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Celebrating the Milestones

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

For a few years now, the phrase "new normal" has been applied time and again to describe the novel and unfamiliar state of economic affairs that followed the Great Recession. The term itself doesn't have any concrete definition. What it means can change depending on the context, which could range from health care to commercial banking.

However, when it's used in relation to today's American labor market, the new normal typically describes a situation in which employers and employees aren't as loyal to each other as they used to be. According to the 2016 figures from the United States Bureau of Labor Statistics, U.S. workers spend 4.2 years on average with their employers; that's down from 4.6 years in 2014. And many companies have started hiring more freelancers and contractors, many of whom could be at part-time hours or performing much (or all) of their work virtually. In this way, those organizations can cut costs in everything from employee benefits to physical overhead.

In simple terms, all this translates to more hourly, less salary; more job-hopping, less job security; more flex-time and less face-time. In fact, another new catchphrase was coined recently to describe it: the "gig economy." And at least in the near term, we're only going to see more of this: Predictive research from financial software company Intuit suggests that sometime between now and 2020, freelance and contract roles will account for more than 40 percent of all American jobs.

Clearly, this has major implications for all aspects of the working world, including rewards and recognition programs. Perhaps chief among them are the years-of-service or milestone awards, which celebrate the amount of time employees spend with their organizations, traditionally in five-year intervals—a practice that is, it should be pointed out, reinforced by Internal Revenue Service (IRS) tax codes.

But is traditional recognition of the five-, 10- or 25-year anniversary still relevant at a time when the average stint for American workers is just above four years, and likely to fall further?

"The simple answer is 'no,'" said Jonathan McClellan, director of employee recognition at Hallmark Business Connections, based in Minneapolis. "And by that I don't mean there's no place for them. It's just that the trend is moving away from milestone or anniversary awards in general, even in traditional business. It's being critiqued. What's the payoff going to be for the company in recognizing those less-frequent milestone events vs. everyday events? If the focus is on the work being done now, then that shift's going to continue to happen. And I've already seen it happening over the past 25 years."

If you do it the way you did it in years past, [younger generations] will find it degrading and condescending.

That's not to say it's all bad news for traditional years-of-service award programs. They remain strong in certain industries, and will likely remain so for a long time to come.

"There's still a place for them," said Christina Zurek, incentives and recognition solutions manager at ITAGroup, based in West Des Moines, Iowa. "You still have certain industries and certain types of positions where you tend to have much longer tenure. The automotive industry and manufacturing are two great examples of where we continue to see organizations that have those very long-term, established employees—and good service award programs, too, by extension. They recognize loyalty with meaningful awards and presentations. Those continue to be a very important part of their culture."

Still, "the wave of change is definitely coming" in the broader workforce, she added. Even so, everyone interviewed for this article agreed that year-of-service awards can not only survive, but possibly will become a valuable advantage for organizations, provided they're reexamined and updated for today's workforce. Here are four ways you can make these programs relevant and effective in the gig economy.

1. Treat Them Like Individuals

One aspect of years-of-service awards that's definitely got to go? The old "gold watch" mentality. This essentially means that all employees get the same prize when they reach certain milestones—e.g., the gold pocket watch, traditionally given at 25 years of continuous employment. This won't fly at all with the majority of today's workers.

"If you do it the way you did it in years past, [younger generations] will find it degrading and condescending," said Steve Damerow, CEO of Atlanta-based Incentive Solutions. "Tenure for the sake of tenure, and just giving them a gold watch, is seen as an insult. These people have grown up with iPhones. They've grown up with the immediacy of coupon codes and going to Amazon and using them right away. They could care less about a watch that you think is pretty. They want to have a choice from among thousands of items and pick their own watch, and then be able to share that choice with their peers."

"There's been a shift away from the traditional symbolic award—i.e., the gold pen, the watch or the 'desktop dust-able'—that standalone object that's been personalized and engraved," McClellan said. "That one symbol of achievement is meaning less to a younger generation of workers than it did to the generations working in the 1950s, 1960s and 1970s. That's creating more choice, and I think that's the right direction. It acknowledges that everybody's different, and everybody's motivated by different experiences and personal preferences. Tapping into that and allowing individuals to celebrate that achievement in their own way is key."

Also, any recognition related to milestones ideally will "tell the story" of all employees from their hire date to the present anniversary. That should involve sharing and celebrating their accomplishments, professional growth, and involvement in major projects and initiatives over that time span.

"If we're not connecting all of that, it's a tremendous lost opportunity to engage those employees and show appreciation for all their hard work and accomplishments," McClellan said. "I think the negative trend I've seen most often is that it's become this turnkey, operational solution that takes that message out of the equation."

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."

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