Own-product benefits are a big motivator for staff

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• Many organisations offer their own products or services to staff free of charge or at a discount, with many such employers to be found in the retail sector.
• These can be offered as core benefits, as well as through incentive and recognition schemes.
• The levels of employee engagement and motivation inspired by these perks will depend on the size and significance of the benefit.
• Such perks also enable the organisation to align its benefits package with its brand and core business ethos

Case study: Tasty bonus for McDonald’s employees

McDonald’s gives its 85,000 UK staff an employee discount card as soon as they begin work with the chain.

The card offers staff five standard discounts, including a medium extra value meal for £2.99, a breakfast extra value meal for £1.99, or a toasted deli sandwich meal for £2.99. There is a limit of two purchases per visit. Staff are also offered free meals while they are working.

Neal Blackshire, benefits and compensation manager at McDonald’s, says: “When we put it in place many years ago, it was done to try to formalise something that had happened in a number of restaurants informally. It was not intended to drive motivation, it was the right thing to do in our relationship with our staff.”

Case study: Salary sacrifice buoys Severn Trent Water staff

Severn Trent Water introduced its SmartWater benefit in January 2010, which enables employees to pay their water bill through a salary sacrifice arrangement.

The company bills about 3.5 million customers throughout the Midlands, a number of whom are its own employees. In the first year of SmartWater, 1,500 of the firm’s 6,000 employees took up the benefit. In 2011, 1,650 staff are participating.

Chris Blakesley, pay and benefits manager at Severn Trent Water, says: “It has certainly enhanced employee engagement. Feedback has been extremely positive as we have often been challenged with regard to what benefits employees could get in relation to the services provided by the organisation. Free water is not a possibility in the
regulated environment we operate in, but SmartWater is probably the next best thing.

Case study: Employee savings check out at Asda

Asda offers its staff a 10% discount card after three months service. The card can be used in any Asda store in the UK and in any global Walmart, Asda’s parent company. Using the card, Asda’s 175,000 staff save over £60 million a year.

When Asda launched an online voluntary benefits scheme in 2010, it also included discounts on its own services, such as insurance, access to opticians, flower delivery and car breakdown cover.

Angela Woodward, reward manager at Asda, says: “By offering staff discounts throughout the business, they become engaged and can also provide insight into the company brand.”

Discounts on an employer’s own products and services can be a powerful motivator to its employees and helps to reinforce the organisation’s brand value, says Jennifer Paterson

Many organisations use discounts on their own products and services – whether it be groceries, flights, mobiles phones or clothes – as part of their employees’ benefits package. For instance, BT offers its own broadband to staff via a salary sacrifice arrangement, Sainsbury’s gives employees a 10% discount on their shopping, and Transport for London allows its staff free travel.

Paul Bartlett, managing director at Grass Roots, says: “If employers actually engage employees in the service they are offering, they can understand the product from a customer’s perspective, can see the immediate benefit of working for that [organisation], and get a tangible discount on a product they would otherwise have to purchase.”

Mike Ashton, senior consultant at Towers Watson, adds: “If an employee uses their company’s product and thinks it’s great, they will talk about that success story with others. More importantly, if they have an interaction with customers, they will be more enthusiastic about a product they use themselves.”

However, not all employers will offer tangible products or services that can be passed on to employees. Wayne Harrington, product manager for reward and loyalty at Edenred, says: “This is only really relevant to certain sectors because not all organisations offer a consumer product. But if it is done right, it engages employees with the organisation. They then believe in that product and can talk about it with first-hand experience.”

Employers should also bear in mind that this way of delivering benefits can backfire if they remove a perk that has been in place for many years that staff have come to expect. For example, when British Airways removed free flights for employees’ families in March 2010, it resulted in strike action. John Sylvester, director of P&MM’s motivation division, says: “One has to question to what extent it is a motivator. These things, although they are specific to a business, once they are provided, are seen as a right rather than a privilege. Withdrawing them or positioning them as an additional layer of benefit can be quite difficult.”

Engagement and motivation tool

For example, if supermarkets and other retailers have historically offered discounts, then the perk will be intrinsically expected rather than valued as an engagement and motivation tool. Dr Cary Cooper, professor of organisational psychology and health at Lancaster University, says: “Quite a lot depends on whether there has been a history of staff being able to get these discounts and, if they have, it becomes an expectation.”

On the other hand, if a perk is not expected, the impact on engagement and motivation will be more evident, especially if the benefit enhances the employee’s perception of their employer. Cooper adds: “For example, an employer might pay 50% of private healthcare for staff if they buy its products and get their families to buy its products. This would be something where the employer knows there is a real need, though it is not expected.”

The level of employee engagement and motivation also depends on the size and significance of what is being offered. Neil Conway, senior lecturer of organisational psychology at Birkbeck, University of London, explains: “If it is something that is really trivial, like 5% off shopping, it will be less motivating.”

Giving employees ownership of shares in their organisation can help to boost motivation and reinforce brand identity. This can be done through a sharesave scheme, share incentive plan (Sip) or company share option plan (Csop).

Linking an organisation’s benefits package with its brand identity is a growing trend, says David Bray, managing director at Active Consulting. “It is quite a powerful tool for reinforcing an organisation’s ethos or core values,” he says. “If it is done correctly, it should result in heightening the level of employee engagement within the business. Brand values are forming part of the business strategy for many organisations, and involvement by HR helps take the benefits package to its ultimate goal: staff retention, engagement and raising performance levels.”

P&MM’s Sylvester adds: “It provides a very heavy incentive to live, breathe and experience the brand that employees are working with. It has clear advantages for any organisation in terms of knowledge about the brand, experience of it, and personalising any customer interaction.”

Landmark case for tax-efficient perks

Another advantage for employers is that they may be able to offer their own products or services to staff on a tax-efficient basis. This results from the landmark 1992 High Court case Pepper (HM Inspector of Taxes) versus Hart (a teacher at Malvern College), which saw John Hart and nine other teachers, who benefited from a concessionary fee scheme that allowed their children to be educated at the college for one-fifth of the fees of other pupils, dispute the amount of tax they had to pay on the perk. Attempting to tax the benefit, the Inland Revenue (now HM Revenue and Customs) argued that the tax on the benefit should be an average of the cost of providing it. Hart and his colleagues argued that it was a marginal cost and, on appeal, the House of Lords ruled in their favour.

Grass Roots’ Bartlett says: “Energy companies are now arguing successfully on the same basis, that since they are providing water or electricity to the households anyway, the incremental cost of putting their own employees onto that service is nil or very small. Therefore, the benefit-in-kind tax charge to the employee is based on that. So they can effectively offer it tax-free, like a salary sacrifice arrangement.”

As well as including their own products and services in a benefits package, many employers are also incorporating them into incentive and reward programmes. However, offering such benefits in this way may limit their motivational impact compared with offering them more widely as a core benefit. Birkbeck’s Conway says: “This kind of reward, because it is not tied to any particular kind of employee behaviour in terms of the task they do as part of their jobs, it would have a very strong incentive effect.”

These benefits also help to attract new employees. For example, discounts on broadband or free mobile phones may attract new recruits to work for telecommunication firms. Conway adds: “Employees from outside the organisation might think those kinds of perk are desirable when they are thinking about taking a position there, and employees within that organisation will see it as a perk, something that is part of their employment proposition which adds to the portfolio of things they get from the organisation.

“It will make staff feel warmer about working at the organisation and possibly make them more inclined to stay.”

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