Spot awards are the most popular recognition incentives among employees, according to one recent Internet survey.

The best part: The incentives usually amount to less than 1% of base pay. That makes the incentives attractive to Finance types. And the awards don’t even have to be given in cash.

Traditional end-of-year or quarterly bonuses cost employers an average of 10% of base pay yet often have a lower payoff in morale and retention.

Reason: Employees appreciate them less because they expect to receive them for reaching certain goals.

Spot awards are spontaneous and paid out immediately. Honorees are pleasantly surprised and see the organization values their work.
Here are four keys to successful spot bonus programs, according to benefits consultant Ken Stahlmann:

1. Creativity is crucial

The most effective programs typically give out awards weekly or monthly. To avoid over-stretching the budget – and avoid a ho-hum attitude setting in – creativity is a must.

One way that never gets old: combining time off with a second, non-cash award. Example: One firm gives a half-day off in combo with movie passes once a month. Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to people’s personal needs or interests. Two examples:

• one firm with many foreign-born, low-wage employees awards a $20 pre-paid phone card after 90 days of service, and a $100 card for outstanding work, and
• a company that employs a lot of sports fans took a few top-performers to a ball game. Managers said it was the best $200 they’ve ever spent in terms of creating ongoing enthusiasm.

3. Add structure

Spot awards may seem spur of the moment, but top programs have a fixed budget and structure set before anything is handed out.

Example: One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise. By letting people bank points for more valuable rewards, the employer saw a solid jump in retention.

Other organizations prefer to let employees reward each other. For instance, a small healthcare provider keeps a “goodies box”  onsite – paid for in petty cash and stocked by employees themselves.

When someone spots a co-worker going the extra mile, he or she pulls
out a prize and awards it. The program is a huge hit: It’s immediate and personal, yet structured.

4. Don’t let good intentions backfire

Most spot awards go over well. But it’s easy for well-meaning managers to miss the mark. Keep these four issues in mind:

• For most cash or cash-value awards, there are tax implications (just as with traditional bonuses)
• Awards need to be spread around or else resentment can creep in
• Make sure honorees don’t mind being the center of attention (some firms have accidentally alienated people they tried to reward), and
• Be certain the reward is something people actually want. One firm that awarded a VIP parking space next to the CEO found no one used it. No one wanted the CEO knowing what time he or she came and left.

The most common characteristics of high-ROI recognition programs — regardless of their monentary value — are their spontaneity and perceived value by employees themselves. 

In reality, the cost of some of most effective spot awards and bonuses often amount to less than 1% of base pay — and the awards don’t even have to be given in cash. 

Less sense of entitlement

Part of the problem with traditional end-of-year or quarterly bonuses (apart from the fact that they cost employers an average of 10% of base pay) is that employees expect to receive them for reaching certain goals.

Sometimes employees simply expect it no matter what. For example, at many firms, an annual holiday bonus is viewed as an entitlement and people inevitably grumble that it’s not high enough. On the flip side, with spontaneous awards and bonuses, workers are often pleasantly surprised.

Benefits consultant Ken Stahlmann spells out four keys to making the latter type of awards work, even if they’re lower in cost:

1. Creativity is crucial

The most effective programs typically give out awards weekly or monthly. To avoid over-stretching the budget – and avoid a ho-hum attitude setting in – creativity is a must.

One way that never gets old: combining time off with a second, non-cash award. Example: One firm gives a half-day off in combo with movie passes once a month.

Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to people’s personal needs or interests. Two examples:

• one firm with many foreign-born, low-wage employees awards a $20 pre-paid phone card after 90 days of service, and a $100 card for outstanding work, and
• another company with a lot of sports nuts took a few top-performers to a ball game. Managers said it was the best $200 they’ve ever spent in terms of creating ongoing enthusiasm.

3. Add structure

The awards may seem spur of the moment, but top programs have a fixed budget and structure set before anything is handed out. Example: One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise.

By letting people bank points for more valuable rewards, the employer saw a solid jump in retention.

Other organizations prefer to let employees reward each other. For instance, a small healthcare provider keeps a “goodies box” onsite – paid for in petty cash and stocked by employees themselves.

When someone spots a co-worker going the extra mile, he or she pulls out a prize and awards it. The program is a huge hit: It’s immediate and personal, yet structured.

In times like these, it’s crucial for colleagues to share their concerns, experiences suggestions. A few weeks ago, HRBenefitsAlert.com ran a special report on calming employees’ 401(k) fears. The reader comments revealed that many benefits pros were just as afraid as employees, and people’s frustration led to some unfortunate carping back and forth between several readers.

The purpose of the comments section, apart from giving people the opportunity to react to the story, is to provide a forum for benefits managers to interact. It’s my hope that we can generate an exchange ideas that have (and have not) been working at readers’ companies during the current situation. Specifically:

• What are you doing to manage health benefits costs as budgets are either frozen or shrink?
• Have you noticed a dip in morale or productivity with all the doom-and-gloom in the news?
• How is your company trying to calm employees’ fears about salary freezes or layoffs, 401(k) losses, health cost shifting and other issues that get a lot of mainstream media focus?
• What are you saying to employees to deliver the news they need to know but also keep morale high?

Thank you in advance for your willingness to share your expertise and personal experiences. Everyone benefits in the long run.

There’s a common misbelief that the IRS considers gift cards worth $20 or less de minimus benefits and, therefore, they’re tax free. Unfortunately, that’s not true.  With few exceptions, the IRS considers almost anything with cash value a taxable form of compensation.

Practically speaking, the IRS is unlikely to go after your firm or an employee over a few small-value gift cards for which you withheld no taxes. But they could, especially if your firm regularly hands out gift cards.  At some firms, those $5 to $20 cards can add up to several thousand dollars worth of unpaid taxes in a few years. Each $15 gift card would typically require about $5.55 withheld.

To be safe, you can use gift cards sparingly and pay the tax for the recipient. Or else you can educate folks proactively that Uncle Sam requires you to take out for taxes.

Read the fine print

Gift cards can be money-wasters or or morale-killers if employees have a bad experience trying to redeem them. Read the fine-print before you buy. Three common pitfalls to watch:

• expiration dates. Some retailers offer cards that last forever. But many have expiration dates, rendering the cards worthless after a period of time
• dormancy fees. A $50 card can end up worth only $40 at stores that deduct “dormancy fees” after a certain period of time, and
• redemption fees. Some stores charge a fee for redeeming cards that can be used in multiple locations.

The good news: There are some good deals out there. Employer use of gift cards has doubled since 2001, and related sales bring in $20 billion a year to retailers. With such fierce competition, it pays to shop around.

From Girl Scout cookie drives to workplace birthday clubs, non-work fundraisers have become a part of many company cultures. Should management be concerned?

There are no simple answers to this question. Most employers want to encourage a family-friendly company culture, but employee (and supervisor) solicitations often have a way of spinning out of control.  Left unchecked, onsite “selling” can go from a harmless activity to an unwelcomed one that causes tension and can actually hurt morale.

No-soliciting policy?

In one recent survey, 22% percent of employers said they have a policy against soliciting. In most cases, the policy limits the times and places (e.g., break rooms only) where employees can engage in the activity. Some employers have created bulletin boards where workers can post their fundraisers for interested co-workers.  According to the survey, about one employer in 10 has banned unapproved fundraisers entirely.

Another thorny issue: In some cases, the one doing the selling is a supervisor or an executive, even if the company bans rank-and-file employees from doing it. 

Unfortunately, this leaves HR/benefits in a real tough position. How can you be expected to enforce a policy that managers themselves ignore? It sets you up to be the bad guy, and also shows employees that the powers-that-be either don’t take the policy seriously or don’t think they need to follow the same rules.

Office sports pools: Harmless or harmful?

Odds are pretty high (pun intended) that your employees and/or supervisors have an office football pool going right about now and/or a March Madness pool during the college basketball tournament. If not, they’ve probably worked somewhere in the past where such activities have had the tacit — or open — approval of the top brass.

Is that a good or bad thing for your company culture?

Never mind the fact that the pools are rarely used for “entertainment purposes only.” Although wagering in office pools (and fantasy sports leagues) is technically an illegal activity in some states, the laws are rarely — if ever — enforced. In most states, the typical $5 to $20 office pool is legal.

A bigger, more practical concern: presenteeism.

Easy to spot, hard to stop

If you were to take a random walk around your office and glance at people’s computer screens, chances are you’d find more than a few folks who have game reports open in one Window and their work in another. Want to guess which screen the employee pays more attention to? Yup.

One estimate says March Madness costs employers nationwide $1.7 billion each year in lost productivity. During that time of year, many employees (and supervisors) are paid to do little more than check on how the teams in their office pool are doing in the NCAA basketball tournament.

Truth be told, even if your organization bans office pools, many employees will sneak glances at the scores, anyway. But people are more open about goofing off — and spend longer doing it — when they participate in a pool at work. Many supervisors simply look the other way.

Morale builder?

The typical reason given for allowing office fund-raising solicitation or sports pools is that the activity boosts morale and employee bonding. In reality, the morale-building advantages depend on your company culture and the demographics of your workforce.

One survey found that 30% of professional and business service employees eagerly look forward to participating in an annual March Madness pool at work. On the flip side, only 13% of employees in the hospitality industry expressed interest in the activity.

Gender also comes into play. Roughly 24% of male employees said they’re likely to participate in an office pool, while 11% of women do.

Bottom line: Some workplaces wouldn’t miss such activities if they disappeared. In others, the long-term morale boost cancels out the short-term productivity hit.

We’d be interested to see how you handle this challenge in your own organization. Do you have a policy banning solicitation and/or office pools? And if so, how has it gone over?

Here’s one that’s recently been adopted at the publishing company where I work: a progam called “See something good, say something good.”  It’s a way for employees to bring positive attention to things that their co-workers, managers and the company’s different departments do well. 

How it works: The company provides colorful index cards, placing them conspicuously in several commonly traveled areas in the building. When employees and supervisors want to publically recognize someone else’s efforts, they can grab a card and fill it out. It takes very little time.

When the index card is filled out, the employee drops it into a wrapped box (there are two in the building). The boxes are later collected and the cards displayed in a room the company uses periodically for meetings, presentations and quarterly employee appreciation events.

In order to build awareness and participation in “Say Something Good,” management put up fliers around the building, so people from every department can see them, as well as visitors and job applicants who’ve come in for interviews.

The program, which was originally thought up by the head of our product marketing division, doesn’t cost anything apart from the cost of the index cards and paper. There’s minimal administration time, and it takes employees only a moment or two to fill out a card on a fellow employee’s behalf. 

But the return is tremendous, and the recognition possibilities are endless. It’s a good way to boost morale, encourage productivity and differentiate the company culture from work environments where the negative things seem to get the lion’s share of the attention.

Some workers barely pay attention, ask few (if any) questions and then hurry to leave the room. Others seem overwhelmed by the info presented.

Almost inevitably, in the days following the presentation you find yourself answering the same basic questions from employees on the very issues that had been addressed during the presentation.

One company in Northbrook, IL, found a simple, but effective way to break the cycle and get folks to pay attention: a contest for employees.

Rewarded folks who paid attention

The HR manager put together a 20-question quiz cribbed from handouts from the presentation. There were 10 true or false questions, eight multiple choice and two fill-in-the-blanks. He distributed the quiz at the end of the presentation.

The employee who got the most questions right received a $20 gift card. In case of a tie – usually, several people got all 20 questions right – they drew a random winner.

The contest was a hit, and served two valuable purposes.

First of all, it successfully got employees to be more engaged during the session. Secondly, the quiz results helped point to areas where employee knowledge was particularly weak and helped HR better target its future benefits education efforts.

A pretty good investment for $20, wouldn’t you say?

Looking for recognition ideas that get results?  Here are two keys to success:

The most common characteristics of high-ROI recognition programs — regardless of their monentary value — are their spontaneity and perceived value by employees themselves. 

In reality, the cost of some of most effective spot awards and bonuses often amount to less than 1% of base pay — and the awards don’t even have to be given in cash. 

Less sense of entitlement

Part of the problem with traditional end-of-year or quarterly bonuses (apart from the fact that they cost employers an average of 10% of base pay) is that employees expect to receive them for reaching certain goals.

Sometimes employees simply expect it no matter what. For example, at many firms, an annual holiday bonus is viewed as an entitlement and people inevitably grumble that it’s not high enough. On the flip side, with spontaneous awards and bonuses, workers are often pleasantly surprised.

Benefits consultant Ken Stahlmann spells out four keys to making the latter type of awards work, even if they’re lower in cost:

1. Creativity is crucial

The most effective programs typically give out awards weekly or monthly. To avoid over-stretching the budget – and avoid a ho-hum attitude setting in – creativity is a must.

One way that never gets old: combining time off with a second, non-cash award. Example: One firm gives a half-day off in combo with movie passes once a month.

Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to people’s personal needs or interests. Two examples:

• one firm with many foreign-born, low-wage employees awards a $20 pre-paid phone card after 90 days of service, and a $100 card for outstanding work, and
• another company with a lot of sports nuts took a few top-performers to a ball game. Managers said it was the best $200 they’ve ever spent in terms of creating ongoing enthusiasm.

3. Add structure

The awards may seem spur of the moment, but top programs have a fixed budget and structure set before anything is handed out. Example: One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise.

By letting people bank points for more valuable rewards, the employer saw a solid jump in retention.

Other organizations prefer to let employees reward each other. For instance, a small healthcare provider keeps a “goodies box” onsite – paid for in petty cash and stocked by employees themselves.

When someone spots a co-worker going the extra mile, he or she pulls out a prize and awards it.
The program is a huge hit: It’s immediate and personal, yet structured.

4. Don’t let good intentions backfire

Most spot awards go over well. But keep these four issues in mind:

• For most cash or cash-value awards, there are tax implications (just as with traditional bonuses)
• Awards need to be spread around or else resentment can creep in
• Make sure honorees don’t mind being the center of attention (some firms have accidentally alienated people they tried to reward), and
• Make sure the reward is something people actually want. One firm that awarded a VIP parking space next to the CEO found no one used it. No one wanted the CEO knowing what time he or she came and left.

Companies have the right to decide what image to portray to their customers and prospective hires. Should dress-code enforcement be a top priority?

Many employers would say yes. But with alarming turnover rates among Generation Y employees (the 18-to-25 group is the most frequent offender), some firms are calling a truce.

Reason: Apart from educational benefits, surveys show that a flexible company culture is the single most coveted benefit among these employees — far more than health coverage, a 401(k) plan, or other big-ticket plans most firms consider their core benefits.  

Every employee defines company culture and flexibility differently, but for a large segment of younger employees, freedom to dress down at work is part of the equation.

Employers that go on a dress-code enforcement kick run the risk of winning the battle but losing the war, hurting employee morale and retention.  On the flip side, the inmates shouldn’t be allowed to run the asylum when it comes to dictating the company image that senior management wants to create.

In either case, people who handle HR and/or benefits duties at their company get caught in the middle of what the top brass demands and what employees want.

Setting limits

For employers, the problem becomes one of re-defining what is and isn’t appropriate dress for employees. Here are four questions many of your colleagues are grappling with at their companies:

• Are flip-flops OK at work?
• How about visible tattoos and/or body piercings? 
• Should your handbooks spell out examples of appropriate and inappropriate attire (e.g., shorts are OK, but short shorts are prohibited)?
• What is the disciplinary process – if there is one — for dress code violations? Alternatively, how heavily is dress code compliance weighed in employee’s annual reviews?

Consistency is key

Consultant Eric Chester, author of Getting Them to Give a Damn,  is of the opinion that it doesn’t really matter how your organization answers these questions, but it’s crucial to define these expectations to employees up front — and then drum home to supervisors that they need to be consistent in how they enforce or relax these rules.

I agree wholeheartedly.  As long as the employer sticks to its policies, the burden falls on the employee to conform or find another place to work.

Communicating these expectations upfront — and addressing questions or concerns right away — saves endless hassle down the road.

Example: It’s reasonable to spell out dress-code expectations to candidates during job interviews. This is also the time for would-be hires to ask questions about dress expectations. 

If your policies don’t match up to the job candidate’s preferences, he or she may not be the right fit for the job. Better to find that out up front. 

Flip-flop Friday

If you already find yourself in the middle of a dress-code war at work, there are still ways to regain control of the situation.

Here’s how one What’s New in Benefits & Compensation reader helped turn an area of discord into a win-win situation for management and employees.

She suggested an update on the old “Casual Friday” idea. Two days each month, the company relaxed the dress code to suit employees’ tastes: They had a “Flip-flop Friday” and a “T-shirt Tuesday.” Since then, morale is up and there have been fewer dress-code battles.

There was still a related, more contentious issue: a policy banning visible tattoos and body piercings.

No, the firm didn’t launch “Tattoo and Tongue-ring Thursday.” Instead, it created a compromise policy as a performance incentive for employees who felt strongly about the issue.

The deal: Keep productivity high and we’d relax the rule prohibiting their display at work.  But if performance slipped or customers complained, the privilege would disappear. So far, it’s worked out well, and the affected employees have lived up to their end of the bargain.

A similar strategy may work — or be all wrong — for your organization.  The only approach that’s guaranteed to fail, however, is to do nothing and hope the problem gets better on its own.

The common thread: using your own communication skills as a powerful tool for boosting morale.

1. Put in face time

When time permits, managers may want to put in some “face time” with employees. This in and of itself is a type of employee recognition. Example: There’s a lot of value in simply walking around the building, chatting with employees.  Ask employees about the personal items they display at their workstations.

In the short-term, folks will notice and appreciate your interest.  Long-term, this may inspire ideas for rewards and incentive programs. The same technique works at  firms with multiple locations.  Make a site visit to get a feel for the morale. This is much cheaper – and often more effective – than designing a formal benefits survey.

2. Send ‘em personalized stuff

Looking for a simple way to show employees that HR/Benefits cares? Create a template from which you can send personalized “Welcome” letters to new hires or “Happy Anniversary” notes for employees’ company anniversaries.

3. Target overlooked employees

Most firms have employees (e.g. part-timers) who aren’t eligible for the 401(k), health plan and other company-sponsored benefits.  Small gifts help firms connect with these often-overlooked employees.

Example: On the first day of spring, send them a packet of flower seeds and attached a note from Benefits. Burston-Marsteller Worldwide has used this simple, low-cost idea and gotten good results.