Buying staff loyalty

The
days of the Luncheon Voucher may seem but a distant memory, but as Caroline
Horn finds out, rewarding performance with coupon-based incentives is making a
comeback

Rewarding employee performance with supermarket or department store vouchers
might, at first glance, seem a little old-fashioned or unimaginative. However,
companies considering incentive schemes should take a closer look at this
burgeoning end of the incentives market.

Experiences and products as diverse as balloon flights, health treatments
and electrical goods, can all be acquired with vouchers, and increasingly
feature as part of corporate incentive schemes.

In addition, voucher suppliers are doing all they can to entice their
clients with discounts, streamlined administration and other benefits.

The voucher market is currently estimated to be worth more than £1.15bn,
according to The Voucher Association, and is looking healthy, despite changes
in government legislation four years ago which removed the tax benefits of
giving vouchers as incentives.

Employers and employees are now liable to pay national insurance
contributions on voucher rewards – although the company can volunteer to pay
the employee’s tax liability.

While the legislative changes did have an immediate and negative effect on
the voucher market when they came into force, suppliers have fought back with a
range of new products and services aimed at encouraging companies to use
voucher incentives.

As well as making their range of products more exciting, suppliers offer a
number of free services, from presentation packs and discounts to online
availability, all aimed at making the running of incentive schemes that much
smoother and more attractive.

Voucher use is growing as part of the corporate benefits package
encompassing child and healthcare provision.

Andrea Born, House of Fraser business incentives manager, says: "Retail
vouchers work well in flexible benefits schemes, where the employee gives up
part of their salary for vouchers, but can also work just as well in optional
benefit schemes to help retain experienced staff and entice new employees
in."

Suppliers argue that there are good reasons for rewarding staff with
vouchers rather than simply putting a few extra pounds into their bank
accounts. Graham Povey, managing director of Capital Incentives and Motivation,
says: "Voucher incentives are different from salary and more attractive
because of that. People will connect the purchases they make using vouchers
with the work they did to get them. They recognise that, if they repeat that
performance, they will be able to buy something again."

Vouchers also offer flexibility – they can be given as one-off rewards,
perhaps for long service or gifts, or form part of formal reward schemes. But
Povey says the golden rule is to keep it simple.

"The reason why many incentive schemes fail is because they are
over-complicated and measurements are not put in place, or people aren’t sure
what they have to do."

Managing voucher-based incentive schemes can be done in a number of ways.
The simplest starting point is to buy vouchers direct from a high street name
and hand them to staff as recognition rewards.

Companies could widen the choice by buying vouchers from several different
retailers or outlets. This, however, also increases the administrative burden,
and it can become complicated if, for instance, petty cash is being used to buy
the vouchers – companies must remember the tax implications of incentive
rewards and keep clear records of what is bought and how they are distributed.

It can be simpler to approach one large company with a variety of products
and services, such as Virgin Incentives, or to deal with a supplier that
‘brokers’ vouchers, such as Capital Incentives or Sodexho Pass – whose
newly-launched corporate gift scheme, Presentz, offers a range of vouchers from
Bhs to Hamleys.

It is also worthwhile checking what additional free services your supplier
will offer, such as individual presentation packs and discounts for bulk
purchases. And check whether you can send back any vouchers that you don’t use.

Any budget allocated to the reward scheme needs to cover administration and
communication costs – a figure that will be similar to the amount spent on the
vouchers themselves. Companies might choose to put these activities into the
hands of an outside agency and centralise their supplier. Line managers would
still have discretion in giving rewards to separate accounts, but buying and
administration would be handled centrally. Centralised buying can also help
increase the levels of discount available from suppliers (see box).

In the US, there has been a shift away from paper towards plastic-based
vouchers, says Neal George, vice-chair of the Voucher Association and manager
of Marks & Spencer Gifts. In the UK, Asda and Borders, owned by US group
Wal-Mart, have already introduced plastic vouchers.

Another move, still in its early days, is away from paper towards electronic
purchases via the web.

Claire Smith, sales manager for Sodexho Pass, says: "Employers can have
a hyperlink from their site onto ours so we can help communicate and explain
the scheme to their employees, as well as showing staff where the vouchers can
be spent."

P&MM’s reward voucher system has a client administrator function,
allowing firms to enter the names of individuals/groups involved and to manage
the schemes electronically in-house. This also makes the job of recording
voucher distribution – particularly for tax purposes – that much simpler.

Companies looking to develop more sophisticated electronic reward schemes
could also set up a collaborative scheme with third party suppliers, where
instead of getting vouchers directly, employees are given reward points which
are paid into a ‘reward bank account’.

Individuals will have their own reward account that their employer will
credit when they achieve certain goals. The individual can redeem those funds
for whatever they want, whenever they want.

This kind of scheme can help bypass some of the problems which are inherent
with paper-based voucher schemes. Jonathan Haskell, managing director of
LongService.com, an incentive and reward programme supplier, points out that
with traditional voucher schemes, the onus is on the employee to redeem the
voucher.

"This is great if staff are shop-a-holics with a relevant retail outlet
nearby, but difficult if they are shop-a-phobics having to visit an
inconvenient location to find the item they want."

Men in particular are prone to leaving vouchers forgotten and unredeemed in
a dusty drawer, he says.

But as Born warns, if you do decide to use vouchers for staff, think
carefully about your target audience.

"Would they welcome holiday vouchers and, if so, will you be able to
give sufficient for a mini-break or holiday – or will they have to use their
own money to ‘top up’ the offering? And how would they feel about being given
vouchers for an ‘experience’ or adventure?" Less-adventurous staff may not
relish the opportunity to go white-water rafting, she adds.

Redemption reports, such as those offered by Virgin Incentives, show clients
where, when and on what the vouchers have been redeemed, which is useful for
campaign evaluation and for establishing participant preferences. And it is
worth noting that while it is great to reward staff imaginatively, core high
street brands still remain the most popular voucher choice, and this is where
the bulk of the turnover in the voucher market remains. It seems that people
still value the tried and tested.

Voucher scheme providers

Virgin Incentives

Voyager House, 5 The Lanchesters, 162-164 Fulham
Palace Road, London W6 9ER
Tel 0208 600 0444
www.virgin.com/incentives

Outlets Virgin offers a number of redemption opportunities, including
buying online (VirginWines.com) or over the phone. Virgin’s retail outlets
include 100 Virgin Megastores, 100 Virgin V Shops and Virgin Bride, but also
leisure activities, such as UGC Cinemas, London VIP theatre packages, Virgin
Active leisure clubs, beauty treatments and products from The Virgin Cosmetics
Company, Virgin Travelstore (travel agent), weekend breaks, Virgin Atlantic air
tickets, and 70 UK Grand Heritage Hotels.

Voucher sizes Virgin Megastore: £1, £5, £10, £20; Virgin
V Shop: £5, £10, £15, £20, £50; and £100; Virgin Travelstore: £10, £50 and £100

Discounts Discount structure for the Virgin Art of Giving
voucher.

            £5,001-25,000             2.5%
            £25,001-50,000           3%
            £50,001-75,000           3.5%
            £75,001-100,000         4%
            £100,000 +      on application

House of Fraser business incentives

Andrea Born, Business Incentives Manager, PO Box
1324, Oxford OX3 9WH
Tel:  0870 606 1010
www.hofbi.co.uk

Outlets House of Fraser has 51 stores nationwide. 13 stores have
personal shopping suites. Makeovers and/or facials are available in the beauty
rooms.

Voucher sizes £1, £5, £10, £25, £50

Discounts

£1,000 – £4,999           2.5%
discount
            £5,000 – £9,999           5% discount
            £10,000 – £14,999       7.5% discount

Other services Use of HoF logo on printed material; use
of images/transparencies; help with copywriting; gift wallets available for
vouchers; help with ideas for employee voucher schemes; website – www.hofbi.co.uk – has a downloadable
presentation

Kingfisher

Kingfisher Voucher Centre, PO Box 141, Castleton,
Lancashire OL11 3DZ
Telephone: 0800 146 500
www.kgv.com

Outlets Valid in 1,300 stores (B&Q, MVC, Comet, Woolworths and
Woolworths’ big W) on 125,000 different products

Voucher sizes £1, £5, £10, £25

Discounts

£1,000 to £10,000       2.5%
            £10,000 plus    5%
            £25,000 plus    negotiable

Additional services Free presentation wallets; logo /
transparency services; credit facilities; voucher tracking service

Case studies

Renault Financial Services

Aim Renault Financial Services (RFS), which provides
motor finance, wanted an incentive scheme to boost dealership sales of the
Renault Selections finance package.

Participants Around 1,500 sales executives from a
network of 250 dealerships.

Operation An annual programme, Get into Gear Grand Prix,
launched in January 2002, developed for RFS by Capital Incentives. Each new
Renault Selections agreement sold was rewarded with a scratch card and awards
in the form of Capital Bond vouchers.

Results The Get into Gear incentive, one of several
tactics used to increase sales of Renault Selections, contributed to a 15  per cent overall increase in Renault
Selections agreements from 2001 to 2002.

EasyJet

Aim To reward and recognise employees through a staff
nomination scheme that offered maximum choice through an easy-to-manage,
cost-effective system.

Participants EasyJet has around 3,000 staff, all of whom
are eligible for nomination.

Operation The scheme, set up by P&MM, allows any
member of staff to nominate any person or team at anytime via the intranet
site. Nominations are judged by a panel of staff from the company and winning
nominations are awarded points, which can be redeemed online for the vouchers
of their choice.

Results The company says it has received positive
feedback from staff and that nominations are increasing month on month.

Boots: Bonmarch‚

A value retailer that sells affordable quality womenswear.

Aim Bonmarch‚ introduced a sales incentive reward scheme
that would drive sales, increase morale and boost staff loyalty.

Participants The company employs around 2,000 employees
nationwide, all of whom are eligible for the award.

Operation The company’s incentive schemes include a
nine-week performance scheme won by one store from each of the 16 regions.
Staff are rewarded with Boots gift vouchers.

Results The company says the programme has helped improve
performance and perception of the company as an employer.

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