What are long-service awards?
These are awards designed to recognise an employee’s loyalty and commitment over anything from one to 40-plus years. Awards can be in the form of cash, but non-cash gifts receive more favourable tax treatment.
Where can employers get more information?
More information about the tax treatment of long-service awards can be found on HM Revenue and Custom’s website.
More details of exemptions under the Employment Equality (Age) Regulations 2006 can be found here.
Who are the main providers?
Argos for Business, Asda Business Rewards, Buyagift Corporate, Corporate Rewards, Cottrills, Edenred, Everything Corporate, Grass Roots, Havens, House of Fraser Business Incentives, Incentive Limited, JMP, Love2Reward, Maritz, Michael C Fina, New Look Business Solutions, OC Tanner, Projectlink Motivation, Virgin Experience Days and Voucher Shop.
These days, employee motivation and retention are often the drivers behind employers wanting to present long-service awards, but time is up for carriage clocks, says Peta Hodge
The archetypal long-service award – a carriage clock for 25 or more years of service – would be out of place in most modern homes and most modern reward packages. Long-service awards are no longer a thank you for staff loyalty, but are part of an employer’s toolkit for motivating and retaining staff.
It is becoming important to match the gift to the employee’s lifestyle, says Mark Towler, head of Business Incentives at House of Fraser. That is why many organisations allow staff to choose for themselves by giving them vouchers or reward brochures. “Employees will soon not have to have a plastic card or a paper voucher, it will probably be delivered to their phone as an e-voucher,” he says.
Cash awards are also an option, although these do not qualify for the same tax breaks as non-cash gifts. Employers should stick to what works best for their business, says Martin Cooper, head of national accounts and marketing at Love2Reward. “If employers give staff cash, they will use it to pay their [credit] card off or pay the gas bill,” he says. “It is intangible – it disappears.”
Pre-paid electronic card
One way to make cash work better is to offer a customised pre-paid electronic card validated by the likes of Maestro, Mastercard or Visa. The card can be company-branded and personalised for the employee.
Whatever gift is offered, the way it is presented – perhaps at a ceremony with champagne – is as important as the gift itself. “People are looking for recognition from their peers and the company,” says Cooper.
It had been thought long-service awards might fall foul of the Employment Equality (Age) Regulations 2006, which state that any contractual benefit that increases with length of service is potentially age-discriminatory.
Awards for service of less than five years are exempt, but Cooper says a further exemption for service-related benefits that fulfil a business need, such as encouraging loyalty or motivation, has helped employers become more scientific in their approach. To meet these requirements, they must be able to show there is a benefit to the business.
Increasingly, long-service awards are tailor-made to employers’ retention stress points. Cooper cites a supermarket that introduced awards to recognise one-year service after experiencing 50% staff churn after year one. More typically, awards are made after five, 10, 20 and 25 years. Values vary widely, although £10-£15 per year of service is a common benchmark.
HM Revenue and Customs permits non-cash benefits of £50 per year of service to be completely free of tax and national insurance (NI) for service of more than 20 years, provided no other long-service award has been made in the previous 10 years.
For non-cash awards given for service of less than 20 years, or where a previous long-service award has been made in the past 10 years, Class 1A NI contributions are generally payable on the whole amount.
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