Acknowledging long service can be a cornerstone of reward practice, but changing demographics and career paths has altered the nature of schemes, says Debbie Lovewell
Long service awards are designed to recognise an employee’s loyalty and service to an organisation. Traditionally, these have often taken the form of a gold watch or a carriage clock presented after 25 years’ service, however, changing workforce demographics and the decline of a job for life are having an effect on how schemes are structured and what is offered to employees.
Now, employers commonly reward staff for their service after much shorter intervals, for example, starting after two or five years’ service. The frequency will depend on organisational culture, but a typical scenario is for awards to be made at regular intervals, for example, after five, 10, 20 and 25 years’ service. Sheila Sheldon, operations director at gift specialist Michael C Fina, says: “Little and often has far more impact. What’s more beneficial is rewarding from five years.”
Employers also have far more choice around the gifts they can offer to staff in recognition of their service. As well as the traditional approach of offering employees a gift selected by the organisation, there are now a number of schemes on the market that enable employers to give staff a degree of choice about what they receive. These typically take the form of gift vouchers or reward brochures from which staff can select what they want up to a designated value. These schemes are also often available online for employees to make their selections. Organisations may choose to brand awards with their name and logo in order to reinforce their link to staff.
Joyce Anderson, vice president of European sales at employee recognition specialist OC Tanner, says: “It’s not just about being there for so many years, but it’s about [employees’] commitment, dedication and performance.”
Alternatively, employers may prefer to make cash awards, although these do not attract the tax breaks that are available for some non-cash awards which are entirely exempt from tax provided they are made to mark at least 20 years’ service, no other long service award has been made within the previous 10 years, and the award is worth no more than £50 per year of service.
Non-cash awards that meet the first two criteria, but are worth more than £50 per year of service are partially exempt from tax and will only incur class 1A national insurance contributions (NICs), which must be reported under form P11D. Long service awards made in cash, however, are only exempt from employers’ class 1A NICs.
Another issue to consider in relation to long service awards is the requirements of the age discrimination regulations, which came into force last October. Although the Employment Equality (Age) Regulations 2006 state that any contractual benefit which increases with length of service is potentially age discriminatory, there are a number of exemptions that mean most long service schemes can be justified as non-discriminatory.
Any awards relating to less than five years’ service are exempt under the regulations. Awards relating to periods of service of more than five years are also exempt if employers can demonstrate the benefit is intended to reward loyalty, encourage motivation or to recognise the experience of the employee. In addition, employers must apply service criteria equally to all staff and ensure they are rewarded at regular intervals, with schemes being based on a realistic length of service for the industry. But employers must be able to produce supporting evidence to demonstrate they have considered their policies.
Product file: long service awards
- What are long service awards?
Long service awards are designed to recognise an employee’s loyalty and commitment. How often these are awarded is at an employer’s discretion. Awards can either be made as cash or non-cash gifts, the latter of which may take the form of vouchers, or an online or paper brochure from which staff can select a gift.
- Where can employers get more information?
More information about the tax status of long service awards can be found at www.hmrc.gov.uk/employers/ebik/ebik2/long-service-awards.htm†
- Who are the main providers?
• Capital Incentives
• Corporate Rewards
• Grass Roots
• Michael C Fina
• OC Tanner
• Projectlink Motivation
• Virgin Experience Days