be of two types:


They are incentives which satisfy an employee internally. Only money is not enough to motivate people and it is important to make people realize their contribution to the organization matters. That motivates employees internally.

Intrinsic incentives can be giving meaningful work to employees, giving autonomy to employees, allowing employees to take responsibility in areas of their expertise and provide developmental opportunities to employees


They are mostly tangible incentives like pay, advancement, recognition, time off etc. Extrinsic rewards the ones which are more sought after by employees as it can improve the motivation and job satisfaction in the short term and addresses immediate issues.

Reward Examples

A company gives various rewards to its employees in their tenure. Good examples of rewards are Promotion, Raise in compensation, Monetary awards, Recognition of work done. Employees in modern organizations want reward as well as recognition for the work they do.

Work from home, flexible timings and option to chose work and responsibilities is also seen as rewards these days and motivates the employees.

Many companies these days have awards ceremonies for the top employees of the company. These awards are given for the contribution of the employee to the organization. The total reward consists of award, monetary benefit and the employee is identified as a future leader.

Hence, this concludes the definition of Reward along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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