I like to reflect the quality of the submission from players. So, for a character background I award 300 to 500 xps depending upon how good it is, with some recognition of the word count as well.
Of course, as a DM you have to use the hooks in the character background in your campaign, as you need to properly incorporate that character in your campaign. Siblings, parents, lost loves, childhood friends and enemies all are excellent grist for the campaign mill.
GM12