By Bryan Van Noy, cofounder of Sonic Boom Wellness

When it comes to wellness incentives, cash is quite common. It’s commonly abused, commonly ineffective, and oh-so-commonly unoriginal. The jury may still be out on the superiority of carrots over sticks, but don’t fall victim to this obviously rotten carrot. Just because employees request cash above all other forms of incentives doesn’t mean employers should succumb. There are better (and not so uncommon) alternatives. Here are six reasons why you shouldn't use cash as a wellness incentive.

1. It’s fungible

Money is inherently fungible, meaning that if you give an employee $100 for losing weight, those five new $20 bills automatically and seamlessly mix with the bills already living in her wallet—and she soon (if not immediately) forgets how she got that $100 in the first place. Whether it came from a standard paycheck, a meaningful health achievement, or a slot machine, cash is cash (is cash). And worse—there’s nothing preventing the employee from buying beer and Twinkies with her hard-earned “wellness” dollars.

2. It has no trophy value

Tangible, noncash awards have “trophy value.” Cash does not. Trophy value means that the reward serves as an emblem of achievement … a constant reminder of success. The employee using a water bottle every day, which she won by engaging in the wellness program, is reminded with each sip how she earned the prize. These kinds of low-cost, tangible items also help promote the wellness program and have higher perceived value for recipients. It’s a win-win-win for employee motivation, engagement rates, and your budget.

3. It’s addicting (like a drug)

One of the biggest problems with financial incentives, especially cash, is that they’re subject to dose tolerance. In other words, if you had to incentivize me (read: pay me) $250 to take a health assessment this year (which I didn’t want to do, otherwise such an incentive wouldn’t be necessary), next year I’m going to expect $275 (or more) for the same effort. You have to keep upping the “dose” because money, much like any other drug, is a drug unto which we build up a tolerance.

4. It’s indistinguishable from ordinary income

Cash incentives must be reported as ordinary income (and are taxed as such). It’s no surprise, then, that employees view cash incentives as compensation (as does the IRS). What’s more, employees often perceive these one-time cash incentives as a permanent raise. Removal of the cash incentive ends up being viewed as a pay cut—met with hostility and resentment.

5. It’s unimaginative ( … did we say, “common”?)

Come on, employers—get creative! The best news for employers of any budget is that the most powerful rewards are recognition-based, not financial. Think about it. After you lose 10 pounds, hearing someone say, “Wow! You look fantastic. Have you lost some weight?” is more gratifying and inspirational than someone from HR giving you a $50 gift card for doing so. Peer-to-peer recognition and the “social” rewards that result from interpersonal interaction and influence drives more success than any form of financial incentive.

In fact, up to 60 percent of our decision to adopt a new health habit is under the direct control or influence of the people who surround us. So, if we’re trying to figure out why someone exercised today, it usually has less to do with her personal motivation or ability (or someone paying her to do so) and more to do with the habits of those who surround her (e.g., a workout buddy, a spouse…).

6. It’s coercive and manipulative

For employers hoping to change employee health habits (permanently) and produce a positive return on investment, the misapplication of aggressive cash rewards is often a disappointment. Nothing makes employees feel more manipulated than a hefty cash “bribe” that coerces them into an activity they wouldn’t do of their own volition.

Our experience has shown that incentives are effective at changing short-term or one-time behaviors, but not at changing long-term health habits. For example, someone may give up smoking under the influence of a cash reward.

If you remove the force of the cash reward and that old habit resurfaces, you weren’t actually successful at changing the long-term habit. While financial rewards have proven to be quite effective at changing behaviors (e.g., quitting smoking for the interim), they are quite poor at changing habits (e.g., quitting smoking for life).

So, which incentives actually work?

This is a loaded question that depends on your employee demographics, company culture, compensation ranges, and types of wellness activities in place. But here’s a general recap that applies to pretty much all groups:

One step up from cash is gift cards, albeit an imperceptibly small step. Gift cards are tantamount to cash in that they have a true cash value, usually printed right on the card (and may often be redeemed for cash). The only advantage to gift cards over cash is that there is some sense of trophy value. These cards can be branded, and every time the person pulls it out they’ll see a reminder of a healthy accomplishment (until it’s spent, of course).

But the best rewards instill a sense of trophy value, have high perceived value (without a high cost), and stem from social recognition rather than financial recognition. Employees want to feel recognized and prefer their recognition to be in the form of permanent reminders of their achievements. Avoid costly bribes that fizzle away after a single “healthy” behavior. Focus instead on celebrating employees’ accomplishments and fostering a culture of improved health habits.