I would definitely go with the positive one by providing the rewards. A reward is better than punishment. Motivating and disciplining employees are often accomplished either through punishment or positive reinforcement. First of all, the major difference between them is that punishment dissipates a tendency where as positive reinforcement strengthens behaviour. The punishment is usually used to kill bad habits and rewards are used to often to develop good business practices.
Think of it as adding something in order to increase a response. For example, the sales team if often rewarded with incentives whenever they achieve targets. The individual in the sales department often work hard and over achieve its target for this monthly incentive. The most common types of positive reinforcement are rewards, and most of us have experienced this as both the giver and receiver.
Punishment refers to adding something aversive to kill or decrease bad habits. For example, deducting an employee half day pay for being 1 hour late to work. The punishment is not liked and therefore to avoid it, he or she will stop behaving in that manner.
Research has found positive reinforcement is the most powerful way. Positive reinforcement allows employee to look and focus on the positive aspect of the situation. Punishment sometimes can also be effective but it results in extinction when it is not applied consistently. Punishment also gives birth to negative responses such as job dissatisfaction, anger, etc. which will affect the overall performance of an employee.