For Your Benefit

Gift Cards Cook Holiday Turkey’s Goose as Employee Incentive

Noncash rewards are on the rise, but there are legal and practical considerations to keep in mind.

By Andie Burjek

C

ash isn’t always king. Employees can feel the love when they receive noncash rewards from their employer.

The 2017 “Trends Study” from the Incentive Research Foundation found that 70 percent of U.S. businesses used gift card programs and 60 percent gave merchandise as some form of reward to their employees. The report also found that U.S. businesses spent $24 billion annually on gift cards.

Noncash rewards such as gift cards help keep employees connected to the greater whole of the organization, according to Jeremy Tolley, chief people officer at CareHere LLC, a Nashville-based health care and wellness provider. Its noncash rewards include sending its nurses a card during National Nurses Week or giving employees an Amazon gift card with a note, “Buy yourself a book! You deserve to curl up, relax and read a book.”

Jeremy Tolley

Such noncash rewards work well with CareHere’s widely dispersed employee population. “[We’ll] have a pocket of three or four employees in a rural location,” Tolley said.

An extra $25 in a paycheck might not be something they notice, especially with direct deposit, he said. If a company wants to reward an employee, a gift card can make that recognition more memorable.

“It makes the thank-you or the occasion last a little longer because they have that in their purse or pocket, and they can take it and cash it in later,” Tolley said.

Such rewards come with legal guidelines. Employers must keep IRS rules in mind and remember that de minimis items — something like a fringe benefit, for example, whose value is too small to be considered legally — are not taxed. However, the IRS does not define what value is considered de miminis.

“It’s important [that] you have a good relationship with your finance department and make sure that they are aware of the taxation fees, because you don’t want to have a problem and get in trouble with that,” said Paula Harvey, vice president of human resources and safety at Schulte Building Systems Inc., a construction company in Hockley, Texas. “Any time I’m thinking about these things, my CFO and I talk about it.”

An extra $25 in a paycheck might not be noticed, especially with direct deposit. A gift card can make that recognition more memorable.

Experts consider $25 or less to be a safe amount, she added. Years ago, Schulte began to offer $25 grocery store gift cards during the holidays when there were complaints about the annual Christmas ham and Thanksgiving turkey. A gift card allowed employees to buy what they needed rather than be limited to one item.

Vendors have ventured into the gift-card space and created a system in which employers don’t have to deal with taxation issues, Harvey added — one reason for their popularity over the years.

Buffalo Wild Wings launched a corporate gift card portal in 2014 to allow organizations to buy cards in bulk. They saw it as an opportunity to remain competitive as more large retailers entered the business-to-business incentive space, said Kim Sobasky, director of gift cards at the Minneapolis-based company.

“To be brand-forward and competitive, we wanted to get as easy and simple for companies to purchase directly from us,” she said.

Although legal considerations are important, other guidelines can help companies use gift cards more effectively.

Gift cards shouldn’t be used to recognize good safety records, Harvey said. She’s seen companies reward employees who went a year without a safety incident, prompting some employees to take advantage of the gift. “[Some employees] want to get the reward and then don’t report when they get hurt,” she said.

Offering a gift card to a place an employee does not like may be seen as a disincentive, CareHere’s Tolley said. Many gift cards go unused, he added, because employees lose them or don’t patronize that store or restaurant. People seem to be happy with something more general, like Amazon.

Paula Harvey

“My No. 1 rule when someone proposes a gift card incentive is, do we know this is a gift card this person will have a use for?” Tolley said.