The Life Coaches Blog offers some good tips on giving a compliment to an employee or co-worker:
1. Make Your Compliment Specific
2. Back Up Your Compliment
3. Ask a Question with Your Compliment
Read more here.
I would add that is is crucially important not to over compliment people. The same goes with thank you notes. Half the value in either is the spontaneity and randomness of the gesture. Once is becomes routine, both of these characteristics are lost in the action.