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How Effective Are Gift Cards for Employee Rewards and Recognition?

Gift Cards as Employee Rewards

According to the 2013 Canadian Incentive Trends Survey, 63.2% of organizations with employee rewards and recognition programs offered retail gift cards for specific stores, restaurants or Visa, MasterCard or American Express prepaid cards. These gift cards were chosen because they were the easiest to administer and provided the greatest return on investment. Retail gift card use for specific stores, restaurants or services also increased significantly from 62.8% in 2012 to 72.8% in 2013.

While gift cards are clearly the incentive of choice today, which employee rewards and recognition programs really work?  And how do we measure “what really works”?

We’ll examine the pros and cons of two common employee reward and recognition programs typically administered by Human Resources in the first installment of our two-part series.

1. Quarterly and/or annual recognition programs for significant contributions to the overall business.

Quarterly and annual recognition programs are especially effective for large, established companies. These are formal recognition programs, and recipients are often acknowledged via company-wide communications, often from the CEO.  Most offer rewards that are valued at $500+ and are limited to just a few recipients a year.  Recipients are typically nominated by their manager, and then reviewed by Human Resources.

These types of programs are effective for recognizing significant corporate achievements.

Quarterly and annual recognition programs have great company-wide visibility because of the limited number of rewards that are given out. Gift cards for high-value merchandise/services are effective here, and these programs are simple to administer.  Effectiveness can be measured by assessing retention rate of the rewarded employees, and anecdotal tracking of the employees’ continued engagement.

2. Points-based recognition programs where employees choose to redeem their points for various merchandise rewards.

Points-based recognition programs are ongoing throughout a fiscal year. Employees earn points for achieving specific business goals (e.g. sales, leads), or for meeting productivity targets (e.g. zero sick days; no workplace accidents). Then they can redeem their points and choose from a number of different rewards from a website.

Typically, gift card rewards in these programs range from $10-$50.  The gift card offering must be broad-based and represent major retailers/service providers in order to appeal to all employees.  Effectiveness is somewhat more quantifiable based on the number of points redeemed, the frequency of redemption, and the rate of redemption on the gift card rewards.

Give employees more choice and variety—but there’s a catch.

Points-based programs are effective because they give employees the ability to choose their reward. However, with the proliferation of reward programs in which consumers participate today (e.g. Optimum, Air Miles), these employee rewards programs may fall victim to user fatigue. Employees may forget to redeem their points, or simply lose interest.  Furthermore, these programs require an infrastructure: either an employer has to invest in an internal solution, or they have to outsource it.

In our next installment, we’ll examine the effectiveness of on-the-spot employee recognition programs.


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