Workers in the UK have been hit with yet another extremely difficult year as pandemic disruption continued to peter out only to be replaced by further geopolitical uncertainty, a worsening cost-of-living crisis, and double-figure inflation.
Like many households, businesses have been tightening their belts and cutting back on non-essential spending. Yet, one area they cannot afford to – and should not – overlook is employee benefits. The economic situation means that many employees in the UK are working the same hours but for significantly less take-home and disposable pay, while soaring costs on energy and petrol further whittle away budgets. It’s perhaps not surprising that morale has taken a hit.
While not all organisations can afford to match inflation with pay rises, employee benefits play a vital role in ensuring that staff feel valued and motivated. Financial incentives, such as gift cards, are a great way to show appreciation to your team and can offer support through the cost-of-living crisis.
While you might be more familiar with gift cards as a birthday or Christmas present, B2B sales represent 57.4% of the total gift card market. The latest data from KPMG and the GCVA shows that employee benefits retains the biggest market share of the B2B market at 55.4%, while rewards and incentives account for 28.7%. Meanwhile, new research into the changing nature of gift cards, sponsored by Tillo, found that 8.1% of UK adults have received a gift card from an employer as a reward, mini-bonus or form of cost-of-living support in the last year.
Additionally, legislation from HMRC that means that businesses can reward staff without either employee or employer feeling it in the pocket. For rewards worth up to £50, the HMRC Trivial Benefits exemption allows employers to thank their staff without the employee incurring additional costs in tax or payroll.
Although gift cards evidently still play a significant role in employee benefits, the boost experienced through the pandemic, as businesses strove to look after their staff through a range of benefits, is starting to moderate.
Yet, arguably, this is a time that the employee benefits market could really benefit from picking up. We surveyed consumers to find out how cost-of-living changes had affected the motivating power of rewards and incentives, for example a small bonus or thank you gift card from an employer or company, and 47% said they are more likely to be positively influenced, including 20% that said significantly more so.
Giving employees the means to treat themselves with a gift card can be incredibly meaningful and powerful, especially when they’d be unlikely to spend on themselves otherwise. They can either spend the value on an item they’d really treasure or put it towards a larger purchase that may have otherwise felt unattainable.
One of the major drawbacks of providing staff with cash bonuses is that the money is often swallowed up by miscellaneous costs such as rent, mortgage payments or domestic bills. Plus, workers are generally less likely to remember what they spent a cash reward on as these are often added onto a salary and, in some cases, can be scarcely noticeable.
Gift cards offer an adaptable solution to a multitude of issues and are being used in different ways to help employees offset the ongoing cost-of-living crisis. Our data shows that they’re often used to cap spending, on home entertainment or gaming services for example, or to access rewards and discounts on everyday purchases. Some organisations also use gift cards as the mechanic to support salary sacrifice schemes, allowing employees to purchase and spread the cost of high-ticket items.
With many sectors being blighted by staff shortages, businesses need to think creatively and strategically about how they’re going to attract and retain employees beyond pay alone. Benefits play a crucial role in showing employees they are valued and supported, and rewards provided through gift card schemes could provide vital support and motivation to workers. And, as the cost-of-living crisis rolls on and energy bills are expected to rise once again, this is only going to become more important and impactful. People are, and always will be, integral to the running of any business, and investment in staff is undoubtedly key to driving profits and growth in 2023.
Gail Cohen is director general of the Gift Card and Voucher Association