Gift cards are becoming increasingly popular as a way for employers to reward and incentivise staff.
Recent research from the Gift Card & Voucher Association (GCVA) and KPMG UK found a 10 percent increase in the sales of gift cards to employers from the second half of 2022 to the same six months in 2023.
Sales of digital gift cards grew the fastest with a 16 percent increase from 2022 to 2023, while physical gift card sales grew 2.1 percent for the same period.
Researchers said the rise in demand was driven by employers wanting to help staff with the cost of living crisis, ongoing efforts to retain employees and a desire to be innovative around reward.
Everyone remembers the book tokens, or Steam vouchers if you’re younger and played online games, they received at Christmas from family members. But these days, receiving a gift card from your employer is de rigueur. For anyone who is a complete novice to workplace gift cards it’s worth knowing that they come in many flavours.
What is an employer gift card?
They can be prepaid cards or vouchers that companies give employees as incentives, rewards or benefits. These cards can be used by employees to make purchases at various retailers or online stores, typically with a specified monetary value. Options run the gamut from supermarket cards, which are for essentials, retailer cards that enable people to buy a wide range of things from clothes to electronics, restaurant cards for meals out and online marketplace cards for purchases on eBay or Etsy.
There are also prepaid debit cards, which work like a regular debit card but come with a preloaded amount that employees can spend as they wish. Although some would argue that these are not strictly gift cards, but they are worth considering.
Another key difference from the book token from grandma is that employers typically pick a provider or platform and purchase a batch of them. They can then be distributed to staff as a form of recognition for hard work, achievements or as part of a rewards programme.
Employees can then redeem them according to the terms and conditions set by the provider.
Flexible friends
A big plus for gift cards is that they offer flexibility. Employees can choose what they want, which is one of the reasons they are a popular choice for incentives because they cater to diverse employee preferences.
A wide range of employers use the cards and they can be especially effective in industries facing high turnover or where employee morale is crucial for business success.
Several companies specialise in providing gift voucher solutions for employers including Reward Gateway (part of Edenred), Pluxee (part of Sodexo) and Perkbox. They all offer comprehensive platforms for employers to manage and distribute gift vouchers.
Gift cards can also be tax-free if the cost of providing the benefit does not exceed £50 per employee, or on average when given to multiple employees. The card must not be a cash voucher and the reward should not be part of a contractual arrangement such as salary sacrifice. It worth checking the details of this with your provider to ensure the card and scheme you choose meets all the requirements.
Siobhan Moore, and Adam Hobbs, GCVA executive board co-chairs, said: “With high inflation and rising interest rates adding pressure on consumer spending, it’s good to see employers helping to pass additional savings onto their employees through gift cards. It shows employers are considering how they reward their staff, and it has the added benefit of helping to encourage more spending in a downturned market.
“Gift cards are an appealing option as not only do they give employers an alternative option to reward staff, but employees will receive more of that reward with the reduction of tax – and that money will be going directly back into the economy.
“And with the Christmas period not rallying consumers to spend as much as was hoped, gift card sales help soften the blow to retailers. In fact, previous GCVA research found that over 20 million gift cards were exchanged over Christmas 2023, with almost a quarter of people receiving more than in previous years.
“All of this points towards the resilience of gift cards, the continued diversification of use and the additional benefits in helping the retail, hospitality and leisure economy, which could go even further if the tax-free threshold was increased by the government.”
Don Williams, retail partner at KPMG UK, said: “Customer spending throughout this period continued to be challenged by the cost-of-living crisis. This had a major impact on non-discretionary categories with clothing, footwear, high-priced goods, electricals, and furniture all suffering challenges. In the general market, we also saw the return to shops (especially retail parks) and online penetration rates continue to fall back; though we need to remind ourselves that this measures the point the transaction is made, not the whole journey to that purchase.
“Against this backdrop, the performance of the gift card and voucher segment has been strong and extremely pleasing – congratulations to all. We continue to believe there is lots of opportunity for the industry going forward, including within employee benefits, and this continued trend can provide additional help to businesses who are finding it more of a struggle in recent times to make as much of a profit.”
