When there’s less cash available for bonuses and promotions, how can HR leaders keep employees feeling valued, motivated and engaged? It may be time to broaden the definition of what ‘reward’ looks like.

Despite this year’s Federal Budget offering cost-of-living relief for Australians – including $17.1 billion in tax cuts and energy bill subsidies – many organisations remain under financial pressure. According to NAB, three in four small-to-medium businesses expect their costs to continue rising in 2025.

Even with AHRI’s latest Quarterly Work Outlook reporting a slight uptick in planned wage increases (up to three per cent by January 2026, from 2.7 per cent previously), many employers will be unable to meet employees’ expectations around pay during upcoming review cycles.

This presents a challenge for HR: how can organisations continue to reward and recognise their people when financial levers are limited?

The good news is that some of the most effective forms of recognition cost very little – and may be even more powerful than pay in driving long-term engagement.

“Statistically speaking, giving a pay rise will be a sugar hit to engagement,” says Matt Connell FCPHR, Deputy CEO and General Manager of People and Culture at Cultura.

“It will be a small blip, and then whatever was bugging an employee last month will be bugging them again next month. The pay rise they got three weeks ago has no impact on their engagement today.”

The key is to make rewards personal and purposeful, says Dr Caroline Knight, senior lecturer at the University of Queensland.

“Talk to the individual and [work] out what works for them. If they can’t have more money, what else would make them excited?” 

Below, Connell and Dr Knight share some of the ways organisations can acknowledge their people’s efforts when additional financial gains aren’t feasible.

1. Reward behind-the-scenes work

Effective recognition strategies should celebrate more than just results – they should acknowledge the individual’s purpose, their growth, and the behind-the-scenes efforts that enable team and organisational success, says Dr Knight.

“What are they doing in the organisation to make it a better place to work?”

At her university, recognition comes through formal awards that spotlight less visible contributions, like innovation in teaching, employability initiatives, media engagement or industry impact.

“You can give people certificates [which] can go into their CVs, so it’s something that feels really meaningful. It’s about thinking about what’s been really innovative – not necessarily what got the most economic return, but the effort and the way people worked together.”

These ceremonies, she adds, also help build community and connection – essential ingredients for wellbeing and performance. They can also act as important proof points for employees seeking future promotions.

“I’ve always said to my employees, ‘I don’t want to be known as the parties and cakes department. Let’s focus on things like psychological safety and wellbeing.’” – Matt Connell FCPHR

2. Encourage peer-to-peer recognition

At Cultura, Connell has introduced ‘purpose moments’ at the start of team meetings – a simple way to build connection and acknowledge contributions across the organisation. Employees have the opportunity to call out colleagues’ work that has aligned with the organisation’s overall mission and purpose.

“There’s nothing more rewarding than hearing from your peers. People can be a little cynical about recognition from their superiors. They think, ‘You just had to say that because you’re my boss.’ But it means a lot when it comes from their peers,” says Connell, who is also an AHRI board member and Victorian State President.

This approach has additional benefits, he adds. As people hear about achievements across business units, they gain greater insight into how different teams contribute – deepening their sense of purpose and cohesion.

3. Design for quality work, not just output

For sustainable motivation, employees need more than praise or perks. They need work that energises and challenges them. 

“I think a lot of people are motivated by having meaningful work – work which is high-quality and offers them abilities to grow and develop.”

She advocates for designing work using the SMART framework, created by Professor Sharon Parker. This framework outlines that work should be:

• Stimulating: varied, cognitively engaging work involving problem-solving and multiple skills
  
• Mastery: clear feedback and development opportunities
  
• Autonomy: flexibility in how, when and where work is done
  
• Relational: meaningful connection with colleagues
  
• Tolerable: workloads and pressures that are realistically manageable.
  

“Often, people say that the job itself isn’t that exciting, but the people they work with make it. And then if you get the rest – stimulating, tolerable work and meaningful relationships – that satisfies that human need for relatedness and belonging.”

Dr Knight recommends incorporating these dimensions into performance discussions and job design.

“You can reward things like supportive networks or helping behaviours, but you also need to align the policies and procedures with quality work. It’s no good trying to create autonomy if people essentially have to come into work nine to five and be attached to their desks all day.”

Connell agrees that HR’s work should be focused on creating the right environment for effective working environments. While creative reward strategies can make a difference, he cautions that they must not be used to paper over systemic issues.

If employees are experiencing burnout, disengagement or psychosocial risks at work, superficial reward and recognition programs could do more harm than good.

“I’ve always said to my employees, ‘I don’t want to be known as the parties and cakes department. Let’s focus on things like psychological safety and wellbeing.’

“If the real issue you’re dealing with is a lack of psychological safety, then a pizza party isn’t going to help.”

4. Job rotation and variety

Adding variety to roles, which exposes employees to new skills and ideas, can also be a form of reward. 

“You could create more rotation [of roles] between different departments so you’ve got more variety of tasks,” says Dr Knight. “Or, if you’re a large organisation, you might have a headquarters elsewhere in the world. Allowing people to work remotely overseas for a while could add a new lens to the work someone is doing.”

Even without global footprints, rotating responsibilities locally can keep work fresh and build capability across teams.

5. Time spent with leadership

A leader’s time and attention can be one of the most meaningful forms of recognition, says Connell, especially when paired with development opportunities like skip-level meetings, mentoring or shadowing.

At Cultura, leaders are now required to engage directly with employee feedback and develop their own engagement action plans, which are reviewed annually by the board.

“The board will look at this information over a few years. So they can offer feedback like, ‘You’re doing well in this area, that’s much better than last year.’”

The aim, says Connell, is to build long-term relationships between employees and their managers – not rely on short-term fixes.

“The sugar hit of a bonus will go away, but relationships will stay.”

Learn how to maintain engagement and performance during times of disruption with this short course from AHRI.