Finding Alternatives to Cash Bonuses for Employees - Stock Awards, Dinners and Gift Cards Can Also Help Retain Staff

By: Martin C. Daks

Trico Lift wanted to honor its top performers, but like many other businesses, the Millville-based lift-services company was on a tight budget. So instead of doling out bonus payments, Trico held an employee appreciation dinner for 10 workers from sales, marketing and other departments who got commemorative plaques and other mementos.

Noncash compensation can be an appealing strategy for money-conscious companies, especially in today’s flat-line economy, some industry insiders say.

“We have given monetary awards in the past,” said Trico spokeswoman Terry Carpenter. “But in this economy, many companies are trying to save money. We believe that having family and company trustees at the event helps to honor the valued employees, and the commemorative plaques and other awards are things that they’ll remember for a long time.”

Noncash compensation calls to mind large-company stock awards, said Tom Senter, a partner with the Woodbridge law firm Greenbaum, Rowe, Smith & Davis LLP.

“But smaller companies got interested in the concept as a way to attract and retain employees,” he noted.

The go-slow economy is spurring smaller companies to consider a variety of approaches, Senter said. The initiatives range from stock-like awards commonly called phantom stock, to giving employees additional unpaid vacations instead of a salary raise or a bonus.

Even something like a gift card can motivate an employee, said Michael Dermer, chief executive officer of IncentOne, an incentive-based consulting firm in Lyndhurst.

“In this struggling economy, people are less likely to reward themselves, so gift certificates or other awards can give them an excuse to buy something they might not otherwise get,” Dermer said. “Also, if an employee receives a cash bonus, he or she will [mentally] build that into their base salary and expect their next raise to be computed on this higher amount of salary and bonus. That’s less likely to happen if they get gift cards or other noncash awards.”

Cash rewards have other weaknesses, said Paul Dorf, managing director of Compensation Resources Inc., an Upper Saddle River consulting firm.

One is that after taxes are taken out, “many cash rewards just don’t seem very impressive,” he said. “The other is that a recipient probably won’t think about the reward after the money’s spent.”

Dorf put his advice into action with a client hospital that wanted to change its ‘above and beyond’ rewards program. “The hospital was giving a $300 check to each award winner, but taxes shrunk it to an average of $216, which just wasn’t impressive,” he said. “So we suggested a two-step process.”

First, every nominee got a coffee mug, mouse pad or other item that would let co-workers know they had been nominated for the honor, Dorf said. “The winners got a 32-inch, flat-screen TV. It’s something that they’ll likely keep for years, and will serve to remind them for a long time that their company recognized their work.”