Award values also warrant some time and attention – especially
in an international program. In any program, it’s always
important that the value of the award offered is commensurate
with the effort needed to achieve the award. (A coffee mug may
not be perceived by participants to be an adequate award for a
productivity increase of 25%.) If awards aren’t aligned with the
effort required to achieve them, human nature will prevail and
most participants won’t make the effort to achieve the goal.
In international programs, you may elect to adjust the value
of the awards offered in different countries based on the
percentage of the value of the award in relationship to average
salary levels, or another economic factor – a practice known
as economic levelling. A $500 award in the United States – and
its exact value equivalent in another currency – would be a
significantly larger award in a third world country than it would
be in the United Kingdom or a European nation.
Creating appropriate global award assortments is tricky business,
made more difficult because the awards play an enormous part
in engaging the hearts and minds of your participants and their
willingness to embrace your incentive program.
Although the corporate objectives for the program may be loftier
than focusing on the rewards, your participants might have a
different perspective and be very focused on the ultimate reward
offered for their efforts. A miscalculation here could undermine
the entire program, so please proceed with caution.
Given the likelihood that you are already conducting business
in the countries where you will be introducing an incentive
program, the odds are high that internal corporate procedures
exist to work with foreign currencies.
If not, you’ll want to get someone from your Finance team to
work with you in this area. If you’re working with a local award
provider in a country, it’s important to establish in which currency
you will be invoiced, which currency will be used for payment,
what currency conversion rate will be utilized and what method
(if any) will be utilized to “true-up” expenditures to address
currency exchange rate fluctuations over time.
If your program also includes gift cards or cash as award choices,
it’s advisable that you establish a policy as to how you’ll handle
award values as currency rate fluctuations occur, if those
fluctuations will impact the face value of the gift cards or cash
awards.
Customs, Tariffs & Taxes
Depending on where your company is headquartered and
which other countries will be included in your performance or
recognition program, awards shipped to participants may have to
clear Customs and be subjected to taxes and tariffs.
Clearing Customs will undoubtedly delay the arrival of the award,
so expectations should be managed in this regard. Also, Customs
regulations impose restrictions on items and materials that aren’t
allowed to enter the country. Check to ensure that restricted
materials are not included (even as components of your award
items) so they will not be barred from entry. Prior knowledge of
Customs regulations for the countries you will be working with
will help you avoid award selections that will be confiscated.
Import taxes and tariffs can be costly depending on the imported
item and the country involved. It’s not unusual for the taxes
to exceed the actual value of the award itself, so factoring tax
implications into your award selection process could prove to be
a very worthwhile endeavour.
Unless you clearly state in your shipping documents that these
taxes and tariffs are to be charged back to your organization, the
recipient will be liable for payment of the taxes and their award
will not be released to them until the charges are paid in full. This
discovery can be an unpleasant surprise for the recipient and
may result in the recipient refusing to claim the award for lack of
desire to pay the taxes.
Recipients may also be liable for taxes on the value of the
award because the award is considered income in that country.
Frequently, these taxes are easily tracked and withdrawn through
your company’s payroll system, but it is imperative to disclose to
recipients which awards may be subject to these taxes.
‘Grossing up’ is a commo n practice for companies that wish to
absorb/reimburse employees for any income taxes they incur
due to the receipt of recognition awards. Since many of the
income tax regulations place thresholds on the value of awards
that will be taxed, clever program administrators are careful to
construct award assortments below the tax threshold to avoid
the tax. It’s highly recommended that you seek guidance from
your Legal and Tax/Finance departments on how to properly
comply with tax laws for your program.
Named one of the most influential women in the incentive industry, Michelle M. Smith,
CPIM, CRP, is an accomplished international author, speaker and strategist. She’s past-
president of the FORUM at Northwestern University, president emeritus of the Incentive
Marketing Association, vice-president of research for the Business Marketing Association,
and vice-president of marketing for O.C. Tanner.
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