Awards Network Blog

Employee Raises and Rewards in a Bear Economy

Written by Amy | Dec 1, 2008 12:45:46 PM

Rocky economic times of late have put a damper on many organizations’ plans to award raises and bonuses this upcoming holiday season. A recent Hewitt survey revealed that the average raise for salaried exempt employees is expected to be around 3.1 percent for the upcoming year. While many organizations are not looking to spend cash on direct compensation costs, flexible incentive pools and retention incentives have been formed by over 20 percent of companies polled in the Hewitt Survey.

I have seen this trend while attending conference calls with prospective clients who are looking to offer employees recognition in addition to regular compensation as these costs are being scrutinized more than ever in this bear economy.

An article by Phred Dvorak in the Wall Street Journal echoes this sentiment, citing a survey conducted by Deloitte Consulting LLP, “Respondents said they were worried about keeping key workers and boosting morale in the turbulent economy.” Nearly one third of those polled said they were planning special measures to keep or reward employees and another third would consider if current economic conditions persist.

There are three main reasons that many companies are planning or considering employee incentives given the bear economy we are experiencing. Giving corporate gifts as part of an employee incentive strategy is a smart solution for one because of the nontaxable status of certain employee incentives. Employee incentive programs also allow companies to separate compensation from recognition. Another benefit of employee incentive programs is the profound impact they can have on corporate culture and cost structure, especially considering many organizations are shrinking their workforces due to the tough economy.

Depending on the type of employee award given and the reason for the award, it may not be 1099 reportable and tax advisors should be consulted to see if your company’s employee award program may be tax exempt. Recognition Professionals International offers the following guideline, “An employee achievement award is defined as an item of ‘tangible personal property’ that an employer gives to an employee for length of service or safety achievement.”

In this bear economy, cash incentives and gift cards are spent on necessities and employees are not often rewarded by these benefits. Tangible, name brand merchandise gifts are an alternative to these cash incentives and provide a lasting luxury gift that many employees admit they would not have otherwise bought themselves without a sense of guilt given the current economy. Allowing employees to select from a plethora of lifestyle merchandise will leave a lasting memory of the reason behind the reward and increase the success and impact of your total rewards program.

Increasing productivity, retention, morale and motivation by incentivizing your workforce is not only possible but becoming common practice for leading organizations. Incentive Research Foundation reports incentive programs can increase performance by 22% and team performance by up to 44%, engage participants to encourage innovation and motivation in the workplace and also helps to attract future employees.

Beat the holiday blues this year and advise your company start or re-evaluate an employee incentive program as a unique corporate gift idea that will help reduce costs while increasing productivity and motivation.