Difference between Reward and Incentive

Rewards and Incentives are powerful tools that can significantly impact the motivation, behaviour, and performance of individuals or teams. They are designed to encourage desired behaviours, enhance productivity, and foster a positive work environment.

What are Rewards?

Rewards are typically given after an action or behaviour has been performed and are often designed to reinforce or encourage that behaviour. It is used to provide feedback to the agent about the quality of its actions and guide it toward achieving its objectives. Rewards can be tangible, such as money or gifts, or intangible, such as praise or recognition.

What are Incentives?

Incentives are often used as a form of motivation to encourage individuals to perform a certain action or behaviour in the first place. Incentives can take many forms, including financial incentives, recognition, promotions, or other forms of positive reinforcement. Incentives are typically offered before an action or behaviour has been performed, to encourage individuals to take that action.

Difference between Reward and Incentive

We often use rewards and incentives interchangeably, but they do have some key differences in terms of their purpose, timing, impact, etc., on employee motivation and behaviour. Here are the primary differences between rewards and incentives:

Basis	Rewards	Incentives
Purpose	Rewards serve as recognition and appreciation for past performance, accomplishments, or contributions of employees. They help strengthen the relationship between the organization and the employee by acknowledging their hard work.	Incentives are meant to motivate and influence future behaviour or performance by offering a specific benefit or compensation for achieving predetermined goals.
Timing	Rewards are retrospective and given after an employee has achieved a goal or completed a task. They act as a form of acknowledgement for the employee’s hard work.	Incentives are prospective and announced beforehand, providing employees with a clear objective to work towards to receive the promised benefit.
Impact on motivation	Rewards can boost employee morale and satisfaction by acknowledging their accomplishments and making them feel valued.	Incentives, however, create a sense of anticipation and motivation for future performance by offering employees an additional reason to strive for better results.
Tangibility	Rewards can be both tangible such as monetary rewards, gifts, and promotions, and intangible such as recognition, praise, or appreciation.	Incentives are often more tangible, as they usually involve a clearly defined benefit or compensation that employees can expect upon achieving a specific goal.
Flexibility	Rewards can be more flexible, as they may be given on an ad-hoc basis or as part of a regular performance review process.	Incentives are usually tied to specific targets or milestones, making them less flexible in terms of when they can be awarded.
Conditionality	Rewards are typically unconditional, as they are given in recognition of past achievements without any further requirements.	Incentives, however, are conditional, as they are only provided if an employee meets or surpasses the specified goals or objectives.
Distribution	Rewards can be distributed more broadly within an organization, as they can be given to employees for various achievements or performance levels.	Incentives are often tied to specific targets, making their distribution more limited to those who meet the established criteria.
Performance measures	Rewards can be based on a range of performance measures, including individual or team achievements, subjective evaluations, etc.	Incentives are generally based on clearly defined, measurable goals or objectives provided by the organisation.