Discounts Not To Be Discounted - employee discounts

HR Magazine, April, 2001 by Nancy Hatch Woodward

Discounts also may vary depending on the product or service. Ford, for example, has several plans from which employees may choose. They may buy a new or used car, or, depending on their position at the car manufacturer, they may lease a car, all at substantial savings. What they pay, however, depends on the plan they choose. New cars, for example, if bought by the employee or his immediate family, can be purchased at dealer's cost. Friends of the employee who are eligible for the X Plan pay approximately 4 percent more than dealer cost.

Erlanger Health System also has various discounts for different services. Employees receive a $400 deduction from their $500 co-payment for inpatient services, $250 from their $250 co-payment for outpatient services and $25 from their $100 emergency department co-payment. In addition, Erlanger offers a 20 percent discount on food in the cafeteria and at the Lifestyle Center, the hospital's community-based wellness facility.

Preventing Employee Abuse

Employers considering offering a discount sometimes worry that employees will abuse the benefit. This problem rarely occurs, and there are some simple ways to protect the company, says John Smoyer, SPHR, an HR consultant located in Mesa, Ariz., who serves on the Society for Human Resource Management's Compensation and Benefits Committee.

Protection will depend on the type of product or service. "If you worked for Hallmark cards, say, and an employee was suddenly buying tons of cards and wrapping paper at discount, you might want to check them out to see if they have their own card shop operating out of their basement," he explains. "But discounts on products that are high-ticket items probably won't be abused, simply because of their cost."

Most companies have some type of tracking mechanism to determine if their employees are using the discount--and not abusing it. Often, that tracking can be as simple as Sears' method of assigning cards to the employee and their eligible family members. Or, it can entail setting a limit on maximum usage, such as Starwood's cap on yearly use or Ford's cap--four cars a year on its A Plan and three cars a year on its X Plan. Other companies, such as Chambers Wine, set no limits; Chambers also doesn't track how much individual employees are buying.

They're Worth It

Employee discounts cost the company little time and money because it only takes a minimal amount of effort to order the extra inventory and to track usage. The payoff, however, is more than worth it, says Smoyer.

"It really enhances employee loyalty, helps with recruiting and makes better sales people out of your employees because they know the product and services better," he says. "Moreover, the company still makes a profit off of it, so it becomes another market for their merchandise. And, it's a great tool for finding out if you have a good product or not."

He adds, "I mean, if you have a product that none of your employees want, that should tell you something."

Nancy Hatch Woodward is a free lance writer based in Chattanooga, Tenn., and a frequent contributor to HR Magazine.