I don't use the XP system at all anymore. I understand that XP was supposed to encourage roleplaying and other desired player behaviors, but in practice it just doesn't work out that way (in my opinion and experience). I see it tending to promote competition between players rather than promoting group play, ends up with people leveling at different times and can lead to a level disparity within the group, and is just one more thing that I and players have to keep track of (for minimal benefit). So, I just scrapped it entirely. Instead, I'll level up characters based on sessions or adventures. Achieving a new level is an individual and group reward for working together and completing an adventure, and everybody progresses equally (making my job easier). Typically, for an average length adventure, I'll use one adventure to level up from 1 to 2, 2 adventures for level 2 to 3, and then about 3 adventures per level after that. If it's a really long or involved adventure, I'll scale accordingly (perhaps considering one large adventure equal to 2 or 3 adventures).
For individual rewards, I do like Rel and give out extra Action Points for good roleplaying or completing quests, subplots, etc. I sometimes also give out small, low powered, one use magic items or resources as rewards. And I'll also give out Action Points to the group for good teamwork and cooperative play.
Speaking of Action Points, I kept encountering a problem with players unwilling to use them, and instead hording them for important/crucial moments. To encourage the players to use them, I changed a characters alotment of Action Points to a per-session model (instead of per level). This way my players know that they will have Action Points available again for the next session. I also give out a bonus Action Point (for use during the next session) if a player uses up all of their alotment of Action Points for a game session. Also, characters always have a minimum of one per every two encounters (combat and non-combat) even if they use up their per-session alotment, so they don't have to worry about using them up and not having any for a crucial fight. I
want my players to use Action Points...a lot...so I've set up a system to encourage that.
So, by changing the way Action Points are alotted and earned, giving Action Points as a reward encourages roleplaying and teamwork, creativity, and let's players do awesomely cool things (which those silly players seem to like

). Win-Win.
