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Promoting, protecting, and researching the optimal use of incentives, rewards, and related promotions in business.
Current Research/White Papers/Legislative Updates
The IRS Issues Legal Advice Regarding Customer Loyalty and Rewards Programs
George Delta, IFI’s Legal Counsel, has provided his bi-monthly Legal Update for IFI members. The topic covered relates to customer loyalty and rewards programs, so if you sell, offer or manage those types of programs, George’s update offers some valuable information for you, your customers and especially the accounting professionals you rely on.
The Associate Chief Counsel of the IRS has recently issued Legal Advice setting forth its position that an accrual method taxpayer cannot account for the costs of redeeming points in its “hybrid coupon” customer rewards program under the Treasury rules that apply to “premium” coupons. This legal advice memorandum is important to companies that operate loyalty programs, because if their programs can meet the definition of a “premium” coupon, they would be allowed to deduct their reasonable estimated redemption costs from gross receipts with respect to sales with which they issue points. (The regulations in question are old, and they refer to trading stamps or premium coupons instead of their current equivalent, points).
In effect, if you can get the points issued under your loyalty program to meet the definitional requirements of “premium coupons,” you can estimate and currently deduct your redemption costs. Otherwise, you can only deduct the cost of points as customers redeem them. Deduction upon redemption is the normal rule, so the IRS wants to limit the scope of what constitutes a “premium coupon.”
For a more complete explanation of the IRS advice on rewards programs, click here.
2016 Incentive Marketplace Estimate Research Reports 17% Growth Since 2013
Conducted in partnership with market research firm Intellective Group of St. Louis, the study measures the expenditures of businesses for non-cash rewards for employees, customers and partners. The results update studies from previous years and provide details about expenditures spent on gift cards, rewards points, travel, and merchandise by corporate America. New this year, the study also focuses on the number of program owners using award points.
The study of a cross-section of US businesses confirms that award points, gift cards, incentive travel, and merchandise are commonly-used tools for firms seeking to reward and recognize their employees, sales teams, channel partners, and customers. Key findings from the study include:
• 84% of U.S. businesses use non-cash rewards to recognize and reward key audiences in the form of award points, gift cards, incentive travel, and merchandise – up from 74% in 2013
• In 2015, U.S. businesses spent $90 billion on these types of non-cash rewards, a 17% increase from $77 billion in 2013. To see the full research report click here.
Additional inquiries may be sent to IFI’s Managing Director, Steve Slagle.
Federation Responds to OSHA Safety and Health Program Management Guidelines
The Occupational Safety and Health Administration (“OSHA”) has issued a revised draft of OSHA Safety and Health Program Management Guidelines. Click here to see the Guidelines. OSHA invited public comment to their proposed revisions and the Incentive Federation and some Federation members have written to OSHA to express opposition to OSHA’s criticism of safety incentive programs. The Draft Guidelines state in a note that, “Incentive programs for workers or managers that tie performance evaluations, compensation, or rewards to low injury and illness rates can discourage injury and illness reporting. Point systems that penalize workers for reporting injuries, illnesses, or other safety or health concerns have the same effect, as can mandatory drug testing after reporting injuries. Effective safety and health programs recognize positive safety and health activities, such as reporting hazardous conditions or suggesting safer work procedures.”
For a little deeper dive into OSHA’s thinking, the agency also references a 2012 memorandum on page 14 of the Guidelines that addresses what OSHA perceives as “incentive and disincentive practices” of safety programs.
In part the memo states, “Finally, some employers establish programs that unintentionally or intentionally provide employees an incentive to not report injuries. For example, an employer might enter all employees who have not been injured in the previous year in a drawing to win a prize, or a team of employees might be awarded a bonus if no one from the team is injured over some period of time. Such programs might be well-intentioned efforts by employers to encourage their workers to use safe practices.
However, there are better ways to encourage safe work practices, such as incentives that promote worker participation in safety-related activities, such as identifying hazards or participating in investigations of injuries, incidents or “near misses”. OSHA’s VPP Guidance materials refer to a number of positive incentives, including providing tee shirts to workers serving on safety and health committees; offering modest rewards for suggesting ways to strengthen safety and health; or throwing a recognition party at the successful completion of company-wide safety and health training. See Revised Policy Memo #5 – Further Improvements to VPP (August 14, 2014).”
To see the Incentive Federation’s response click here
2015 Incentive Federation Program Design and Support Study Released
IFI engaged Intellective Group of St. Louis to conduct its 2015 Program and Design Study. Using a national sample of business stakeholders with at least $1M in revenue, the study aimed to determine the drivers of programs, award types, supplier use and program metrics. The full study may be reviewed here. Additional inquiries may be sent to IFI’s Managing Director, Steve Slagle.
2015 Incentive Federation Program Design and Support Study Waterfall Release #1 – Program Goals and Objectives
IFI has released the first of a series of white papers on its 2015 Incentive Federation Program Design and Support Study. In this white paper, the Federation focuses on an in-depth analysis of program goals and objectives companies strive to achieve when designing an incentive program. Review the Program Goals and Objectives white paper here.
2015 Incentive Federation Program Design and Support Study Waterfall Release #2 – Communication, Technology and Tools
IFI has released the second of a series of white papers on its 2015 Incentive Federation Program Design and Support Study. In this white paper, the Federation focuses on an in-depth analysis of how companies utilize communication, technology, tools and reporting within their incentive programs. Review the Communications, Technology, Tools & Reporting white paper here.
2015 Incentive Federation Program Design and Support Study Waterfall Release #3 – Award Program Spending
IFI has released the third in a series of white papers on its 2015 Incentive Federation Program Design and Support Study. In the latest release, IFI puts the spotlight on program spending. Click here to learn more.
2015 Incentive Federation Program Design and Support Study Waterfall Release #4 – Engaging Outside Program Support
IFI has released the fourth in a series of of white papers on its 2015 Incentive Federation Program Design and Support Study. In the latest release, IFI puts the spotlight on engaging outside program support. Click here to learn more.