Handing out cash rewards may not be the best way to motivate employees as it is not any different from a salary, a new study revealed.

In fact, tangible rewards that are easy to use, unexpected, pleasurable, and distinct from monthly remuneration would likely motivate employees more than cash rewards would.

Researchers from the University of Waterloo surveyed firms and discovered that 84% spend US$90bn yearly on tangible employee rewards, such as vacation trips, gift cards, and merchandise to boost employee productivity.

Associate Professor Adam Presslee, one of the researchers of the study, said they found it puzzling why companies would spend billions giving out tangible rewards when cash rewards can also increase motivation.

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To determine this, the research team led four experiments to investigate factors that drive the preference between tangible and cash rewards. They examined different attributes such as the reward’s ease of use, hedonic nature and novelty and how it is presented.

Presslee explained that the team found mixed evidence regarding the efficiency of tangible rewards for motivation versus cash rewards. He explained that rewards are a “constellation of attributes,” meaning there are different factors that come together to increase the attractiveness of a reward.

The academic suggested that companies should focus more on the motivational effects of a reward instead of the type of reward itself. He said that the attributes mentioned here – ease of use, hedonic nature, novelty, and presentation – increase employees' effort and performance.

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The researchers therefore recommend that anyone who is interested in motivating employees with tangible rewards would be best served to offer rewards that contain the abovementioned attributes.

Presslee added that if tangible rewards are the only ones available, employees would most likely be motivated by rewards that are different from a salary. Employers that want to get the most out of their reward programs must emphasise this difference, and the attributes mentioned above can do that.