Cash vs. non-cash rewards: in the land of employee rewards, cash isn't necessarily king - Awards & Incentives Agenda - Hitchcock Chair Co., among others

HR Magazine, April, 2003 by Diane Cadrain

"Giving employees a choice is an important engagement tool," says Charlie Montreuil, vice president of human resources at The Carlson Companies. He describes the program as "an internal currency that employees receive for several different reasons, such as peer-to-peer recognition, supervisors recognizing employees or service anniversaries."

The Carlson point program replaced an earlier one that used pins and certificates--rewards that rank pretty low on the flexibility scale. "In the first year of the point program, participation tripled," says Montreuil. "The flexibility rejuvenated the program."

It has been so popular that Carlson is considering allowing employees to redeem points to purchase days off. "We surveyed employees, and we found that people value time off more than anything else," says Montreuil. "It's the ultimate reward."

Factoring in Overtime

Whether you settle on cash or some form of non-cash reward for workers, you should be aware of the potential effects a reward program can have on overtime. In some situations, employers may have to count cash and other awards as part of an hourly employee's regular wages, in which case HR will need to recalculate the overtime earned by that worker.

Generally, an employee's regular pay rate includes all "remuneration for employment," and that may include awards, explains Amy Jantz, an attorney with WorldatWork, a Scottsdale, Ariz., association focused on compensation, benefits and total rewards. (For more information, see "Recalculating Overtime" on page 83.)

Employers bear the burden of showing that an award was not such remuneration, so it helps to know the ropes. Here are some tips:

Reward for doing one's regular job, only better. If an award is given for the quality, quantity or efficiency of work done on the usual job at the usual time, it's definitely remuneration for employment. In such cases, the employer determines the hourly rate by allocating the amount of cash, or the cost of the merchandise, over the period during which it was earned.

Reward for doing work outside the regular job. Prizes awarded for activities outside the scope of the usual job may be remuneration, depending on several factors.

The first is this: Did the employee compete for an award outside of normal working hours, off premises or beyond the scope of his customary job? If so, then several other factors must be considered. These include: the amount of time the employee spent earning the reward, how closely his efforts mesh with his regular work duties, whether the employee's efforts to earn the award include work typically done by other employees for employers and whether the employer encouraged the employee to participate.

Reward for suggestions. Generally, rewards for suggestions aren't considered remuneration if all of the following are true:

* The amount is unrelated to the employee's earnings and is, instead, based on the value of the suggestion to the company.

* The suggestion is derived from effort outside an employee's usual job.