Do rewards motivate employees? What the research shows

The short answer is yes, but motivation is only part of the equation.

Rewards can encourage people to put more effort into their work, which can support performance.

But the type of motivation a reward inspires, what you’re asking employees to accomplish, and how the reward is delivered can all affect the outcome.

So, what does the research say? Let’s look at when rewards can support motivation and performance, when they may fall short, and how to use them effectively.

A deep dive into the research

To understand how rewards motivate employees, it helps to look at both the type of motivation and the performance you're trying to influence.

Research suggests rewards can support motivation, satisfaction, commitment, and engagement. These outcomes can matter for performance—motivation influences where employees direct their effort, how much effort they put in, and how persistently they pursue a goal.

But motivation does not automatically translate into better performance, and not all performance looks the same.

Both financial and nonfinancial rewards are generally linked to positive employee outcomes, but findings on the effect of rewards on employee performance are less straightforward.

One reason may be how performance is measured. Performance can mean how much work gets done, how well it is done, or both.

Intrinsic and extrinsic motivation

Understanding intrinsic vs. extrinsic motivation and rewards can help explain why different approaches produce different results.

Intrinsic motivation and incentives can both contribute to performance, but in different ways.

Intrinsic motivation comes from the work itself, such as finding it meaningful, interesting, or satisfying. Extrinsic motivation comes from outside the work, such as a bonus, recognition, or another reward.

Both can influence performance, but they may do so differently:

• Someone who is intrinsically motivated may be more likely to invest in the quality of their work.
• An external incentive may encourage greater effort toward performance quantity.

These forms of employee motivation don't have to compete. Someone can enjoy their work and still appreciate being recognised for doing it well.

Match rewards to the performance goal

The type of work also matters:

• For quantity-focused work, incentives can be effective when the goal is clear and measurable, such as meeting a specific target or increasing output.
• For quality-focused work, intrinsic motivation may play a larger role. Work that depends on creativity, problem-solving, judgement, or collaboration is often harder to capture with a single output metric.

The takeaway is not that one type of motivation is better than the other. It's that the reward should support the kind of performance you actually want.

Delivery matters, too

A 2026 systematic review of verbal rewards found that praise and other verbal recognition generally have positive effects on performance, but their impact depends on:

• The reward itself
• How it was delivered
• The type of work involved

For complex work, rewards that feel overly controlling may undermine motivation. In other words, a reward can encourage effort without necessarily producing the kind of performance you want.

How should HR apply the research?

Let’s revisit the key lesson: Start with the behaviour or outcome you want to encourage, and then choose a reward that supports it.

Here are a few specific conditions to consider:

1. What behaviour or outcome are you trying to encourage?

Start with the goal. Be specific about the behaviour, contribution, or result you want to reinforce. This helps you determine whether a reward is even the right approach.

2. Are the criteria clear and attainable?

Employees should understand what earns the reward and what constitutes successful performance. Goals should be challenging enough to encourage effort without feeling out of reach.

3. Is the approach fair?

Consider who is eligible, how decisions are made, and whether the same standards apply consistently. Clear and transparent criteria can help build trust in the programme.

4. Does the reward fit the achievement?

Choose a reward that feels appropriate to the contribution. When possible, give employees some choice so they can select something meaningful to them.

5. Are you delivering it at the right time?

The closer the reward is to the achievement, the easier it is to connect the two. Timely recognition can reinforce why the behaviour or contribution mattered.

6. Are you explaining why it matters?

Don't let the reward speak for itself. Pair it with specific recognition that explains what the employee did well and how their contribution supported the team or organisation.

7. Is it actually working?

Measure more than whether employees received or redeemed the reward. Look at whether the intended behaviour changed and whether the reward is producing the outcome you wanted. Consider improvements in performance, participation, or other business metrics relative to programme costs. For a broader framework, explore how to measure the return on employee recognition.

When can employee rewards backfire?

Rewards don't always have the intended effect. When goals, metrics, or rules aren't well designed, employees may focus on earning the reward rather than achieving the outcome behind it.

A few common pitfalls to watch for:

• Unattainable goals. If employees don't believe they can earn the reward, they may stop working toward it altogether. Goals should be challenging without feeling impossible.
• Wrong metrics. What you measure can shape what people prioritise. If a reward is tied to the wrong metric, employees may focus on increasing that number rather than improving the outcome you actually care about.
• Gaming the system. Narrow rules can encourage people to check the right boxes without creating meaningful value. Reward criteria should leave room for good judgement and the bigger picture.
• Unhealthy competition. Individual rewards can sometimes make collaboration less appealing, particularly when team members are competing for a limited reward. Consider whether the reward encourages people to work together or only to stand out individually.
• Perceived unfairness. Even a well-designed programme can lose its impact if employees don't understand how decisions are made or see rewards being applied inconsistently. Clear, consistent criteria build trust.

Is there a link between monetary rewards and employee motivation?

Monetary rewards can motivate employees, but the amount of money isn't the whole story. Awardco's 2026 research of 4,800 employees across 21 countries and 11 industries found that what makes a monetary award meaningful has more to do with the recognition behind it than the dollar amount alone.

When employees were asked why a monetary award felt significant:

• 55% pointed to recognition of their contribution or achievement
• 45% reported that a sense of pride made it feel significant

That suggests a monetary reward works best when people understand what they did to earn it and why it mattered.

A part of executing this well involves timing. A spot reward given soon after a meaningful contribution can create a clearer connection between the achievement and the recognition. Don’t let the money do all the talking. Timely, specific recognition can add meaning without increasing the spend.

For a deeper look at what makes rewards psychologically meaningful, read about the psychology of employee rewards.

What reward strategies work for different goals?

Think about what you want to encourage first. A reward that works for hitting a specific target may not be the best fit for recognising collaboration, values, or everyday contributions.

Here are example strategies for rewards that can motivate employees:

For more guidance, see how to reward employee performance effectively.

Design rewards around the behaviour you want to reinforce

The most effective reward strategy starts with the behaviour you want to reinforce. Awardco Rewards helps organisations build incentivised programmes around the goals, contributions, and achievements that matter most.

Explore the Awardco platform.

FAQs

Do rewards motivate employees?

Yes. Research suggests rewards can support motivation, engagement, satisfaction, and performance—depending on the reward, its delivery, and the work involved.

How do rewards affect employee performance?

Rewards can encourage effort toward a specific goal, but their effect varies. Incentives may suit measurable outcomes, while intrinsic motivation can play a larger role in work requiring quality, creativity, or judgement.

Do monetary rewards motivate employees?

Monetary rewards can provide a clear external incentive, but money isn't the only source of motivation or the best fit for every situation.

Can rewards reduce intrinsic motivation?

They can in some contexts, particularly when rewards feel controlling rather than informative, particularly when the work is already interesting or meaningful.

What makes an employee reward effective?

Effective rewards have clear, fair, and attainable criteria and reinforce meaningful behaviour or outcomes.

Should employee rewards be tied to performance?

They can, especially when performance is clear and measurable. For complex work, consider whether a single metric captures the contribution you want to recognise.

What types of rewards motivate employees?

Options include monetary incentives, gift cards, experiences, recognition, time off, and development opportunities. The right choice depends on what you're trying to encourage.

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