How NOT to Implement an Employee Rewards Solution

Introducing a new employee rewards solution is a welcome change, but sometimes it can backfire.

March 30, 2022 By Ivo Jurcic Share on Twitter! Share on Facebook! Share on LinkedIn!
Frustrated employee

A Reddit post gave us a perfect real-life example of an employee reward experience gone wrong. 

The post uncovered critical problems one employee had when using a new solution for recognition and rewards. Instead of creating value and improving their employee experience, the solution stirred confusion and frustration.

In this article, we’re going to 

  • analyze the Reddit post
  • break down the pain points
  • give you insight into how to avoid these pitfalls 

You’ll find this article ‌particularly useful if you’re in charge of your company’s reward system. 

Confuse Employees With the Value of Their Points

Employees can’t benefit from rewards programs if they don’t understand the reward points system. 

Reward point systems can be complicated. If the employee doesn’t understand how much money is 100 points worth, they can’t have a sense of value tied to their points or see the benefit of the solution.

They just see a confusing system they have to navigate to extract value.

Let’s take an example from the abovementioned Reddit post. 

reddit post screenshot

If you were this employee, would you be able to tell how much money is 100 points worth?

Let’s break down the maths: 

According to this post, 1100 points equals a $50 gift card. Let’s stick to this example for simplicity’s sake.

If we divide the number of points by the dollar value of the reward, we’ll calculate the number of points a user needs to convert to get $1 worth of value, i.e. the conversion rate

1100 points = $50
1100 points/ $50 = 22 points/$
22 points = $1

Keep in mind that the employee has to pay taxes for the points received via payroll deduction, so 22 points are worth less than a dollar.  

If you convert 580 points for a $25 gift card, your conversion rate is 23 points for $1.

You’re seeing some problems: 

  1. The conversion rate of points for the value of $1 varies on the size of the purchase, i.e. the conversion rate is not flat. 
  2. Since you must pay taxes for every purchase, if you redeem your points for a more valuable item, you’ll have to pay more out of your own pocket. 
  3. The overall conversion system isn’t transparent. The employee has to sit down and calculate the conversion rate if they want to understand how much money are their points worth for every purchase. 

Dealing with these problems is very discouraging, especially if you’re trying to adopt a new solution that is supposed to improve your employee experience.  

A better practice would be to use a solution that has a reward points system that’s easy to understand so that employees don’t have to pull out a calculator whenever they want to convert their points.

In addition, the points/$ conversion rate has to be flat. 

For example, if 100 points are always worth $100, there’s no confusion. Employees don’t have to scratch their heads if they want to understand the worth of the points they’ve been awarded.   

By choosing a straightforward solution, you’ll make it easy for your employees to extract value from the reward points and feel good every time they redeem them for a gift. 

Not Giving Employees Enough Control Over their Rewards Points 

Another problem we found from the Reddit post is the lack of control the employee has over their points.

If the reward points are subjected to taxable income, the employee has to have a say over whether they want to accept reward points and pay taxes for them. 

reddit screenshot

Reward and recognition solutions must have the option of canceling a monetary reward, especially if reward points mean getting a tax cut out of their salary. 

After all, the solution has to put employee interests at the forefront. 

Poor Communication and Explanation of The Reward Platform 

Whenever you’re introducing a new solution that affects your employees, you must educate them on how to use it properly.

As you can see from the Reddit discussion, adopting new solutions can be complicated.

You have to assume most of your employees need guidance on all the features and capabilities. 

If you neglect to onboard your employees, it will take more time to adopt the solution; employees will hesitate to discover all the features and have limited use.

The second issue with the lack of education is that employees won’t understand the full repercussions of sending and receiving points. 

This was brought up directly in the Reddit post:

reddit workhuman screenshot

Judging from this post, the worker is worried about the lack of education regarding the new solution. 

In this specific instance, there are 3 things you can do to educate your employees:

  • Organize onboarding sessions after signing up a new solution
  • Make sure your employees have access to educational materials and walkthroughs
  • Encourage employees to ask questions and reach out for help  

Recognition and rewards programs are all about promoting value, rewarding positive behavior, and creating a great company culture. When the program frustrates employees, you reward their positive behavior with confusion. 

How you pursue employee education speaks volumes about your company culture and the effort you put into communication. 

Make the Rewards More Expensive in the Reward Catalogue Than On Retailer Websites 

It’s often the case that the items in the reward catalog are more expensive than on retailer websites, like Amazon or Walmart. 

Here’s one more example from a reward catalog of one employee rewards provider.

workhuman cataog

Here, for $100, you can get 2000 points, meaning that 20 points equal $1. The highlighted Apple iPad costs 9594 points, which is approximately $480. 

However, if we search for the same product on an online store, such as Amazon, we’ll find that the same product costs $325.

amazon tablet pricing

In other words, the price for the same product in the rewards catalog is 32% higher.

We don’t have to go to great lengths to explain why employees don’t enjoy the practice of having markups.

After all, how can you expect somebody to adopt a solution and redeem points for products with exaggerated price tags? 

A markup is a percentage added to the buying cost of a product, to cover the overhead costs and add a profit. In the context of employee rewards, when platforms that offer rewards in return for points use markups, they make a profit for every claimed reward. 

This happens when the provider of the rewards and recognition platform does not clearly communicate that they have markups. 

Ultimately, the people that pay the markup costs are the employees. 

Here’s one more example of a negative experience (found on G2) from an employee displeased with the prices in the reward catalog:

g2 workhuman comment

In addition to exaggerated pricing, the employee’s reward points can expire after one year. 

Imagine getting recognized for your hard work, and then having somebody force you to spend your well-earned reward points on rewards you don’t really want just because they are about to expire. 

If the solution is intended for employees, how is it fair that they have to cover the additional costs or forcingly spend their points?

Conclusion 

In this post, you had the chance to read and analyze a poor employee experience. 

We singled out 4 pitfalls that you should look out for when signing up for a rewards program:

  • Confusing your employees with the value of the reward points
  • Not giving your employees enough control over their reward points 
  • Poor communication and education about the new rewards program
  • Markups, fees and restrictive terms of using points

The best way to avoid these pitfalls is to methodically approach employee recognition and rewards programs. You have to do your due research! 

A great place to start would be to read a step-by-step guide so there are no surprises along the way. If you’re weighing on different solutions, be sure to go through a buyer’s guide so you can choose the best vendor for your employees.

When a solution is confusing and non-intuitive, it’s only natural that employees will resist adopting it. If you don’t want the same happening to your employees, choose a reward and recognition solution that has you covered.

Let this lesson sink in and we’ll catch up on the next blog post.