What Does it Cost to Implement an Employee Service Award Program?

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What Does it Cost to Implement an Employee Service Award Program?

You’d love to refresh your employee service award program and bring your organization into the 21st Century, but at what cost?

You recognize that it is time to refresh and update your employee service award program or milestone program. Likely due to lackluster survey results from your employees on the poor selection of gifts, or maybe you realized that the cost of gifts has ballooned over the years, and your program value has all but disappeared. In this article, I am going to help answer the question of what does it cost to implement an employee service award program?

The good news is that if you haven’t reviewed your service award program and the pricing or costs associated with that program for some time, you may be in for a pleasant surprise. And I’m like almost everyone else in that I don’t like surprises unless they are good ones.

But what will a new program cost?????

In short….that depends.

On what?

Well, let’s jump into this article.

At CoreCentive, we meet with numerous prospective clients just like you every week, and we always will answer questions just like these in a very transparent way. We understand that different vendors have different pricing models, and this can be confusing, so in this article, we will explain the following:

  • The two ways employee service award program fees can be structured (Gift Markup and Service Fee )
  • What, if any, costs should you anticipate outside the standard fees
  • Any major factors that could affect the implementation of your program and the overall total service award program cost
  • When the service award or milestone program award fees are due

Read Now: Building a Recognition program

The Two Service Award Fee Structures

The traditional model for structuring the fees associated with an employee anniversary program was always tied to marking up the gifts selected by participants by as much as 100%! This model still occurs today with many vendors.

As the internet and web-based shopping took hold in the middle 2000s, the efficiency of consumer product distribution channels took a dramatic positive shift. This opened the door for the creation of a new service fee model. I’ll talk more about each model next.

1. Employee Gift Markup Model

Traditionally, and even still today, the gift markup mode puts the profit center for service award vendors around marking up the price gift item itself over and above the item’s retail price. A well-structured year of service program will start with a program budget. Your service award vendor will provide a selection of gifts that match your service milestone budget for the years your employees are recognized. The fee charged after a gift is redeemed includes the gift, the use of the technology for ordering the gift, customer service, and in most cases, a product guarantee for five years or longer. What is not included in this model are the shipping fees and tax expenses. On average, recognition vendors with this fee structure markup gifts between 45%-100% over retail, depending on the company and the gift category.

2. Service Fee Model

The internet changed many things, and the employee recognition industry was not immune. But I think change can be good, and in this case, change was good for your employees and your business. The service fee pricing model was born as a number of key factors converged.

First of all, almost all of the gifts in your service milestone program and their retail prices are available online through Amazon, Target, Walmart, and many other retailers. Secondly, as mentioned earlier, the direct-to-consumer distribution channel became streamlined, and the delivery of goods became much faster. These two factors allowed innovative vendors to drastically reduce the amount of gift merchandise that needs to be maintained in their warehouse while also adding thousands of new and exciting categories of merchandise that can be offered to your employees. In fact, a warehouse is not even required to facilitate the fulfillment of gifts from ordering to delivery to the recipient’s home. The net result can be significant program savings to you, the end customer, as a tremendous amount of overhead has been removed from a vendor’s fulfillment process.

In general, a service fee model charges your organization a percentage of what your overall recognition budget is. This percentage is an administrative fee to cover the technology costs, maintaining the program, and providing customer support, and of course, a few dollars are allocated as a profit to the vendor. The gifts themselves that your employees select are invoiced to you at a pass-through cost. So, in other words, what the vendor is charged by their supplier is charged to you without an added markup, including shipping and inclusive of any additional taxes.

These two models are the most common fee structures that you will find in the service award space. Remember that vendor platforms and the user experience will vary greatly depending on the particular recognition vendor. Ultimately, serious consideration must be taken into account on what is included in the “service” and how much true value you and your employees receive from the program.

Potential Costs that May Not Be Included in your Recognition Program

All employee recognition vendors are not created equal. Especially when you receive your bill, you must make yourself aware of the fees by asking about all hidden fees prior to the commencement of a program. These include items such as setup fees, employee data loads, technology fees, product shipping, and handling fees.

If you are a multinational organization, then fees associated with running a global employee recognition program should closely be looked at. These include international shipping charges, duties, customs fees, and additional taxes. If a recognition vendor does not have an extensive framework to provide in-country gift fulfillment, I would strongly caution against utilizing this vendor.

Another area to address is the presentation materials that will be used by your managers to award their employees. These recognition presentation pieces are critical to making the actual physical milestone award interaction more memorable for your employees. The good news is that there are presentation options that will fit into any budget. Whether a simple certificate or a more elaborate presentation box is used, the act of physically presenting a milestone award to your employees in front of their peers cannot be understated.

Fortunately, employee service milestone programs are fairly straightforward and not very complex. The ongoing monthly costs should be fairly consistent but do your due diligence upfront before there are surprises that surface down the road.

Implementation Costs

Again, standalone employee service award programs should not require any extensive implementation costs. However, with that being said, there may be costs associated with customizing the look and feel, or skin, of your service award portal should you be looking to go beyond a standard corporate branding design. There is truly no “standard,” so you will be best served to discuss your branding needs with your vendor prior to moving forward.

Another item to consider is whether or not you need a data connection to any of your existing HRMS platforms. APIs to many of the top platforms exist, but each service award vendor will have their own set of costs to tie into these systems, usually in the form of a one-time fee.

So, What will my Total Employee Service Award Program Cost?

Several factors can impact the total cost of your years of service program, most of which were mentioned above.

The bottom line is that the variable factors that will affect your service award program fees are going to be based on the fee model your recognition vendor has, the size of your program, the budget that you allocate for each employee milestone year level, and how much customization that you require for your system portal. Above all else, select the program and vendor that provides the best value to your employees with regard to what they receive from the program. The milestone is about them, and they deserve the most for every dollar spent on the program.

The CoreCentive recognition management team has decades of experience in deploying new and fixing broken recognition programs and is ready to help guide you through your next years of service program implementation or upgrade. If you have any questions about this or any other services CoreCentive offers, request a consultation today.