This could be one reason why growth in sales of corporate gift cards has increased at a rapid pace this year.
With business-to-business sales outstripping business-to-consumer sales, according to the UK Gift Card and Voucher Association’s industry figures, released in September 2015, it appears that the role of the corporate gift card in incentivising, recognising and motivating employees is more important than ever.
Technology brings greater flexibility
In the digital age, developments in the technology behind the gift card operations of retailers have transformed their capacity to incentivise, recognise and motivate. Employers have greater flexibility; they can hold a stock of blank gift cards with ‘no value’ assigned, top them up and activate them remotely, and with schemes that are run well, achieve a good return on their investment.
However, in order to produce the desired effect, a gift card scheme has to be part of an integrated and aligned reward strategy, says Charles Cotton, performance and reward adviser at the Chartered Institute of Personnel and Development (CIPD). “It won’t matter how great the gift card scheme is if workers don’t earn enough to enjoy a decent standard of living, or if employees are not given the training that they need to do their jobs effectively,” he says.
Any organisation that runs a scheme should use the insights from behavioural science on how employees respond, either individually or collectively, and how they value the gesture of recognition. “The gift card itself also has to have value to the employee, as well as to the organisation,” he adds.
A successful scheme also depends on the challenge or opportunity a gift card scheme is used for. In businesses where there are commission or fee-based roles, for example, gift cards could be used within both incentive and recognition schemes. In other organisations, cards are typically used as part of an employee recognition strategy.
“Before offering gift cards to employees, [employers need to] think about what the organisation hopes to achieve from it,” says Cotton. “And think about whether [it is] recognising individual or collective achievements, or both, because that will impact on such issues as design, administration and communication.”
Choice of card type
Employers have a wealth of choice in the type of gift card they offer to their staff. As well as the familiar credit card-sized plastic gift card, there are mobile versions that can be delivered to mobile phones via text messages and apps, and virtual gift cards that can be emailed to their recipient.
Gift cards can be spent in-store or online by their recipients, and include open-loop cards, which can be used at multiple retailers via payment networks such as Visa or MasterCard, and closed-loop cards, redeemable at one specific retailer.
However, to get the best out of any gift card scheme, employers need to ensure that the cards they offer match the preferences of those receiving them.
A study by digital gift card service Giftcloud, Employee benefits survey, published in September 2015, found that out of the 63% of employees who said they had received a gift card from their employer, 41% admitted that they either lost them or failed to use them before the expiry date. A third of these said they did not use their card because it was for a store they did not particularly shop with.
One way of enhancing the value of a gift card in the eyes of the recipient is by personalising it, says Sir Cary Cooper, professor of organisational psychology and health at Manchester Business School.
“What would be nicer than knowing what individual members of staff are interested in; playing golf or reading, and then giving them a gift card that they will enjoy spending in a golf shop or book shop? It takes the impact of recognition to another level,” he says.
“Gift cards are just a great way of telling [an employee] they’ve done a good job. And let’s face it, employees don’t get told that often enough.”
Value of card is important
Of course, the actual value of the gift card is also important. Used as an incentive, the value has to reflect the scale of what employees are being incentivised to do and the timescale involved, says Michael Rose, director at Rewards Consulting.
“If, for example, [an employer is] running a competition in a call centre for a week, and wants it to have an element of fun, the value of the gift card could be reasonably modest, maybe around £50,” he says.
“[Employers] need to take people’s earnings into account. Somebody who is low paid or earning the minimum wage who receives a gift card worth £50 at the end of the week will be happy.”
Offered as part of a recognition scheme, the element of surprise at being rewarded simply for doing a great job is the real driver of motivation.
“The fact that the recognition was unexpected means the value of the card can also be modest,” adds Rose.
What this means is that a well-planned, well-run gift card scheme can deliver a good return on investment for the organisation.
Cooper explains: “When people realise that their boss has actually noticed that they’ve put in extra effort, pulled all the stops out, and gone over and above, they become very aware of the fact that their employer is socially sensitive to what the employees are doing, and that has a huge impact.
“Being recognised makes employees feel more motivated and more loyal. And as we know, these things are all connected to engagement and productivity.”
When it comes to reward and recognition, employers cannot afford to be complacent. In order to gauge the effectiveness of gift cards and their role in the overall recognition strategy, the scheme needs to be evaluated on a regular basis.
“This is important, because the value to the employee will decline over time as the cards become ‘expected’,” says the CIPD’s Cotton.
The facts
What are corporate gift cards?
Corporate gift cards are designed to be pre-loaded or topped up with a monetary value and offered to employees to use at a single store or at multiple retailers.
What are their origins?
The first gift cards that used a payment infrastructure appeared in the US in the mid-1990s. They were developed to replace gift vouchers that were increasingly under threat from counterfeiters.
Where can employers get more information?
The UK Gift Card and Voucher Association on 08702 416445 and at
www.ukgcva.co.uk
What are the costs involved?
Corporate gift cards 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?
Gift cards are treated as benefits in kind, so tax and national insurance (NI) are liable, but only on the actual cost of the voucher or gift card. For example, if the face value of the gift card is £100, but the employer negotiated a discount and purchased it for £95, the liability is on £95, not the £100 face value. Employers 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?
The total UK gift card and voucher market is worth £5.4bn, 61% of which comes from business-to-business spend, according to the UK Gift Card and Voucher Association’s industry figures, published in September 2015.
Which providers have increased market share?
The UKGCVA does not provide information on market share.
Which voucher providers have the biggest market share?
Leading providers include: Boots, Edenred, Grass Roots, LogBuy, Love2reward, National Gift Cards, Next Jump, One4all, P&MM, Personal Group, Projectlink Motivation, 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, Halfords, Haven Holidays, House of Fraser, John Lewis, Marks & Spencer, New Look, Pizza Express, Primark, Red Rush Vouchers, Sainsbury’s, Signet, SpaFinder Wellness, The White Company, Thomas Cook, Thorntons, Tesco, TK Maxx, Virgin, Waitrose, Waterstones and Wickes for Business.
Statistics
- The total UK gift card and voucher market grew by 7% in the first half of 2015. (Source: UK Gift Card and Voucher Association [UKGCVA], September 2015)
- Business-to-business gift card and voucher sales rose by 10% in the first half of 2015. (Source: UKGCVA, September 2015)
- The top five reasons for receiving a gift card from the boss are for birthdays (83%), hitting targets (64%), sign of gratitude for hard work (57%) or a promotion (39%). (Source: Giftcloud September 2015)
- 80% of employees who are highly engaged at work receive some form of reward or recognition for their work. (Source: Red Letter Days for Business, June 2015)
- Four out of 10 employees feel that their achievements at work are not being recognised. (Source: Lansons, July 2015)
- Nearly three-quarters (74%) of employees are more motivated, and would increase their efforts at work, if offered extra incentives. (Source: One4all Rewards, September 2015)
