HR Agenda - Awards & Incentives

Just down the road from his office in Poughkeepsie, N.Y., Tom Brocks of Central Hudson Gas and Electric has a superb resource for recognizing employee efforts—the gourmet meals available at the Culinary Institute of America (CIA).

“We use meals on a routine basis—it’s a common, accepted way to say thank you,” says Brocks, Central Hudson’s assistant vice president for human resources. “We give gift certificates for CIA meals as rewards in our suggestion program, as door prizes during our annual holiday party and as miscellaneous rewards throughout the year.”

Brocks isn’t alone in applying the truism that the path to the heart often lies through the stomach. In an HR context, one route to retention is through the taste buds. Employers use food not only to reward employees for specific achievements but also to boost team spirit and good will across the board.

Ginny Fitzgerald, assistant controller of Yarde Metals, a Connecticut-based processor and distributor of stainless steel and aluminum, cites an example of how her company uses food as a reward for accomplishments.

“The three employees in our accounts payable department were doing check runs to pay our vendors every Tuesday,” says Fitzgerald. “They knew that most of our vendors offer 1 percent discounts for bills paid within 10 days of receipt. They saw that if they could do two check runs a week instead of one, the company could get that discount more often. So they came up with a plan to add a second weekly check run on Fridays.”

The change meant more work for the employees—and challenged them to collaborate to figure out how to do it without letting other work slide. But it saved Yarde $30,000 in the first month it was implemented and $24,000 in the second month.

To reward them, Yarde’s Chief Financial Officer Jim Nicklas took the employees out to lunch and gave them each a check for $300, which represented a proportion of the first month’s savings.

While the money was welcome, “the lunch gave them the chance to get to know each other better,” says Fitzgerald. “They brought that team spirit back to the office with them, where they worked together to revamp their schedules to accommodate the extra check run.”

Guidelines

Some companies, like the 15,000-employee University of Michigan Health System, give managers some guidelines on rewarding with food.

“We ask our managers to tie rewards to behavior that furthers our strategic goals, and to spend no more than $25 per employee,” says Denise White, corporate lead for the health system’s employee recognition program and a board member of the National Association for Employee Recognition.

The criteria for awards are clearly communicated to employees, White adds. “When awards are tied to departmental award programs, staff are aware of the criteria in advance. The [managers] know the criteria when they vote” on nominations for awards.

Other employers leave it to managers to decide whether to use food as a reward, for what behavior and under what circumstances.

“We allow our leaders to make their own decisions about how to do it and to use their own good judgment,” says Julie Hatch, a spokeswoman for Dallas-based Southwest Airlines. “It depends on how well it fits within their budgets, which depends on how many people are involved. It could be for a large team accomplishment, or to pat each other on the back for getting through a crunch period.”

At Yarde Metals, “we have no formal written or verbal guidelines as to what qualifies for a luncheon or dinner reward,” says HR Director Sharon Provenzano. “Most managers will make that determination on their own, based on the accomplishments and needs of their area. Typically,” she adds, “they don’t need approval to take an associate or group of associates out for lunch or dinner. Based on the extent of the expense, though, some managers may run it by their manager as a courtesy.”

Brocks of Central Hudson Gas and Electric agrees: “We leave it up to supervisors and managers. They check with a group vice president first,” but disapproval is rare.

In addition to recognizing specific achievements, meals also may help build employee loyalty and good will.

“We use food more as a team-building tool instead of a reward for specific employee behavior,” says Valerie Kinney, public relations manager of Auntie Anne’s, a franchise organization headquartered in Gap, Pa. “Every quarter, departments go out on team-building exercises that aren’t really rewards [for specific achievements]—they’re more like tokens of appreciation. They might go out to lunch, play miniature golf or go to New York City for the day. Managers decide where they’ll go and when, and what they’ll do.”

Tips on Taxes

Of course, the Internal Revenue Service also has some rules about meals, and outlines their tax implications in IRS Publication 15-B, “Employer’s Tax Guide to Fringe Benefits.” The general rule is that meals used as rewards can be taxable income to the employee, unless the meal is:

• On the employer’s premises and offered for the employer’s convenience, as in pizza offered to employees who are working late. Most meals offered as rewards wouldn’t fall into this category.
• A “de minimis” meal, meaning a meal so small that accounting for it would be unreasonable or administratively impractical. According to Publication 15-B, coffee and doughnuts or an occasional party or picnic for employees and guests would be de minimis, along with meals furnished to promote good will or boost morale. The full cost of de minimis meals is deductible to employers, and their value is not considered taxable income for employees.

A meal at a fancy restaurant, however, is a different creature. “If a meal exceeds de minimis, and it’s not on the employer’s premises and not for the employer’s convenience, it’s taxable,” says Chip Wry Jr., a partner at the Waltham, Mass., law firm Morse, Barnes-Brown and Pendleton. “Not only are [such meals] taxable to the employee, but the employer has to withhold taxes and show it on the person’s W-2.”

For Here or To Go?

As with personal meals, whether to go out or to stay in is often the first decision. For employers, bringing a catered meal to the worksite may be a good option. “If it’s a larger group, we’ll bring in a caterer. With a smaller group, we won’t bother,” says Brocks.

At Auntie Anne’s, “most of the groups that go out for meals as employee rewards are pretty small—15 to 20 people,” says Kinney.

The Michigan Health System will entertain up to 100 people at an off-site facility, says White. “It’s unwieldy if it goes over 100.”

With any size group, employers agree that it is sometimes appropriate to treat spouses, too.

“On occasion, we invite spouses,” says Brocks. “When an employee has put heart and soul into a project and worked long hours, we try not to lose sight of the fact that the spouse is doing just as much to hold things down on the home front.”

To Drink or Not?

A weightier decision than where to go is whether to permit or to pay for alcoholic beverages, a matter on which there is more disagreement.

“No, no, no,” says White.

“No—company policy,” says Kinney.

“If the reward is a dinner, alcohol is acceptable,” says Provenzano of Yarde. Central Hudson also allows alcohol.

Although alcohol can encourage conviviality at a work-related food event, it also can heat up potential employer liability for workers’ comp benefits, personal injuries to third parties and even sexual harassment.

Mark Burak, a partner in the Waltham, Mass., law firm Morse, Barnes-Brown and Pendleton, cites a horrific case in which a female employee joined a co-worker and two managers for a business dinner that included heavy drinking. The employee alleged that, by the end of the evening, when she was semiconscious, all three men raped her. She sued the company for hostile work environment, sexual harassment and other claims. (Tomka v. The Seiler Corp., 2nd U.S. Court of Appeals, No. 1180, Docket 94-7975, 1995.)

Before the employer settled for an undisclosed amount, an appeals court ruled that the company’s liability for the alleged rapes depended on the extent to which the dinner was considered a business event and the extent to which the manager who convened the meeting used his authority to encourage excessive drinking. Factors that would contribute to the employer’s liability included whether:

• The employee felt compelled to attend.
• The employee felt pressured to drink.
• The managers charged the drinks on a company charge card.
• It was customary for employees of that company to meet after hours and discuss business over drinks.
• The corporate culture encouraged drinking.

The stronger the link between a social event and the workplace, the stronger the likelihood that a workers’ comp claim stemming from the event would be considered compensable, or that employers could be held liable for negligent harm to a third party by an employee.

Factors that would contribute to this determination would include whether the employer paid for the alcohol, whether the event was held at the workplace or during working hours, and whether attendance was compelled, expected or optional.

To minimize these threats, Burak advises that employers limit the link between the company and any alcohol consumed by paying only for food and nonalcoholic drinks at work-related gatherings. “Not footing the bill [for alcohol] would provide a level of insulation,” he says.

But if alcohol is deemed appropriate for an occasion, consider the following methods of keeping consumption under control:

• Pay for a limited number of drinks by issuing each attendee one or two bar tickets.
• Allow alcohol to be served, but require employees to pay for their own drinks.
• Stop serving alcohol an hour before the event ends.

Everyone who has ever hosted a party knows that good food and camaraderie are sure routes to positive feelings about the host. It doesn’t take expensive food to win employee loyalty. It’s the appreciation extended that counts.

Diane Cadrain is an attorney and writer who has been covering workplace legal issues for 20 years. She is a member of the Human Resource Association of Central Connecticut.

Web Extras

• Employer's Guide to Fringe Benefits (PDF file; source: Internal Revenue Service)