Nowadays, in addition to human capacities and knowledge, more and more emphasis is put on the interests and motivation of employees. Therefore, it is extremely important to know how to motivate employees and how to choose the right motivators. Employers can use the reward system to further motivate their employees and thus contribute to greater success of their businesses. Also, given the right choice of reward system, employees will be more successful, engaged and loyal to the company. In addition, companies need to pay more attention to the reward system in order to strengthen market competitiveness, as well as attract and retain employees. Small and medium enterprises have a less formal reward system and as such managers can form compensation packages on their own and therefore attract, motivate and keep their employees. Therefore, the reward system depends on how much importance the employer gives to the role of compensation. Also, competition has a strong influence on the reward system. A less formalized reward system, or greater personalization, allows employees to be more motivated and engaged. The aim of this thesis is to investigate the role of the reward system in motivating employees in small and medium enterprises. As part of the proposed thesis, it was investigated how the reward system is designed in individual companies and what motivates employees. For the purposes of this thesis, data was collected by primary and secondary research. Empirical online research with a questionnaire was conducted on a sample of 146 employees in small and medium enterprises. The questionnaire was used to collect data on how the reward system is designed in individual companies and on the attitudes of employees about which elements in the reward system can increase their level of motivation. The insights gained during the writing of the thesis can help SME managers to identify reward elements that motivate employees.