Employee rewards can be as simple as a one-off gift card to thank someone for going above and beyond. Or they can be part of a company-wide program, with rewards scheduled for holidays, milestones, and exceptional performance.
At Giftogram, we've helped 25,000+ businesses reward their employees, and one thing is clear: there are countless reasons to show people they're valued. The question isn't whether rewards should be part of your company culture, but which types work best for your business.
In this guide, we'll cover the different types of employee rewards, when to use them, and the US tax rules you need to know.
An employee reward is something an employer gives to acknowledge an employee's performance, contribution, or milestone. Rewards can be monetary, like prepaid cards and gift cards. Or non-monetary, like extra time off (PTO), experiences and professional development.
Unlike regular pay and benefits, rewards are typically connected to an employee's achievement, an occasion, or behavior to show that you appreciate their contribution.
This is also where rewards and recognition get muddled. Employee recognition is the thank-you itself, like a manager's message or a shout-out in a meeting. The reward is what you give alongside it.
Before we go further, it's worth clarifying these terms. They're closely related and often used interchangeably, but they actually serve different purposes.
| What it means | Example | |
|---|---|---|
| Employee recognition | Acknowledging someone's contribution | A manager publicly thanking an employee for exceptional work |
| Employee reward | Giving something tangible and of value to acknowledge an achievement or occasion | A $50 gift card for completing a major project |
| Employee incentive | Offering something in advance to encourage a particular outcome | Promising a $100 bonus for reaching a sales target |
While rewards and incentives overlap, the difference comes down to whether you're encouraging something to happen or acknowledging something that already has.
When employees feel appreciated, they know their contribution matters. And that makes a difference. Great companies depend on people who care about their work and go the extra mile. So it's worth motivating those people to keep performing and stick around.
Rewards are one way companies show people they're seen and appreciated, whether for hitting a big sales target or celebrating 10 years with the company. Whatever the milestone, the point is: appreciation is good for people and for business.
Research from Gallup and Workhuman shows that employees who receive meaningful recognition are more engaged at work and more likely to stay with their employer. For businesses, making appreciation part of their company culture is common sense.
Employee rewards take a few forms, from cash bonuses and gift cards to experiences and extra time off. Most companies choose a rewards platform that offers a mix, since different rewards suit different things.
Cash is about as flexible as an employee reward gets. Companies can send monetary rewards through payroll, direct bank transfers, or digital reward platforms like Giftogram, which offer cash payout options. Whether it's a performance bonus or a thank-you for going the extra mile, people are free to spend it however they choose.
The trade-off with cash is that it can feel more like compensation than a gift, particularly when it arrives with a regular paycheck. Payroll and taxes also apply, which we'll cover later.
Employee gift cards hit a sweet spot: they feel like a genuine reward, but they still give employees plenty of freedom to choose where and what to spend.
Multi-brand rewards take that flexibility a step further. With a Giftogram, recipients can choose from gift cards from 140,000+ national and local brands, and even split their reward across multiple retailers.
Prepaid cards are another option. Instead of choosing different retailers, recipients can choose a prepaid Visa or Mastercard to then use it wherever the card is accepted. Because it still comes as a branded digital gift card, it feels like a gifted reward, something a direct cash payout doesn't quite offer.
An employee reward doesn't have to come with a dollar amount attached. Extra PTO gives someone a well-earned break, and professional development can be a great fit when an employee has their eye on a particular course or opportunity. Some companies also use merchandise or extra schedule flexibility as part of their reward programs.
The catch is that these rewards tend to be more personal. One employee might jump at an extra day off; another would rather have something they can spend. And what works for someone in an office may not be practical for a colleague working shifts or in a customer-facing role.
And don't assume "non-cash" automatically means "tax-free." The IRS has specific rules around which fringe benefits can be excluded from taxable income, which we'll come to shortly.
Experiences work well when you know enough about the person to choose something they'll genuinely look forward to. That could mean tickets to see their favorite sports team or an activity they've been wanting to try.
They work particularly well when you want to celebrate something significant and make the occasion feel special. In these moments, the freedom to choose how to spend the reward may matter less than getting something personal.
Buying a great experience for someone you know is one thing; finding something that suits hundreds of employees in different locations is another. If you're unsure, don't leave it to chance. Gift cards take the guesswork out of choosing something everyone will genuinely enjoy.
With so many options, the key is finding a reward that fits the occasion and reflects what your employees value most.
Here's how they break down:
| Employee reward | Best for | Trade-offs |
|---|---|---|
| 1. Multi-brand gift cards | Everyday recognition, work anniversaries, and rewarding larger teams | Easy to suit everyone and send at scale, but less specific |
| 2. Cash disbursements | Significant performance achievements or hitting major targets | Flexible, but can feel more like pay than a gift |
| 3. Prepaid cards | Flexible rewards when employees want more freedom over spending | Widely accepted, but check restrictions globally |
| 4. Extra paid time off | Recognizing sustained effort after a demanding project | Valued by employees, but harder to offer equally |
| 5. Restaurant gift cards | Birthdays, personal thank-yous, and smaller milestones | Thoughtful, but tastes and locations vary |
| 6. Travel rewards | Major achievements and long-service milestones | Memorable, but expensive and harder to organize |
| 7. Wellness rewards | Wellbeing initiatives and personal appreciation | Shows care, but preferences vary widely |
| 8. Professional development | Recognizing progress and supporting career growth | Valuable, but may feel more like work than a reward |
| 9. Experiences | Celebrating significant individual achievements | Personal, but difficult to organize at scale |
| 10. Company merchandise | Team identity, company milestones, and shared celebrations | Builds belonging, but may lack personal value |
| 11. Charitable donations | Letting employees support causes they care about | Meaningful to some, but perhaps not everyone |
| 12. Extra flexibility | Recognizing additional effort with an early finish or later start | Low cost, but not practical for every role |
| 13. Team celebrations | Celebrating wins that belong to the whole team | Brings teams together, but overlooks individual effort |
| 14. Food and drink gifts | Seasonal appreciation and personal thank-yous | Easy to give, but dietary preferences vary |
| 15. Personalized gifts | Celebrating important milestones when you know someone's interests | Thoughtful, but difficult to get right and at scale |
It goes without saying that a company shout-out or personal message makes any reward feel more meaningful. After all, appreciation should feel personal.
And you don't need all 15 options; one can work just as well. When in doubt, let employees choose something they'll genuinely value.
Send rewards when something is genuinely worth acknowledging. And do it as close to the moment as possible, when the connection is obvious. A thank-you for brilliant work means more in the moment than three months later.
Most employee rewards fall into two groups.
Planned rewards
Recognize occasions you know are coming, like birthdays, work anniversaries, and holidays.
Achievement-based rewards
Recognize something an employee has accomplished, whether that's hitting a target, completing a big project, or referring someone who joins the company.
Automating both reward types
Planned rewards are simple to automate because the data already lives in a calendar or HR system. Once connected, either through a direct integration, custom API or Zapier, they can be sent automatically.
Achievement-based rewards can be automated too. Giftogram integrates with tools like CRMs and sales platforms, so you can set up triggers that send rewards when someone hits a target or reaches a milestone.
In both cases, Giftogram lets you set up rewards in advance, complete with your branding and a personal message, so every reward feels thoughtful, even when it's automated.
There are plenty of moments that deserve a reward:
Almost all of these employee reward moments can be automated, taking the busy work of gifting off your team's plate. Giftogram lets you schedule rewards in advance and connect reward delivery to your HRIS system through integrations and Zapier. So predictable occasions can happen on time without someone manually managing every send.
Then there are the moments you can't plan for. When someone does a fantastic piece of work or goes well beyond what was expected, managers can send a Giftogram there and then. You can automate the rewards that follow a pattern and still make spontaneous recognition just as easy.
Many employee rewards are taxable in the US. As a general rule, the IRS treats fringe benefits as taxable unless a specific exclusion applies, so employees may need to include a reward's value in their taxable wages.
It's easy to assume that a small thank-you sits outside those rules, especially when you're talking about a $10 or $25 reward rather than a substantial bonus. Unfortunately, value alone doesn't decide how a reward is treated. What you give matters too.
The IRS explains the general rules in Publication 15-B: Employer's Tax Guide to Fringe Benefits.
Any gift cards given to employees are generally taxable in the US. The IRS treats gift cards as cash-equivalent fringe benefits, so you must include their value in the employee's wages and pay applicable employment taxes.
That means a small gift card isn't automatically tax-free. The IRS is quite specific here. Cash and cash-equivalent benefits don't qualify as de minimis benefits simply because they're worth a small amount. This also applies to prepaid cards.
If you're rewarding people outside your workforce, more rules apply, and reporting requirements may differ. We cover those distinctions in more detail in our Ultimate Gift Card Tax Guide.
Yes, some employee rewards and fringe benefits can be tax-free if they pass the specific IRS requirements. You shouldn't assume that there's a blanket "under $X is tax-free" rule you can apply to every reward.
The IRS exempts certain small, occasional non-cash gifts under its de minimis fringe benefit rules, like a box of chocolates or a holiday gift basket. The IRS says these benefits are generally low-value and given so rarely that tracking them for tax purposes wouldn't be worthwhile.
But there's an important distinction: gift cards and other cash equivalents are generally taxable, even when the amount is small.
Separate rules also apply to employee achievement awards, like the tradition of giving someone a watch to celebrate 20 years with a company. The IRS is a little more lenient with physical gifts like these, but there are still rules to follow here. Tax-free limits are generally $400 a year, or up to $1,600 under certain qualified plans, so it's worth checking before you gift.
You can find more detail in the IRS guidance on de minimis fringe benefits.
A few things are worth putting in place before launching your program:
Beyond being good practice, having everything in one place makes tax reporting much easier. Giftogram's built-in tracking records rewards sent, their value, who received them, and which department sent them, reducing year-end reporting admin.
Tax treatment can vary by reward, employee circumstances, and applicable state rules, so it's worth getting it right from the start.
For more information, check out our Ultimate Gift Card Tax Guide.
A good employee reward program makes it clear what you're rewarding and gives people rewards worth getting. It should also be easy to run.
If every $50 reward involves an email chain and multiple approvals, keeping the program going will become much harder than it needs to be.
Here's where to start:
Some occasions are easy to plan for, like work anniversaries or employee referrals. Others are more spontaneous, so managers should know when to reward and what deserves it.
Some rewards are company-wide, like birthdays or work anniversaries, while others depend on individual achievements. Make sure people understand what they can be rewarded for, and give decision-makers clear guidelines so recognition feels fair across teams and roles.
You might know exactly which gift card your closest colleague would love, but getting that right for everyone is impossible. Letting people choose how to spend their reward means no one is disappointed.
Different rewards need different budgets and reward types. Set guidelines for each type so managers can make decisions consistently without needing approval for every send.
Like most projects, employee rewards programs work best when there's a centralized, approved budget and team-level autonomy over how to spend it. Getting budgets approved by HR each time shouldn't become a roadblock.
Birthdays, work anniversaries, and holidays are easy to plan for, but achievement-based rewards should live somewhere in your systems too. Technology is there to make life easier, so use Giftogram's scheduling and integrations to automate rewards and keep programs simple at any scale.
Check where your budget goes, who receives rewards, and whether some teams get recognized more than others. Ask employees what they think, and adjust as you go.
The real test is whether your program works just as well for 20 employees as it does for 200 or 20,000. Giftogram makes that easier with bulk sending, scheduled rewards, team budgets, and reporting, all in one place.
Giftogram lets you send thoughtful employee rewards in minutes, whether you're recognizing one person or rewarding thousands of employees at once.
Each recipient can choose from thousands of national and local brands, prepaid cards, and cash options, so everyone can choose what matters to them, without getting the same gift.
You can keep things just as simple behind the scenes. Send rewards in bulk, schedule the ones you know are coming, and let managers reward their own teams, with the right spending controls in place. Reporting keeps everything visible, and integrations easily connect rewards with the tools your team already uses.
More than 25,000 companies use Giftogram to send rewards, and you can reach employees across 230+ countries.
Make employee rewards more rewarding. Get started for free with Giftogram.
A $50 gift card sent after someone completes an important project is a simple example of an employee reward. You could also reward an employee with extra PTO, a bonus, or something more personal to the occasion. The reward itself can vary; what makes it meaningful is that the employee knows exactly what they did to earn it.
Gift cards, prepaid cards, cash bonuses, extra PTO, and experiences are all popular employee rewards. There's no reason to use the same type every time, either. A small thank-you after a great piece of work might call for something different from a five-year anniversary or a major achievement.
Employees value rewards they can actually use and enjoy, which is why giving people a choice works so well. Rather than trying to find one gift that suits everyone, Giftogram lets each recipient choose their own reward from 140,000+ national and local brands.
Many employee rewards are taxable in the US. The IRS treats fringe benefits as taxable unless a specific exclusion applies, so employers need to consider the type of reward and how to report it. Read our ultimate gift card tax guide for more information.
Yes. The IRS treats gift cards given to employees as cash-equivalent fringe benefits, so they're taxable in the US. This applies even to relatively small gift cards, which generally can't be treated as tax-free de minimis benefits simply because their value is low.
Recognition acknowledges someone's contribution, while a reward is something of value given alongside it. A manager might thank someone for exceptional work and send them a gift card as part of that recognition.
An incentive is usually offered before someone achieves a goal, while a reward is given after. If you promise a $50 gift card for hitting a sales target, you're offering an incentive. If you send someone a $50 gift card because they just did exceptional work, you're giving them a reward.