Voucher schemes: What’s in your wallet?

For some staff, nothing beats cold hard cash, but vouchers – for anything from childcare to balloon rides – are fast becoming a desirable alternative. Virginia Matthews reports.

Forget the flimsy book token that your aunt shoved into your Christmas stocking, or even the Luncheon Vouchers you received on your first day at work – 21st century gift vouchers can be redeemed for anything, from cars and kitchens to belly dancing classes, gym membership or childcare. And now they’re as often found in a workplace rewards package as they are in a child’s birthday card.

Tomorrow’s voucher-card technology may even see the introduction of a fully transportable ‘benefits passport’ that can be individualised and taken from employer to employer. For now though, more and more employers are turning to vouchers as a no-fuss, off-the-shelf, or even web-based element of their rewards offer.

Avoiding red tape

Andrew Johnson, director-general of industry body the Voucher Association, says that current voucher programmes – especially those that can be administered over the internet – are easy to use and don’t risk HR or compensation and benefits specialists getting bogged down in more red tape. If they choose, employers can hand the administration of the entire scheme to a third party, allowing them to concentrate on other issues and easing any worries over the security implications of handling high-denomination vouchers themselves.

Johnson estimates that the voucher business was worth around £3.4bn in total last year, and the business-to-business (B2B) element of it counts for around 40% of the whole industry’s turnover.

“Employee motivation accounts for 70% of the B2B voucher market, making it highly significant,” he explains. “Gift vouchers are fast superseding hampers, flowers, retirement clocks and even cash as the reward of choice for many workers.”

Food distributor Young’s Seafood, for example, uses vouchers from retail conglomerate Kingfisher as a means of improving its recruitment and retention rates among its 5,000 employees working across 13 sites. Last year, 83% of the value of these vouchers was spent at Kingfisher’s DIY outlet B&Q.

Employers also use vouchers to honour long service, reward excellent work, encourage staff to use suggestion schemes, and even to reduce absenteeism.

According to Graham Povey, managing director of the firm Capital Incentives and Motivation – which last year issued £55m-worth of vouchers to 2,200 clients – vouchers are often more welcome than cash.

Perceived value

“On a pound-for-pound basis, a voucher is worth no more than its sterling equivalent of course, but while a £100 bonus in your pay packet disappears into an overdraft or to pay off bills, a £100 voucher presented to you by your boss – especially if it’s in front of colleagues – is a very memorable event for both sexes and all ages,” says Povey.

The average voucher reward, he adds, is a fairly modest £50 and may be given on the spot for a particularly good job well done. At the other end of the scale though, a high-performing sales team could net thousands of pounds worth of vouchers on incentive reward cards each month, so they can contribute towards a hefty portion of someone’s salary. The fact that ‘multi-option’ vouchers are redeemable at well over 100 different national stores increases their perceived value, adds Povey.

However, while it may now be possible to exchange vouchers for hard-to-get West End theatre tickets, hot-air balloon trips and luxury hotel breaks, most employees still want to use them in high-street shops or simply to buy their weekly groceries, says Julie Rosehill, sales director of rewards specialist The Voucher Shop.

“We find that everyone, from poorly paid call centre staff to well-paid salesmen, will tend to use vouchers at their local supermarket. And although we do offer a range of interesting experiences such as hot-air ballooning and other extreme sports, take-up is low,” she says. “White-water rafting and spa breaks still haven’t taken off, but the demand for clothes, luxury electronics and groceries is still very high.”

Salary sacrifice

Now, it is even possible for staff to sacrifice a portion of their salary in return for vouchers as part of a flexible benefits package, an option that is proving popular among Voucher Shop customers such as Lloyds Pharmacy, HBOS and Merrill Lynch banks, and the AA motoring organisation. Again, supermarkets overwhelmingly top the popularity poll in terms of redemption.

Some reward firms also offer ‘cheques’ that are branded with the employer’s own message or logo and can be used at dozens of stores and businesses.

The perceived benefits of voucher schemes don’t stop at the staff who receive them either. Povey says there’s a discernible trend towards using gift vouchers as a reward for families or partners. “Many employees share their vouchers with other family members, but when it comes to using their reward to treat a partner with maybe a weekend away or even a break for the spouse, they need something special,” he says. Capital Incentives now offers spouse cards for precisely this purpose.

Flexible future

More than 90% of vouchers are still given in paper form, but a move to plastic is changing the traditional view of vouchers as an incentive, says Johnson. “As a 30-year-old industry, we’ve already had a great impact on attitudes to employee motivation and reward among employers,” he says. “But it is the change from paper to plastic – making vouchers even more flexible and less risky – that will really cement our position.”

Some suppliers now use holograms and other devices to make our paper vouchers look like banknotes, but to some staff, paper vouchers will always look “a little downmarket”, according to Povey.

Whatever the reward is made of, it’s vital to retain the personal touch if your voucher is going to sound the right note with staff, Johnson explains. “If you know your employee well,” he says, “you should know exactly what will motivate them. You should be able to distinguish between the employee who would consider a large department store voucher a real treat and the employee who is dying to visit a specialist like PC World.

“By tailoring a specific card or voucher to an individual employee, you are demonstrating that you have put some real thought into the gift, and that will be a very motivating message indeed,” he believes. “It could be that an individual wants to opt for using spare capacity in their flexible benefits pot to purchase vouchers for groceries, or they may simply want the opportunity to buy themselves a special treat. It all comes down to how well you know your own people.”

Knowing your audience is the key for any reward. The flexibility of vouchers means employers have a good chance of pleasing most of their staff, most of the time.

The UK voucher market

  • £1.2bn worth of vouchers are sold to businesses to boost employee morale, as benefits or as sales promotions, of which £670m of vouchers are bought for rewards and incentives (in corporate motivation schemes) and £198m of vouchers for corporate benefits (as part of wider benefits schemes).
  • Overall annual sales of vouchers are growing at 24%.
  • Among organisations that do not yet use vouchers as perks, 30% of the decision-makers in medium or large organisations in the UK plan to use multi-retailer gift vouchers as a performance improvement and staff retention tool in the next two years.

Source: Sodexho

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