Buyer’s guide to motivation vouchers 2014

More than half (54%) of the UK’s £5 billion gift card and voucher market is business-to-business (B2B), and much of that is spent on employee rewards, according to research published by the UK Gift Card and Voucher Association (UKGCVA) in May 2014.
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Its research also found that 63% of providers in the gift card and voucher market saw double-digit growth in sales during the first quarter of this year.

The market is certainly continuing to grow. B2B gift card and voucher sales rose in the first quarter of 2014, with direct sales up nearly 6% and online sales up nearly 5%.

Technological capabilities

The card and voucher’s technological capabilities have also grown, from book tokens in the 1930s, paper-based, multi-store vouchers in the 1970s to electronic cards and vouchers in recent years. In the 1990s, they entered the workplace as motivation, recognition and reward tools.

Today, electronic cards and vouchers can be topped up multiple times, remotely and with any value, typically starting at £5. The cards can then be spent in-store or online by their recipients, making the reward process much more convenient.

The process is convenient for employers, too. They can choose one of three formats: pre-denominated paper vouchers; gift cards, which can be loaded once or multiple times; and e-cards, which are delivered electronically and can be of any value.

The latter is the most cost-effective way to deliver motivation vouchers to staff because the employer pays less than the face value of the reward, then benefits from the fact that there are no delivery costs involved because the e-card is sent via email.

Alongside ease of administration and delivery, motivation vouchers can also be cost-effective thanks to bulk-purchasing discounts, typically between 2.5% and 7.5%. Employers can choose to take the saving or pass it on to the employee in the form of a greater reward.

Electronic vouchers

Electronic cards and vouchers come in three forms: open-loop cards, which use payment networks such as Visa or MasterCard and are accepted at multiple retailers; closed-loop cards, which are redeemable at one specific retailer; and restricted-use cards, which can be used at selected retailers.

To ensure this type of reward is truly motivational, it is important that employers match their workforce demographic by offering brands that meet the desires and aspirations of recipients. If an employer can tailor the type of voucher it offers its employees, it can show it is truly singling out and celebrating individual employees.

On the other hand, the wide range of vouchers in the market means employers can avoid any claims of discrimination relating to gender or age.

Options include retail spending, travel and restaurant vouchers, and experience days, such as spa days, trips to the theatre or adventurous activities. These are popular because of their flexibility, but also because the recipient can include a friend or family member.

Employers can also brand the vouchers with the organisation’s name and logo, positioning the reward as part of a wider benefits programme.

Mobile and electronic devices

A key development in the motivation card and voucher market is the use of mobile devices, smartphones and tablets. For instance, rewards can be sent as e-codes via online devices and then redeemed straight from the device in-store.

The UK’s first virtual gift card, which was launched in July 2014, gives motivation cards and vouchers a global reach. Backed by MasterCard, the Giftsplease card can be sent anywhere in the world to anyone with an email address, and spent at any online retailer that accepts the credit card.

The shift from paper to card to electronic delivery continues to gather momentum, as employers and providers adopt technologies that deliver greater efficiencies and cost benefits.

While many employees still prefer traditional paper-based vouchers, the benefits of electronic and virtual gift cards are significant, including reduced fulfilment times, associated costs and the added impact of receiving an instant reward.

The facts 

What are motivation vouchers?

Motivation vouchers are paper-based or electronic cards or vouchers, which can be loaded or topped up with a monetary value. These can be spent at a single store or multiple retailers.

What are their origins?

The first vouchers date back to the 1930s, when book tokens made their debut. The most significant developments began to take shape when retailers began to offer multi-store vouchers in the 1970s.

Where can employers get more information?

The UK Gift Card and Voucher Association at www.ukgcva.co.uk or on 08702 416445.

What are the costs involved?

Vouchers are available in various denominations, often starting at £5. Bulk-purchasing discounts of between 2.5% and 7.5% are typical, so the employer can choose to take the saving or pass it on to the employee in the form of a greater value of reward.

Any legal implications?

There are no legal implications.

What are the tax issues?

Vouchers and gift cards are treated as benefits in kind, so tax and national insurance (NI) are liable. The liability is due only on the actual cost of the voucher or gift card, so if the employer has negotiated a 7.5% discount on a £50 reward, then the liability is on £46.25, not the £50 face value. The employer can also opt to pay the employee’s NI and tax liability by setting up a pay-as-you-earn (PAYE) settlement agreement with its tax office, so the employee receives the full face value of the award.

What is the annual spend?

More than half (54%) of the UK’s £5 billion gift card and voucher market is business to business.

Which providers have increased market share?

The UKGCVA does not disclose market share information.

Which voucher providers have the biggest market share?

Some of the biggest players in the market include: Boots, Edenred, Grass Roots, LogBuy, Love2reward, Next Jump, One4all, P&MM, Ovation Incentives, Personal Group, Projectlink Motivation (part of Grass Roots), Red Letter Days, Sodexo Benefits and Rewards, SVM and The Voucher Shop.

Other providers include Asda, Arcadia Group, Argos for Business, B&Q, Costa Coffee, Debenhams, Haven Holidays, HMV, House of Fraser, John Lewis, Marks and Spencer, New Look, Pizza Express, Sainsbury’s, Signet, Swissport, The White Company, Thomas Cook, Thorntons, Tesco, Waitrose, Waterstones and Wickes for Business.

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Statistics

  • Business-to-business gift card and voucher sales grew by nearly 6% in the first quarter of 2014, contributing to nearly 11% growth across the industry.
  • Category-specific gift cards saw the largest growth in the B2B market, with an overall increase of 8%.
  • Both direct and online B2B sales saw growth in the first quarter, of nearly 6% and 5%, respectively.

Source: Research published by the UK Gift Card and Voucher Association (UKGCVA) in May 2014.