Home' micenet eMag : micenet December 2015 Contents LEGAL ISSUES | MATT CROUCH
ncentive programs are basically reward
systems to encourage or reward clients
and/or staff - rewarding clients for loyalty,
giving you their business and encouraging
them to give you more; rewarding staff for
success and hard work and encouraging
more of the same.
Incentive programs have grown
enormously in popularity. Just think of the
number of customer loyalty programs for
products of all kinds.
Employee incentive programs are also
growing in popularity as the morale-building
effects are becoming more widely
understood and embraced.
And many employee incentive programs
offer travel as the reward.
There is a raft of legal and commercial
issues relating to employee incentive travel
programs - and we are going to look at a few
of the most important. This will be relevant to
your business if you have an incentive
program or are thinking of introducing one –
or if you are one of the many businesses out
there that assist companies to create or
implement their staff incentive arrangements.
The rules of the game –
will they work?
In order to work not just as a reward, but
also as an encouragement, the incentive
program is of course best communicated to
staff in advance.
Sometimes this does not happen –
Done correctly in a legal sense employee incentive programs are an
effective method of reward, explains Matt Crouch.
especially with employee arrangements. I know of some businesses that, on the spur of the
moment after a good year, hand out bonuses (including travel) to staff without prior mention.
While the employees appreciate it, the incentive benefits are somewhat lost if the rewards are
perceived to be given on a whim.
It is essential that the “rules of the game” are clearly expressed from the outset. Having
authored many of them, I can tell you that game rules are not easy things to write.
If they are not well expressed and clear, your business can be guilty of misleading and
deceptive conduct and all manner of employee problems can arise.
It’s a little like KPIs in business contracts. How will you measure performance? Over what
periods? Will the criteria be “soft”, ie “touchy-feely” and perhaps to measure, or “hard”
economic or other data? If the latter, it is essential that the data can easily be extracted from
your business that you have confidence in its accuracy.
An employee incentive/reward program can do more harm than good if your employees
perceive that performance measurement is arbitrary or subject to favouritism - or subject to a
measurement system that doesn’t properly measure an employee’s contribution.
And if “hard” data (eg, billings or revenues) is used exclusively, this can be to the detriment of
those that contribute in other ways.
Some employees are better at and more devoted to creating their own “empires”, claiming
credit for successes and taking control of clients for themselves and their own personal
aggrandisement. As it happens, nowhere is this worse than in law firms!
The outcome of a poorly conceived incentive program is that employees start to look out for
themselves and not the business as a whole. They might hoard clients for themselves and do
work that really should be passed on to other members of the team. It may encourage a short
term, selfish focus and discourage mentoring and collaboration.
Rewarding and incentivising teams rather than individuals can be a better approach as it can
remove many of the self-interest pitfalls noted above.
If a business formally offers an incentive program, this can become part of the contractual matrix
between the business and the employees. The business must honour the promises made! If the
specified targets are met, the reward must be given – otherwise the business may be in breach of
contract and guilty of misrepresentation, to say nothing of the resentment that would generate.
Incentive programs are not things that can simply be cancelled just because some other
business problems or downturns have occurred. They are not “gifts” if they are announced in
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