Budgeting tips for Employee Recognition Programs

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Determining how much a company should invest annually per employee in an Employee Recognition software system can be challenging as it depends on various factors such as the size of the company, budget, and the scope of the recognition program. However, a commonly used rule of thumb is to allocate between 1-2% of the company's payroll budget for recognition and rewards.

When considering user costs and the redemption of points for merchandise, a company may want to allocate their budget as follows:

1. User Costs: Many Employee Recognition software systems charge per user, per month or annually. The cost per user can vary depending on the software features and the size of the company. Based on industry averages, companies can expect to spend between $2 and $6 per user, per month. For example, a company with 100 employees could expect to spend between $2,400 and $7,200 per year on user costs.

2. Redemption of Points: Employee Recognition software systems often allow employees to redeem their earned recognition points for rewards such as merchandise, gift cards, or experiences. The cost of these rewards can vary widely depending on the program and the type of rewards offered. To determine a budget for redemption of points, companies should consider the total number of recognition points earned by employees and the average cost of rewards.

As for market data on recognition expenditure, a study by WorldatWork found that the median total spend on recognition programs in 2020 was 2% of payroll. Another study by the Society for Human Resource Management (SHRM) found that the median spend per employee on recognition and rewards was $500 per year. However, it is important to note that these figures may not be directly applicable to every organization and that each company's recognition program budget should be tailored to their specific needs and goals.

In conclusion, companies may want to allocate between 1-2% of their payroll budget for recognition and rewards and may further allocate their budget as per user costs and the redemption of recognition points. However, it is important to carefully evaluate the costs and benefits of any Employee Recognition software system and tailor the budget to meet the specific needs and goals of the company.