Feature Article - January/February 2018

Celebrating the Milestones

Do Years-of-Service Awards Still Matter in the 'Gig Economy'?

By Brian Summerfield


2. Define 'Employees' More Broadly

If a characteristic of the gig economy is a greater number of indefinite freelance and contract work arrangements, then it will become increasingly important for organizations to recognize the long-term contributions of these "employees." Milestones can become a weapon in the war on talent, which doesn't stop because more people are filing 1099s instead of W-2s.

Many of the organizations that use milestone awards most effectively apply them in such a way that it instills and reinforces key organizational values among employees while also recognizing their years of service.

"I've been encouraging leaders for some time now to include temporary and contracted workers in as many employee programs as possible," said Michelle M. Smith, CPIM, CRP, vice president of marketing at rewards and recognition company O.C. Tanner, based in Salt Lake City. "We're squandering an opportunity to optimize their performance while they are with us if we don't fully engage temporary workers in our organization—not to mention that some of them may actually be interested in working for us permanently and could help us secure the talent we need to thrive. Rather than ignoring freelancers, or making them feel like second-class citizens, leaders would reap the benefits of higher productivity, engagement and performance if they were to include them in employee engagement programs wherever appropriate."

Damerow knows this from personal experience: He's had a 1099 contractor who's worked full-time for his company for 12 years, and participates in the same incentives programs as his regular employees.

"The only reason he's not an employee is that I'm in Atlanta and he's in Charlotte," Damerow explained. "He's been a great addition to our team, and we treat him just like all of our other employees. On the other hand, let's say I had a full-time employee who I've wanted to fire for 15 years. Why should I give him a gold watch once he reaches 15 years?"

3. Use the Awards to Drive Internal Culture and Branding

Many of the organizations that use milestone awards most effectively apply them in such a way that it instills and reinforces key organizational values among employees while also recognizing their years of service.

"Celebrating career milestones provides unique opportunities to teach and reinforce what matters most in the organization," Smith said. "During the service award presentation, a clear connection is made between individual employees and company brand values. It gives your employees a purpose, making them part of the bigger organizational vision."

"It's leaning into who you are and your unique identity," McClellan said. "I think there's a tremendous opportunity for internal branding."

He offered a couple of specific examples of this, the first one being online apparel retailer Zappos, which is based in Las Vegas.

"They've got a really simple and unique way to acknowledge years of service," he said. "They have personal Nevada license plates that are created and hung above people's cubicles. An employee or even just someone just visiting the facility can walk down the hall and see that visual array of who's been there, how long and where the institutional knowledge resides. And people take great pride in hanging that over their cubes because they've built that into their culture.

"Other companies are doing it well because it aligns to what their brand is and what they stand for," he added. "One was a media-buying business and ad agency. While everybody in that industry was moving toward more casual dress, it was leaning in the opposite direction and going toward more professional business attire: 'Whenever we meet with a client, we're always going to be well put-together.' So on employees' five-year anniversary, they would be sent to the local haberdashery and get a new suit custom-made for them."

4. Start Celebrating Milestones Earlier

Unfortunately, the tendency in the past has been to use the IRS tax guidelines as the standard for issuing these awards, Zurek said.

"Anything before that first five-year mark is not eligible [for tax benefits]," she explained. "And a lot of companies default to their tax breaks for service award programs, which means those awards will be applied in five-year increments."

Celebrating career milestones provides unique opportunities to teach and reinforce what matters most in the organization.

Still, just because the IRS doesn't provide tax breaks for awards before the five-year mark doesn't mean you shouldn't do them.

"It may be worth the tax implications to be able to invest more than just a card or a verbal 'thank you' to that employee," McClellan said. "It often pays to be able to get the message to that employee sooner."

And "sooner" could be a matter of months—or weeks, or even days—not years.

"Companies are investing in recruiting and onboarding [awards] so they start off on the right foot with them," Zurek said. "They use that to show the purpose of the organization, and to demonstrate the culture and what makes that company unique. So, right away people feel that connection with their new employer. We've also had companies that have turnover after a year or two move that award up in the employee journey. They might give that award just three months or six months into the job just to reinforce that feeling more immediately and show that they value employees' contributions."

And if you're worried about the bottom-line implications of either program expenditures or tax penalties, bear in mind that these awards don't have to cost much, or even anything at all. It could be as simple as an extra day off or a small contribution to their charity of choice.

"Honestly, it's not like any service awards are typically million-dollar prizes," Zurek said. "I don't think the monetary value is going to keep somebody there for another five years or whatever the milestone is. It all comes back to the spirit in which it's being given. That's really going to give you that emotion you're looking to achieve."