Employee Service Award Programs: How to Stay on Budget

What is an Employee Service Award Program?

Employee Service Award Programs recognize employees for their years of service and loyalty to the company. Awards are typically given at milestone anniversaries (e.g., 1, 3, 5, 10, 15, 20 years) and can include gifts like plaques, gift cards, travel experiences, etc. The purpose of these programs is to boost morale, increase retention, and show appreciation for employees’ contributions.

What is the Average Cost per Year for a Service Award Program?

According to SHRM, employee service awards are a recognition acknowledging how long an employee has stayed at your company, usually beginning at the five-year mark. However, as tenure has decreased, many companies now begin awarding service awards at 1 year. The average cost of employee recognition programs is 2% of payroll.

Here at C.A. Short, we recommend spending at least $25 per year of service.

Employee Milestone Recognition Program: Budget Control vs. Average Pricing Model

In the employee recognition industry, it’s common to use an average pricing model when designing service award programs. However, at C.A. Short, we believe a more effective approach is to use a budget control pricing model. This model allows us to provide clients with a clear, fixed cost for each milestone award and ensures that spending stays within budget.

The average pricing model can be unreliable and, frankly, misleading. While it may seem like your budget is being adhered to, the reality is that award prices can vary widely. Here’s how the two models compare:

Typical Cost Breakdown: Average Pricing Model

Under the average pricing model, companies set a budget for each employee milestone. For example:

- 5 Year Service Milestone = $205

- 10 Year Service Milestone = $370

- 15 Year Service Milestone = $685

However, there’s variability in pricing. While the 5-year award might average $205, the actual cost could range anywhere from $180 to $227, depending on the employee’s choice of reward. This discrepancy can result in exceeding your original budget.

Service Award Cost Comparison: Average vs. Budget Control Pricing

Milestone | Avg Price | Guaranteed Budget Control | Price Range (Low to High) | Swing (Low to High)

| 3 Years       | $85           | $85                    | $66 - $98            | $32

| 5 Years       | $205         | $205                  | $180 - $227         | $47

| 10 Years     | $370         | $370                   | $330 - $418         | $88

| 15 Years     | $685         | $685                  | $610 - $787         | $177

| 20 Years     | $800         | $800                 | $675 - $891         | $216

| 25 Years     | $985         | $985                  | $801 - $1,112       | $311

As you can see from the table, while the average pricing is usually close to the budgeted amount, the price range for each milestone can vary significantly, leading to potential overage costs. The price swing (the difference between the lowest and highest award options) can be substantial.

Why Choose a Budget Control Pricing Model?

A budget control pricing model eliminates this uncertainty. It guarantees that each employee receives an award with a fixed value, ensuring that you stay within your predetermined budget.

For example, under a budget control pricing model, every 5-year service award would cost exactly $205 — no matter what specific item the employee selects. This eliminates the risk of exceeding your budget and makes it easier to plan and manage your recognition program.

Award Budget and Prices:

Benefits of Budget Control Pricing

1. Predictable Costs: You’ll know exactly how much each award will cost, which simplifies budgeting and eliminates the possibility of surprise expenses.
2. Standardized Awards: Every employee receives the same value for their milestone, ensuring fairness and reducing the potential for resentment or perceptions of favoritism.
3. Increased Engagement: Employees appreciate consistency and fairness, which can lead to higher morale and better engagement.
4. Simplified Management: With fixed costs, it’s easier to track spending, plan for future milestones, and gain executive buy-in for your employee recognition program.

Why It Matters: Fairness and Transparency

A standardized pricing model ensures that all employees are treated equally, reinforcing a culture of fairness and transparency. With fixed budgets, you can also design future reward offerings based on predictable costs, making it easier to plan long-term.

By using budget control pricing, you not only avoid budget overruns but also create a fair, transparent, and consistent employee recognition experience that boosts morale, fosters company loyalty, and strengthens your workplace culture.

While average pricing can leave you exposed to unexpected costs and potential budget overages, C.A. Short's budget control pricing model gives you clear visibility and control over your spending, while still offering your employees meaningful and impactful recognition. Make the smart choice and eliminate budget confusion with a fixed-price service award program.

Contact us to learn more!