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U.S. Federal Regulations for Reward Programs: Do You Understand?

Posted, by Deborah Merkin
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The Incentive Research Foundation (IRF), a leader of research and education in the global incentive and recognition industry, recently published its first study about U.S. federal regulations that impact reward and recognition programs. 

From meeting sales goals to promoting workplace health, companies of all sizes organize reward and recognition programs to engage employees and customers in ways that support their organizational goals.

To ensure good practice, U.S federal regulations are in place and periodically changed to adapt to program growth and use—but that doesn’t mean that companies understand the regulations that affect them.

Related: 2 Crucial Questions to Answer for Your Wellness Program's Success

This study surveyed 419 businesses based on sector and revenue size, and examined program owners’ general understanding of the regulatory environment. Here are two big takeaways. 

Smaller Companies Are at Risk

Across the board, more program owners feel aware of regulations that affect their reward and recognition activities than those who say they know exactly how they are impacted. Smaller companies are even less likely to know how regulations affect their programs, with 57% reporting an awareness and only 33% reporting being knowledgeable.

With the recent regulation developments, companies already feel pressure to reexamine and redesign their programs to comply. But smaller companies, with less confidence in their awareness and knowledge, may be the most at risk of getting caught in litigation and experiencing fines for not meeting federal regulations.

One area isn’t affected by business size though: the impetus to adapt to the regulatory environment. That means small businesses, despite having less knowledge and certainty, are still making an effort to meet the compliance requirements for their programs.

Changing to Meet Regulations

Program regulations cause companies to change. Just last year 93% of U.S. businesses made at least one change to program design due to the regulatory environment, and half of U.S. businesses made eight or more changes for the same reason.

Some of most common design revisions are to general program design (87%) or program communications (85%). Specific changes made by at least 40% of U.S. businesses to address regulations include:

  • Underlying business purpose of the program
  • Changing the reward mix
  • Changing the products included in a sales or channel incentive program
  • Changing cash rewards to non-cash
  • Redesign of group incentive travel events

The rise in use of non-cash rewards in programs means companies are looking for more diverse rewards and incentives while still being compliant with reward and compensation regulations. Some of the benefits of using non-cash rewards are: they promote fun experience, they facilitate interpersonal relationships, and they create a good memory that’s tied to the company.

Related: The Science of Non-Cash Rewards

Ultimately, regulations are in place to protect companies and program participants from malpractice. Stay informed on federal regulations and start the conversation with management about how your organization is meeting them.

How confident are you about your knowledge on the regulatory environment? Tell us in the comments below!

Topics: Gift Card Programs, Employee Incentives & Rewards

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