Electronic vouchers offer a secure, convenient and environmentally-friendly way to reward and motivate employees with savings on a variety of goods and services.

Since Boots launched its Advantage points card for consumers in 1997, major retailers have followed suit, with more progressive employers now providing electronic voucher cards as part of their motivation and incentive schemes for employees.

There are three categories of electronic voucher card: closed loop, open loop and restricted loop. Closed-loop cards are redeemable at one specific retailer, open-loop cards use the Mastercard or Visa payment networks and are accepted at multiple retailers, and restricted-loop cards can be used at a selected group of retailers.

Data for the first quarter of 2012, published by the UK Gift Card and Voucher Association in April, showed the corporate voucher market has been fuelling growth of the overall market (including consumer vouchers), with sales to organisations up 5.7% year-on-year.

Closed-loop cards grew 11.8% year-on-year in the same period, with most gains in the corporate sector, according to the GCVA.

The popularity of vouchers goes hand-in-hand with the economic downturn, with many employers keen to help their employees’ take-home pay go further, particularly in organisations unable to grant pay rises.

Less administration
One of the advantages for employers offering staff electronic vouchers is less administration. Distribution can be managed online via each employee’s card, instead of handing out thousands of paper vouchers.

The cost of delivering electronic cards is less then for paper vouchers if they are sent inactive. Because the cards have no value until they are loaded with credit, they can be sent without the expense of secure delivery.

Employees can activate their card when they receive it. If a card is lost, some providers have the facility to enable employees to report the loss and have the card blocked to prevent anyone else using it. A replacement card can then be requested.

The tax treatment of voucher cards depends on how employees receive them, whether they are a salary sacrifice benefit or used as an incentive by the employer. The way in which an employer buys vouchers can also determine how much tax and national insurance contributions they are subject to.

Also, with effect from 1 January 2012, HM Revenue and Customs rules came into effect making voucher cards liable for VAT.

Nevertheless, electronic cards remain popular with employers and employees because of the flexibility they offer. Many organisations also use cards to promote their corporate brand, adding their logo to remind staff who the benefit is from.

STATISTICS

5.7% year-on-year growth in sales on gift cards and vouchers to cirporates in Q1 2012

66.7% year-on-year increase in sales of restricted-loop cards in Q1 2012, boosted by sales to corporates

THE FACTS

What are electronic voucher cards?
Electronic voucher cards can be offered to employees as part of an incentive scheme or through a salary sacrifice arrangement. The cards can be programmed for use at a specific retailer, multiple retailers or at a selected group of retailers.

Where can employers get more information?
The UK GiftCard and Voucher Association at www.ukgcva.co.uk

Who are the main providers?
Electronic voucher cards for use at single retailers: Arcadia, Asda, Boots, B&Q, Comet, Debenhams, Fresh Travel, HMV, House of Fraser, John Lewis, Marks and Spencer, Matalan, New Look, Next, River Island, Sainsbury’s, Thomas Cook, Toys R Us and Waterstones. Cards for multiple retailers: Asperity Employee Benefits, Cottrills, Edenred (Incentives and Motivation), Grass Roots, Logbuy, Love2reward, Michael Fina, Next Jump, One4All, PrePay Solutions, P&MM Employee Benefits, Projectlink Motivation, SVM Cards and Xexec.