If you read nothing else, read this…
- The motivation voucher market continues to grow.
- The flexibility and versatility of vouchers appeals to employers.
- Employees appreciate the immediacy of the reward.
Paper or electronic card-based gift vouchers have long been a cost-effective way of rewarding employees. With pay remaining under pressure, despite signs of an economic recovery, employers have welcomed a low-cost tool with which to reward and incentivise their staff.
The tangible nature of vouchers that can be redeemed on the high street, or used for an experience, is an extra attraction.
Market growth
This appeal is evident in the continued growth of the card and voucher market.
The UKGCVA’s latest quarterly analysis for quarter two (Q2) 2013, published in July, shows that gift card and voucher sales increased by 5.12% compared with the previous quarter. Within business-to-business (B2B) sales, such as voucher providers to employers, key growth areas were category-specific paper vouchers, category-specific gift cards and ‘redeem anywhere’ gift cards.
But the overarching trend has been employers’ increasing migration from paper-based vouchers and cards to online and digital formats.
For example, the UKGCVA’s online B2B sales showed remarkable growth of 104.78% in Q2, albeit from a very small base.
Consequently, the association expects to see many retailers launching digital vouchers this Christmas. The instantaneous nature of digital vouchers explains their appeal with employers and employees alike.
The UK voucher and gift card market saw an annual spend of £4.7 billion as a whole in 2012 and the UKGCVA expects that figure to top £5 billion this year, no doubt with a big helping hand from digital sales.
Over the last three to four years, overall market growth has averaged 4% to 5% each quarter.
Obvious appeal
The appeal of motivation vouchers is obvious. An expression of gratitude is always well received by employees, but coupling this with a tool of monetary value can reinforce the sentiment in a compelling way.
The flexibility of vouchers is also appealing. They can be used to reward long service or loyalty, or be linked to performance targets or goals. They can also boost employee engagement.
Unlike a pay rise or bonus, which may need to reflect an employee’s salary and can get lost in their overall remuneration at the end of the month, motivation vouchers can provide a flat-rate instant reward. The fact that staff can spend them on something special, perhaps a treat or experience, makes the gesture even more memorable.
The wide range of voucher options now available, the simplicity of administration and delivery and the fact that there is no impact on payroll costs further explain the appeal of vouchers as a motivational tool.
Range of vouchers
The range of vouchers available extends beyond retail spending to travel and theatre, for example. Supermarket vouchers have been seeing strong growth in take-up, as have restaurant vouchers and those linked to leisure operators, according to the UKGCVA.
Experience days, such as a spa days or cinema trips, or even more adventurous activities such as skydiving, remain attractive, although multi-store cards, which can be redeemed at a number of outlets, are popular because of their flexibility.
The wide range of vouchers enables employers to avoid any claims of discrimination relating to, for example, gender or age, as long as organisations offer their workforce relatively generic retail or cinema vouchers, which are typically considered a safe option for most staff.
Electronic gift cards
Employers can also consider electronic gift cards, which 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.
As well as ease and flexibility of use, electronic cards can be branded with an organisation’s name and logo, and can easily be reloaded and reused by employees, which reduces administration costs.
Employers can also issue staff with gift cards that have no assigned value, which the employer then activates and loads with credit remotely. This helps to guard against theft.
The fact that such cards are not deemed live currency also means employers can avoid secure delivery charges, which are required for paper gift vouchers or pre-loaded gift cards.
Electronic cards also provide an extra element of security. Staff can activate their card when they receive it and if it is subsequently lost, there may be an option (depending on the card provider) to report the loss and secure the card by blocking it to prevent anyone else using it.
Some electronic vouchers can also be linked to an online reward account, which employees can access to check their balance and then decide whether to spend or save their credit to buy a more expensive item at a later date.
Key development
A key development in the motivation card and voucher market is the growth in the use of mobile devices, smartphones and tablets. For example, the technology is available to send and access cinema vouchers via mobile handsets.
The UKGCVA concedes that digital delivery is still at an embryonic stage, so the association has not collated growth data on this segment of the market since the end of 2009.
Nevertheless, with online retail sales growth outstripping sales growth on the high street, the association predicts that digital and e-vouchers will follow suit in due course.
This development will doubtless be boosted by sales at Christmas, a traditional time to think about how to reward and thank staff for all their hard work and commitment.
And it doesn’t all have to be pre-Christmas; motivation vouchers can also work well once all the excitement of Christmas is over, as a way of stimulating and re-engaging staff as they return to a new year of work.
The facts
What are motivation vouchers?
Paper-based vouchers or electronic cards with a monetary value, which can either be spent at a single store or at multiple retailers. Travel and experience vouchers are also available.
What are their origins?
Gift vouchers first appeared in the 1930s in the form of book tokens, but they did not become a motivational tool until the 1970s. The first multi-store vouchers appeared in the 1970s.
Where can employers get more information and advice?
The UK Gift Card Voucher Association on 08702 416445.
What are the costs involved?
Vouchers are available in various denominations, often starting at £5. Discounts of up to 5% are available when they are bought in bulk, with paper vouchers generating higher discounts. If buying a variety of vouchers, it may make sense for employers to look at resellers, the UKGCVA suggests. It is also a good idea to factor in the cost of delivery and any cost around payment methods, with BACS normally the cheapest.
Any legal implications?
There are no legal implications, according to the UKGCVA.
What are the tax issues?
Employers must pay national insurance on a voucher scheme, but can pass the income tax on to staff. There are tax breaks for long-service awards, loyalty awards and suggestion schemes.
What is the annual spend?
The UK gift voucher, gift card and stored-value solutions market was worth £4.7 billion in 2012, according to the UKGCVA.
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: Asperity Employee Benefits, 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, SVM and The Voucher Shop. Other providers include B&Q, Comet, Wickes, Debenhams, Haven Holidays, HMV, House of Fraser, John Lewis, Marks and Spencer, New Look, Sainsbury’s, Signet, Thomas Cook, Thorntons, Tesco, Waitrose and Waterstones.
STATISTICS
- 59% percentage of employees who say being recognised by an employer creates a positive change in their productivity. (Summer 2013 Globoforce Workforce mood tracker)
- 82% percentage of employees who say being recognised for their efforts at work motivates them. (Summer 2013 Globoforce Workforce mood tracker)
- 4.6% growth in direct sales in B2B voucher sector, with the channel representing 98% of B2B sales. (UK Gift Card and Voucher Association’s Q2 2013 Commentary, July 2013)
- 1% growth in average weekly earnings, excluding bonus payments, between May and July 2013. (Office for National Statistics, Labour Market Statistics, September 2013)
