The advantages for employers of giving staff gift vouchers

Employers are increasingly using gift cards or gift vouchers as incentive tools. However, what makes them more desirable than the more conventional incentive of a wage increase?

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The market for gift cards has expanded significantly in recent years. Although they have been around for more than 70 years, the UK Gift Card and Voucher Association (UKGCVA), a trade association, reports that since 2003, yearly growth has been a consistent 5% to 15%.

DG Andrew Johnson reports that the market is currently valued at £4 billion, with business-to-business accounting for 40% of that amount.

Gift certificates, often known as incentive or motivation vouchers, originated as paper tokens given to employees to spend anyway they pleased at retail or entertainment establishments, or even for vacation days.

Although many employees now receive vouchers through flexible benefits or voluntary benefits programs, employers often distribute them through incentive schemes.

In addition to the still-popular paper vouchers, there are also electronic gift cards, e-vouchers, voucher checks, and even voucher codes that may be sent by text message. Another option are debit cards that are pre-paid.

Regardless of type, the increasing usage of vouchers indicates that businesses believe them to be a useful tool for inspiring and energizing employees by offering a reward with real monetary value and a hint of “treat” factor.

“Companies like gift vouchers because of the convenience and choice – they’re leaving the final decision to the individual, but still giving them an informed choice,” says Andrew Johnson, director general of The UKGCVA.

Surely, though, cash is a greater incentive if a company truly wishes to inspire staff members? Okay, so perhaps not.

“Personal bills swallow up cash,” Johnson claims. Although a voucher is usually used for a reward, it also creates a memory for the recipient. They consequently associate that treat favorably with their employer.

Enhanced effectiveness

P&MM cites a study conducted by US market research company Wirthlin, which discovered that, among more than 1,000 employees surveyed, monetary incentives had no effect. Only 9% of respondents recalled using the money to purchase a special treat for themselves, while 29% of respondents claimed they used it to pay obligations.

According to John Sylvester, executive director of P&MM, “the idea behind motivation theory is that there needs to be a close relationship between the employee behavior and the incentive scheme, as well as the reward’s branding.”

This is done in order for the worker to mentally believe, “I’ll get that reward again if I perform better,” and to explicitly correlate the reward with the work.

According to a different research conducted by the International Society of Performance Improvement, team incentives may boost performance by up to 44%, while tangible prizes can improve employee performance by an average of 22%.

Aside from being a more effective incentive, gift cards provide other benefits.

According to Johnson, “an employer can align itself with a specific brand by implementing a voucher scheme.”

Employers may now provide their employees with coupons for a wide range of businesses, from high-end high street stores to ethical programs that promote eco-friendly items.

Employers can also save money by using income tax and NIC voucher programs. If the voucher is not cash, the employer only needs to pay income tax and national insurance payments on the purchase price, not the voucher’s value to the recipient.

Therefore, the amount due for tax and NICs is £95 if, for instance, a business offers an employee a £100 gift certificate for which it only spent £95.

For employers who purchase in bulk, voucher suppliers can offer substantial savings.

Employers at House of Fraser are eligible for discounts that increase based on the amount of vouchers purchased; the discounts start at 2.5% for vouchers valued between £1,000 and £4,999 and go up to a staggering 10% for vouchers valued at £15,000 or more.

While multi-outlet suppliers might provide substantial savings as well, single sellers are typically more forthcoming about their discounts.

“Employes have to order a minimum of £1,000 to get a discount, but the size of the saving tapers so that you get a higher rate as the order value climbs,” says Martin Cooper, director of Love2reward.

Of course, using the vouchers allows employees to save money that they couldn’t have with cash.

Perhaps the most significant benefit of all that a successful voucher program provides is a contented and driven staff.