Best practices in offering employee discounts

ELBONOMICS: The best product discount can be seen on how you treat people.

We’d like to improve our fringe benefits policy for all employees and managers regardless of work performance. What would a program that is cost-effective, practical and easy to administer look like? — Little Lily.

Providing extra benefits outside of statutory requirements is one of the tools that management can use to motivate and nurture loyalty. Top of mind for me is an employee discount scheme. It’s low-cost and practical. Maybe you’re offering such a program already.

If you manufacture or distribute consumer products, you can make customers out of your employees by offering, say, 10% to 30% discounts. The higher, the better. If you’re unsure about what to do, check the practices in your industry.

If you want to be more competitive, you can give as much as a 50% discount or give things away for free. But be circumspect by asking yourself the following questions:

One, how would you track the level of employee patronage as against other key indicators like turnover?

To put it in another way, how would you measure performance improvements after offering the program? You can’t simply create this benefit without understanding its impact, good or bad.

Two, how would you handle employee abuse or misuse of the benefit, such as reselling the discounted products to non-employees? You must understand that when product or service discounts are given, it may be unlawful for employers to withdraw such offerings because of a labor policy against non-diminution of benefits.

Three, is it better to give discounts according to certain conditions, like limiting it only to executives or those with five years of service? As I’ve said earlier, giving discounts on an across-the-board basis to all employees is a bad idea. Therefore, it’s better to impose certain standards.

BEST PRACTICES

The critical steps in establishing an ideal employee discount system lies in catering to the needs of different people. Which is why it’s better not to do it across the board. Here are the fundamentals of implementing an effective system:

One, keep the discount system simple and easy to manage. Don’t complicate things. You can establish a cooperative or in-house grocery where employees can make on-the-spot purchases in cash, digital payments, or salary deduction, subject to certain conditions like a prohibition against the reduction of employee’s net take home pay, as provided for by the Labor Code.

Universal Robina extends 5% to 10% grocery discounts to all employees while Century Pacific Foods discounts only slow-moving consumer goods. Toyota, on the other hand uses the wholesale price (not the dealer’s retail price) of their cars when selling to qualified employees. Further, it gives 10% to 15% discounts on labor and parts for after sales service.

S&R gives free membership to all employees, who enjoy discounts of up to 60%.

Two, consider subsidies or a favorable pricing scheme. In the banking industry, qualified employees (mostly ranking executives) are charged only half of the commercial interest rate on their housing loans. Also, the annual dues for bank credit cards are waived for all employees.

One common practice is subsidizing cafeteria meals, usually in factories in export processing zones. Another model is the case of a Japanese factory in Laguna that sells brewed coffee for few pesos while offering a Starbucks type of ambience. Another creative model is the sale of bread at a no-frills honesty bakeshop that accepts digital payments using a QR code embedded in employee ID.

Three, give products or services free as much as possible. A good example is in the case of the airline industry. Cebu Pacific gives free flights not only to employees but to their family members as well. In the healthcare industry, Makati Medical Center offers employees 100% off on their health needs.

EXCEPTIONS

Of course, giving employees discounts does not apply to every organization. It would be a laughable idea for a funeral home to give such discounts. At any rate, giving extra benefits to employees are always an option to influence employee behavior and improve the company’s image.

So, what would be the ideal employee discount scheme? There’s no such thing, unless it’s already an established practice, such as the benefits available in the airline, banking and healthcare industries. One caveat. Don’t even think of conducting a survey as people can throw your plan into disarray with impractical ideas.

Just do whatever is acceptable in your industry and you’ll be fine.