Buyer’s guide to motivation vouchers 2011

Focus on facts

What are motivation vouchers?

These are paper-based or electronic gift cards with a monetary value, which employers can use to incentivise staff. Shopping vouchers can be redeemed at a single store or at multiple retailers. Employers can also offer travel or experience vouchers.

What are their origins?

Gift vouchers were first introduced in the 1930s in the form of book tokens. It was not until the 1970s that they became a motivational tool in the workplace. They reached a peak in the 1980s when Capital Bonds, the first multi-store gift voucher to market, was launched.

Where can employers get more information and advice?

The UK Gift Card Voucher Association (UKGCVA) is the trade body for gift cards and vouchers. See its website or telephone 08702 416445.

More information can be found on the Employee Benefits 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 5% are available when vouchers are bought in bulk, with paperbased vouchers generating higher discounts than electronic gift cards.

What are the legal implications?

There are no legal implications associated with motivation vouchers.

What are the tax issues?

The employer running the programme has to pay the national insurance, but the income tax can either be paid by the organisation or passed to the recipient. There are some tax breaks for long-service awards, loyalty awards and suggestion schemes.

In practice

What is the annual spend on motivation vouchers?

The UK Gift Card and Voucher Association (UKGCVA) quotes the gift voucher, gift card and stored value solutions market in the UK as being worth about £4 billion. Sales to employers make up about 45% of this, some £1.6 billion, of which motivation vouchers account for two-thirds.

Which motivation voucher providers have increased their market share the most?

The UKGCVA does not disclose market share information. As voucher sales are spread between the high-street stores and agencies selling vouchers on their behalf, it is not easy to determine who has increased market share in the industry.

Which voucher providers have the biggest market share?

Some of the biggest players are: Asperity Employee Benefits, Boots, Edenred, Grass Roots, LogBuy, Love2reward, Next Jump, One4all, P&MM, Personal Group, Projectlink Motivation, Sodexo, SVM and The Voucher Shop, as well as large retailers such as B&Q, Comet, Debenhams, HMV, House of Fraser, John Lewis, Marks and Spencer, New Look, Sainsbury’s, Thorntons, Tesco and Waitrose.

Motivation awards, in the form of paper vouchers or pre-paid cards, are a popular, cost-effective way for employers to reward staff for a variety of achievements, says Tom Washington

While salary increases remain scarce and bonuses even more so in some sectors, reward managers must use other means to keep staff motivated. Sometimes simply saying thank you will not suffice, but by offering a retail voucher or gift card, employers can ensure employees feel appreciated and are receiving a tangible reward.

According to the UK Gift Card and Voucher Association (UKGCVA), the UK’s gift card and voucher market saw a year-on-year sales increase of 14.3% in the second quarter of 2011. Andrew Johnson, director general at the UKGCVA, says about 45% of gift cards and vouchers bought in the UK are acquired for commercial use, largely for incentive rewards.

“Gift cards and vouchers continue to be one of the most popular corporate gift choices on the market,” he says.
Employers can use motivation vouchers to incentivise staff in various ways. They can be used to reward loyalty or long service, attaining targets, special performance or just to say thank you for a job well done.

While cash incentives, such as bonuses, often end up as part of an employee’s overall salary at the end of the month and can easily be sucked up into everyday household expenditure, motivation vouchers are an instant reward that are more likely to be spent on treats or can be put towards larger purchases. This can help to boost employee engagement immediately.

More cost-effective

Motivation vouchers also offer organisations flexibility, ease of administration and delivery, and can be more cost-effective, putting no permanent extra cost on the payroll.

The movement from cash to non-cash reward is a growing feature of the industry in these current harsh economic times, says Declan Byrne, managing director UK at One4all Rewards. “Non-payroll rewards are becoming more popular to avoid building in pay inflation,” he says.

Vouchers can be paper-based or in the form of an electronic gift card that can be loaded with a monetary value.

Standard shopping vouchers can be spent on a wide range of everyday and treat items at retailers such as Comet, Asda, Debenhams and Argos. Some vouchers are limited to single-store purchases, while others are valid at multiple outlets.

Electronic gift cards come in three forms. Open-loop cards use payment networks such as Visa or MasterCard and are accepted at multiple retailers, closed-loop cards are redeemable at one specific retailer, and restricted-use cards can be used at a select group of retailers.

John Sylvester, executive director at P&MM Motivation, says that although the market is moving rapidly from paper vouchers to electronic gift cards, the latter is still in its infancy, with technology companies such as Amazon and Comet leading this development. A poll conducted by The Voucher Shop in August 2011 found that despite the dominance of plastic gift cards, 45% of employers surveyed still requested paper vouchers.

Tangible reward

Paper vouchers enable employers to give staff a tangible reward at the point where it is due, for example if they have performed well or given good customer service. These can also be presented publicly in front of their peers to reinforce their achievement.

Electronic cards offer many advantages over their paper-based counterparts. For example, they can be branded with an organisation’s name and logo, and can be reloaded and reused, which can reduce administration.

Tessa Unsworth, product and solution director at PrePay Solutions, says: “Multi-retailer vouchers and salary sacrifice schemes with additional savings for everyday spend are proving popular. For example, £100 salary sacrifice can enable an employee to receive £110 of Sainsbury’s vouchers.”

Staff can also be awarded gift cards with no assigned value, which their employer can activate and load with value remotely once they have been handed out. Sending out gift cards without an assigned value can also help to guard against theft.

Kuljit Kaur, head of business at The Voucher Shop, says that, unfortunately, the growth in the use of vouchers and cards has attracted fraudsters, so a key benefit of card-based systems is the level of security these offer.

“Automated remote activation and re-loadable functionality are key developments,” she says. “Other advantages are the reduced costs and improved speed of delivery, while the ability to reload existing cards further facilitates convenience. All of these factors reduce the impact of fraud and are therefore valuable benefits to employers.”

Online account

Some electronic vouchers can be linked to an online reward account, which enables employees to check their balance whenever they like. They can then choose whether to spend their credit immediately or save it to spend on an item of greater value at a later date.

“The growth in retailer cards is key,” says P&MM’s Sylvester. “These facilitate the delivery of value to employees and also mean that organisations can reward staff quickly and instantly by loading a card that the employee has previously been sent.”

With online schemes and electronic gift cards that are sent out without an assigned value, customers can also benefit from avoiding secure delivery charges, which are required for paper gift vouchers or pre-loaded gift cards because these are deemed ‘live’ currency.

Other types of motivation voucher that are available include travel, theatre or restaurant vouchers. Experience days, such as a trip to a spa or skydiving, are also popular.

David Pearson, director at Filmology, has seen an increase in the number of employers offering cinema ticket vouchers to employees as a form of motivation award. “This is not only a convenient and cost-effective reward, but it carries wide appeal and accessibility to all employees, regardless of age, sex or marital status, making it a flexible incentive.”

From an employee’s point of view, the more practical the reward, the better, particularly in the current economic climate, when making money go further is key for many. One4all Rewards’ Byrne says: “The recipient is looking for more useful motivation rewards. Abstract rewards, such as a day skydiving, are losing out to more practical rewards, such as multi-store gift cards.”

Sylvester adds: “Giving staff the opportunity to save money on essential purchases, such as a weekly supermarket shop, means that the incentive is tangible and makes a difference to their everyday expenditure.”

Smartphone revolution

Looking to the future, Pearson says the mass take-up of smartphones will revolutionise the delivery of gift cards and vouchers within motivational programmes.

“With regard to cinema tickets, the technology is already available to send mobile vouchers with barcodes whereby the recipient can have the screen of their mobile phone scanned at the box office,” he says.

“I predict that this format for delivering employee motivational gift cards and vouchers will become the norm as the adoption of smartphones continues to boom.”

The move to electronic cards is also leading some providers to explore next-generation vouchers that are supported by mobile technology, says Byrne. “The One4all smartphone application is an example of mobile fusing with card to bring greater convenience to the recipient,” he explains.

This type of voucher has an additional element of security. Vouchers delivered to mobile handsets are often not susceptible to spam filters or plug-ins to download, compared with vouchers that are emailed to staff.

With Christmas on the horizon, there is no better time for employers to use motivation vouchers, says Colin Hodgson, sales director at Edenred. “In the current economic climate and with VAT increases and tax changes in full force, there is pressure on disposable incomes,” he says. “Gift cards or vouchers can be put towards the Christmas shopping, and save money for employees.

“Splitting the reward process, with part before and part after Christmas with a gift and motivational message can make an immediate change to performance.”

But at any time of the year, the use of a motivational voucher rather than cash is a reward all employers will respond to.

Sign up to our newsletters

Receive news and guidance on a range of HR issues direct to your inbox

OptOut
This field is for validation purposes and should be left unchanged.

Read more buyer’s guides

Read more articles on motivation vouchers