Buyer’s guide to motivation vouchers (November 2009)

Vouchers are a cost-effective and popular way to motivate employees, especially in tricky economic times, and the variety of formats available is widening, says Sam Barrett

Tough times generally put a squeeze on benefits spend, but when it comes to motivation vouchers, demand remains strong as employers look for ways to incentivise staff.

UK Gift Card and Voucher Association (UKGCVA) figures show sales of vouchers to employers have increased by almost 10% in the past year, although sales to consumers have fallen slightly. UKGCVA director general Andrew Johnson says: “In the past, sales have dropped off in recessions, but we have seen sales to employers continue to rise this year.

“Employers recognise that they need to keep the staff they have and cannot afford to incur costs for recruitment or suffer the impact on business if their employees are not motivated.”

Useful purpose

Vouchers serve a very useful purpose in tough times. Martin Cooper, sales and marketing manager at Love2reward, explains: “Offering a pay rise involves a long-term commitment that cannot really be taken away. Vouchers are perceived as close to cash by employees but, from the employer’s perspective, there is no long-term commitment to provide them.”

Behind the growth in voucher sales, a number of trends are emerging and some providers are noticing a shift towards vouchers that can help with employees’ everyday living costs. Kuljit Kaur, head of business development at P&MM and The Voucher Shop, says: “Employers are aware employees are finding it tough and they are looking to help them budget with things like supermarket vouchers.”

Shopping vouchers that can be put towards the cost of everyday living are sometimes made available through flexible benefits schemes, with employees often selecting these to mop up the last of their flex allowance.

Other voucher providers are seeing greater demand for vouchers for buying treats or days out, such as theatre, travel or experience vouchers. With experience days, employees get to pick a fun activity, such as a trip in a hot air balloon or a day whizzing round in a Ferrari. Nick Wake, head of marketing and communication at Grass Roots, says: “If a company is looking to make a treat-style gesture, then supermarket vouchers do not work. They do not have any trophy value.”

Travel vouchers are also popular. For example, this month P&MM is launching a scheme called U Choose that enables employers to offer a choice of trips, ranging from £100 to £5,000 in value. Nigel Cooper, managing director of P&MM Travel, says: “We have about 100 different trips in each price bracket. The employer can pick the ones they want to offer, for instance short-haul rather than long-haul, city break rather than beach holiday, and then offer them to the employee as an incentive.”

Although multi-store vouchers have been available for some time, employers are increasingly likely to favour them over single-store vouchers after several major retailers went into administration last year.

When Kingfisher Vouchers, issued by Flogistics (a wholly-owned subsidiary of the Woolworths Group), exited the market last year, participating retailers Comet and B&Q stopped accepting the vouchers.

“Some people were caught out when Woolworths went under last year and this has created nervousness about which vouchers to take,” says P&MM’s Kaur. “Confidence is growing, but employers are going for the safer names when they pick vouchers.”

Electronic cards

Another gradual trend is the shift away from paper-based vouchers to electronic gift cards. In 2008, the market was fairly evenly split between paper and plastic, but plastic is now expected to become the more popular method of distribution.

Wayne Harrington, product manager for rewards and loyalty at Capital Incentives and Motivation, says most of the new business the provider picks up is for its card product. “The shift has been slower than we expected, but with gift cards being the norm in the consumer market, we expect to see more employers move over to them.”

As well as being the norm with consumers, electronic gift cards offer a number of advantages. They can be branded with a organisation’s name and logo and, depending on the type, can be reloaded with cash, which can cut down on administration.

Love2reward’s Cooper says cards can be a more secure option for employers that usually mail out their vouchers. “Putting a paper voucher in the post is like sending cash [so] if it goes missing, it is gone,” he says. “With a gift card, it can be stopped or left to be activated when the employee receives it.”

Cooper is also a fan of the traditional paper-based product, however. “Motivation vouchers are about reward and recognition,” he says. “Giving an employee vouchers in front of their colleagues can be a very powerful way to motivate them.”

Kim Honess, senior consultant at Watson Wyatt, also believes both methods have their part to play. “Electronic gift cards are a lot neater, especially when you are paying for something, but the costs involved mean they are more expensive than paper vouchers,” she says. “When these costs come down, take-up will grow, but there will always be room for the more tangible paper product.”

While the market might be debating the benefits of the old method over the new, other ways of delivering motivation vouchers are beginning to appear. For example, vouchers that can be redeemed online by logging a unique employee number are already growing in popularity with employers.

Mobile phone technology is also being explored by voucher providers. This has become a popular way to distribute vouchers in Scandinavia and has been trialled in the UK, with mixed results.

“There are a couple of disadvantages to this form of technology,” says Johnson. “It uses MMS rather than SMS technology and you also need to know the employee’s mobile number to be able to use it.”

He does believe it could become more prevalent in the UK, however. “This form of technology could have its uses, for example, in a call centre environment, where there is a lot of motivation and rewards,” says Johnson.

Using modern technology not only cuts the burden of administration, it also brings motivation schemes bang up to date

Focus on facts:

What are motivation vouchers?
These are paper-based certificates or electronic gifts cards with a monetary value that can be given to staff to incentivise and motivate them. Vouchers can be used in stores and leisure outlets or online. They may be redeemable at a single store or at a number of retailers. Vouchers can also be used to pay for experiences, such as dinners out, theatre tickets or a trip to an amusement park.

What are their origins?
Gift vouchers, in the shape of book tokens, were introduced in the 1930s, but it was not until the 1970s that they became a motivational tool in the workplace. There was a big peak in the 1980s as more retailers recognised the demand for vouchers in the corporate arena. Employee motivation organisations also played a big role in raising the profile of vouchers, which have become a key component of most workplace recognition and reward schemes.

Where can employers get more information and advice?
The UKGCVA is the trade body for gift vouchers and cards. Its members include organisations selling vouchers, such as high-street retailers, experience companies and gift card processors. Its phone number is 08702 416445, and website

Nuts and bolts:

What are the costs involved?
Motivation vouchers are available in a variety of denominations, generally starting at £5. Discounts of up to about 5% can be achieved by bulk buying vouchers, with paper-based vouchers generating higher discounts than electronic gift cards. Voucher companies will also take into account the organisation’s credit rating when determining the discount.

What are the legal implications?
There are no legal implications associated with motivation vouchers.

What are the tax issues?
Motivation vouchers lost their tax-free status in the late 1990s and are now regarded as benefit-in-kind from a tax perspective, making them subject to tax and national insurance (NI).

In Practice:

What is the annual spend on motivation vouchers?
More than £3.2bn is spent on gift cards and vouchers each year, according to the UKGCVA. Sales to employers make up about 45% of this, of which two-thirds – about £1bn – is for motivation vouchers.

Which voucher providers have the biggest market share?
Although the UKGCVA collates information from its members, it does not disclose market share information. Also, with voucher sales spread between the high-street stores and agencies selling vouchers on their behalf, determining who is the king of the motivation voucher is not easy.

However, some of the biggest players in the market include Capital Incentives and Motivation, Debenhams, The Gift Voucher Shop, Grass Roots, House of Fraser, John Lewis, Love2reward, P&MM, Projectlink Motivation, and Sodexo.

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