What employee rewards actually cost when nobody uses them

Ever heard of the sunk cost fallacy? It's the idea of carrying on with something that's cost you (in time, money, wasted mental strain, you name it) because of that fact alone. Even when it's a far better idea to call it a day. Unfortunately, reward schemes often fall into that category.

Here's why. You've ticked off "implementing a reward system" in your quarterly goals. Contracts signed, budget approved, credit added, points issued, job's a goodun. But in most cases, no one looks too closely at what happens next.

What points were awarded? What rewards were claimed? How many people did it reach? Often, it wouldn't make for particularly flattering reading (the kind of report you quietly minimise before anyone wanders past your desk).

In theory, you've successfully launched a reward scheme to motivate employees. In practice, you've spent a lot of time and money to make people feel… almost nothing. And that's a hard pill to swallow.

Harder still: next quarter, you'll probably do it all again. Renew the contract, top up the budget, reissue the points. Not because it's working, but because you've already committed. That's the sunk cost fallacy, dressed up as an employee benefit.

The good news? There's a better way to spend that money, and it's simpler than the scheme you're running. Because here's the reality: a reward scheme isn't the right way to make recognition happen.

Why rewards are built to go unused

A reward is basically a transaction. You do this, you get that. Buy me a pint (i.e. do that presentation deck for me), I buy you a pint (award you digital points that can, once you've saved up enough, be exchanged for some kind of nominal treat).

But it's a bit of a process. Hit the target, earn the points, log in, browse the catalogue, pick something before it expires. Every one of those steps is a chance for someone to get bored, and ultimately not bother. And plenty of people don't.

Then there's the reward itself. Points that only ever convert into things nobody really wants: a catalogue of the same branded fleeces and travel mugs, or a gift card for a shop half your team would never set foot in. Even cash, the supposedly safe option, tends to disappear the moment it lands.

Emily Hall, Head of Engagement at Octopus Energy, put it better than we could: "If I just handed someone £30 right now, realistically they'd spend it on something they need but don't want: groceries, a household bill. But with a curated list of gifts, they get the thing they actually want."

Or take the classic corporate hamper. As the team at Mercia Asset Management described the old way of doing things: "People might like 50% of what's in there, but then they give away the other 50%." Half the budget, gone, before anyone's felt a thing.

The pattern's the same every time. You delivered a reward. But the recognition didn't land. And recognition is the bit you should actually care about.

What gets used: a gift someone chooses

Here's the shift. Recognition should be a moment. Someone went above and beyond, they fixed your I-have-no-idea-what-I'm-doing-or-what-our-brand-colours-are nightmare of a PowerPoint, and you want them to feel it. Really feel it. That's a completely different job from "run a reward scheme", and it needs a different tool.

Introducing… choice. When someone receiving a gift gets to pick it themselves, from things they actually want, two things happen at once. They claim it, because it's actually for them. And they feel recognised, because someone thought about them, not about ticking a box.

It's massively helpful when there's nothing in the way. No account to set up, no app to download, no addresses to collect. Jenny Wieland, People Systems Manager at Cycas Hospitality, on how simple it should be: "Our staff don't need to sign up for anything. It's all done with one link, and they get their gift. It couldn't be easier."

Take the friction away, and people slide on into feeling recognised. When Starbucks moved from a nomination scheme to instant recognition with Huggg, the share of the workforce actually receiving recognition went from 0.5% to 28.8%. That's a fiftyfold increase. Same intent, same effort from leaders, a completely different number of people who felt seen.

That's really the whole point. Recognition that reaches almost no one is expensive. Recognition that reaches a third of your workforce, for the same cost, is the opposite of expensive.

People genuinely feel the difference. At Octopus Electric Vehicles, 98.5% of people said they felt more empowered to recognise their colleagues, and 70.1% said they felt more motivated at work. Not because of the money involved, but because recognition finally reached them.

Stop measuring what you spent. Start measuring what got used.

If your reward scheme gives you reports on budgets issued and gifts sent, you're measuring the wrong thing. Those numbers look tidy in a board deck and tell you almost nothing, because they only cover what went in.

Ask for the ones that tell you what came back out:

• claim rate: what proportion of what you sent was actually claimed
• cost per recognised employee, not cost per gift sent (a £30 reward at 40% take-up costs you £75 for every person who felt something)
• repeat usage: are managers and teams coming back to it, or did it fizzle out pathetically a couple of weeks after launch
• spread: is recognition reaching the whole team, or the same few faces every time

Get those numbers jotted down, and the ROI conversation changes completely. Emily Hall again, on whether it's worth it: "It's totally worth it from an ROI perspective." Or look at Wingstop, where turnover sits at an all-time low against a 52% industry benchmark for hospitality. That's not what a wasted budget buys you.

The point

You probably don't need a bigger reward budget. You need to stop wasting it.

A reward scheme spends a lot of money to look like you've done something. We don't want to say vanity metric… but whoops, we already did. Recognition, a gift someone chooses, sent with a message that actually means it, costs money but really, really pays off. And it's a far easier line to defend when someone asks you what the spend was for.

Start gifting and pay for recognition that reaches people, not a scheme that becomes the office joke.

Common questions

Why do employee reward schemes go unused?

Because a reward is a transaction with steps attached, and steps get skipped. People have to earn the points, log in, browse a catalogue and claim something before it expires. Plenty never do. And the rewards on offer are often things nobody really wants, so the budget gets spent but the recognition never lands.

What's the difference between a reward and recognition?

A reward is transactional: do this, get that. Recognition is a moment: someone did something good and you want them to feel it. Reward schemes are built around the mechanism. Recognition is built around the person. A gift someone chooses themselves does the second job, which is the one that actually changes how people feel.

How do you measure whether recognition is working?

Stop measuring what you put in (budget issued, gifts sent) and start measuring what came out: claim rate, cost per recognised employee rather than cost per gift sent, repeat usage over time, and how widely recognition reaches across the team.