When budgets are tight and raises are not a realistic possibility, how can you keep employees productive and committed to your company? Although a competitive employee benefits package that includes health care and other components, such as a 401(k) plan and disability and life insurance, will always be valuable to employees, there are many other types of initiatives that are also meaningful and effective. Consider instituting a recognition program to reward employees for jobs well done. Here are five components for creating a successful program:

1. Professional Growth
Employees want to know that they are advancing their skill sets and their position within your company. Yet, they often do not understand how their role affects the company’s success. Managers should communicate how each employee’s efforts, whether by working independently or as part of a team, directly impacts the company’s operations. It is important that everyone knows his or her contributions matter. Equally important, employers should help employees establish career paths by providing them with opportunities for promotion or cross-training to help keep them challenged.

2. Pay for Performance
Rewarding employees for a job well done directly affects their performance and the company’s bottom line. However, according to Kevin Herring, founder of Ascent Management Consulting and an expert in workplace performance turnarounds, traditional merit-based pay plans, such as raises and bonuses, are not the most effective employee motivators. Paying workers based on their performance, commonly referred to as pay for performance, offers employers and employees several advantages over the traditional across-the-board merit system, including:

• Improving morale and retention. Top performers want to be recognized for their hard work. It is more motivating for employees to know they will be well compensated when they meet or exceed goals than it is when everyone receives the same increase regardless of their individual performance. Employers that provide extra incentives to valuable employees are more likely to enjoy lower turnover rates.
• Increasing productivity. When individual and group goals are aligned with the company’s objectives, productivity can be greatly enhanced. Each person is held accountable for doing his or her part and more, and poor performers are forced to work harder and carry their share of the workload.
• Engaging top performers. Employees want to work for an organization that values their efforts. A pay-for-performance initiative that is carefully communicated and executed can help employees exceed their goals.

While it is important to establish realistic goals, a pay-for-performance program should make it worthwhile for employees who do more to receive more. Employees should always know what is expected of them. Standards of performance should be established and communicated, and regular reviews should be conducted.

3. Public Praise
Recognizing employees for their positive contributions provides multiple benefits for companies. Employees appreciate being recognized both privately and publicly for their efforts and creativity. Honoring employees in the company newsletter and through employee appreciation events are other methods of developing loyalty among talented staff members. Special rewards also can be given for major achievements. And always, showing appreciation with a simple thank you—no matter how big or small the contribution—goes a long way.

4. Work-Life Balance
Successful employers understand the relationship between work-life balance and productivity and offer flexible work policies and practices. Those can include part-time employment, job sharing, telecommuting, and employee assistance programs. Many employees value time over money. Employers that offer opportunities to enhance work-life balance demonstrate to employees that they care about both their professional and personal well-being.

5. Have Fun
A fun work environment is among the many factors that employees say contribute to job satisfaction. Employers should foster an upbeat, enjoyable work environment that strikes a balance between productivity and fun. By celebrating a milestone, conducting team-building activities or going on a retreat, employees can see that their employer is human too and not all-work-and-no-play.

Retaining top talent is essential to a company’s success. By establishing a rewards and recognition program, employers can help maintain employee motivation and an atmosphere where everyone feels they are an important contributor to the company’s success.

Rick Gibbs, SPHR, is a performance specialist in the New York offices of Insperity. Insperity (NYSE: NSP), a trusted advisor to America’s best businesses for more than 25 years, provides an array of human resources and business solutions designed to help improve business performance. For more information, call (800) 465-3800 or visit www.insperity.com.